short term seller financing

[Jasmine C.]

I have a property I want to seller finance to a prospective seller but I have never done a seller financing deal. I am trying to learn what is fair for myself and the potential buyer. it is a SFH 3/2 that is currently rented for 1175 with a year long lease. good condition in a ok neighborhood. The buyer is not able to get a loan because of high DTI and is working on selling off some non performing properties to become eligible to get loans again. This will take a year so they want a seller financing for only a year. The property is worth 100-110k with a 63K mortgage of 4.3% on the home. They can put 5k down now but once their properties are sold they will have enough down payment for a traditional loan when they get their own financing in a year.   They want to own it on title and we want to keep the mortgage in place until they get their own financing and have that pay off the loan.  could you help me understand what is considered to be a fair term and price for short term seller financing?

[Michael Ealy]

Originally posted by @Jasmine C.:

I have a property I want to seller finance to a prospective seller but I have never done a seller financing deal. I am trying to learn what is fair for myself and the potential buyer. it is a SFH 3/2 that is currently rented for 1175 with a year long lease. good condition in a ok neighborhood. The buyer is not able to get a loan because of high DTI and is working on selling off some non performing properties to become eligible to get loans again. This will take a year so they want a seller financing for only a year. The property is worth 100-110k with a 63K mortgage of 4.3% on the home. They can put 5k down now but once their properties are sold they will have enough down payment for a traditional loan when they get their own financing in a year.   They want to own it on title and we want to keep the mortgage in place until they get their own financing and have that pay off the loan.  could you help me understand what is considered to be a fair term and price for short term seller financing?

 Jasmine,

Sounds like he is doing a "subject to". You are not a motivated seller. The property is rented and it cashflows. So I wouldn't do the deal as presented. Also...

1. $5K is too low downpayment when selling a property on owner financing. I will ask for 20% or $22,000 of a $110,000 sales price. 20% is serious skin in the game and the chances of default is lower.
2. NEVER give him title. Owner finance or contract for deed works like this: he is your borrower-buyer and you are the bank-seller. He does not have title but he has equitable interest in the property.
3. By them having YOUR loan but you giving them the property, they will pocket all the cashflow. What is your incentive for doing that? To get the $5K upfront?
4. There is a chance (albeit a low one) that YOUR bank can call the loan due because there's transfer of title or transfer of equitable interest on the property without paying off the loan or informing the lender

Makes sense?