Seller financing: setup, taxes, and contingencies?
Hello all.
I'm exploring a deal on a property that is well suited for seller financing: house paid in full but desperately in need of work (for which the owners don't have the cash to fix themselves) and the owners want way more than it's worth. My goal is to offer the owners something that gets them the price they want, but over the course of 20-30 years. Before I make the offer, I'd like to better understand some of the nitty-gritty so I can calculate my numbers appropriately.
First, how do you go about writing up a seller-financed offer? Is this something you'd need a specific kind of attorney for, or should my realtor be able to handle this? If one needs to go the attorney route, how much does it typical cost to set up such a contract?
Second, how do closing costs factor into an owner-financed deal, and how does realtor commission get calculated?
Third, how are owner-financed deals set up such that the seller is protected against default? Basically I'm wondering people's strategies for giving the seller assurances that I will not default on the loan, or skip out on paying by selling the house and high-tailing it to Mexico ;)
Finally, what are the tax implications of going owner-financed? I know one can typically write off the interest of a mortgage, but I'm not entirely clear on what these payments count as, or if there are ways to declare them as a write-off.
Phew, that's a lot to lay out. To any that have made it this far, you're already a hero. Thank you for any help!