100% Seller Financing at 75% Market Value

[Michael Chilton]

I heard an interesting strategy discussed on episode 1932 of Joe Fairless’s podcast with guest Joe McCabe. The guest uses 100% seller financing at a purchase price that’s 75% of market value. After 3 months he refinances with a traditional loan and has 25% equity. Sounds like a great strategy if you can get it, but seems like it would be very difficult to find a seller willing to go along.

A similar, but perhaps more palatable solution, would be to make an offer at 75% of market value and ask for the seller to finance the down payment required by the lender.

Has anyone executed either of these strategies? I’d be interested to learn how to best propose them to a seller.

[David Flores]

@Michael Chilton

Not many people are going to sell their property 75% of market value. What I have done on a couple deals was have the seller carry the down payment which got me the property for nothing down. Then I did the math as to when I would gain 20% equity in the property so I can refinance. I was able to get about 11% equity after appraisal and after 8 years I will have the 20% equity I need to refinance. This is given that there is 0% appreciation as well to stay conservative. So that is what we did for the seller financing terms.

There is risk in the deal. If after 8 years the market is severely hurt I would have trouble refinancing. The seller has the second though so they can not foreclose. I have a good relationship with the seller so if this does happen my plan would be to re-negotiate longer terms.