Owner Financing or a Lease-Option?

[Mark Stice]

I recently verbally agreed with a seller in my neighborhood to purchase a townhome from him for $130,000. As I understood the deal, he would finance the purchase and I would pay him $700 (542 in interest and 158 in principal) per month for 24 months at 5% interest. After the 24 months were up I would go to the bank and refinance the property to pay him off. The total balance after 24 months that I thought I would need to pay off was $126,000 which I saw as reasonable considering the property is worth between $145,000-$150,000. I had a contract drawn up and when I presented it to him he said this isn't at all what he wanted. 

Here is how he wanted the deal to work: He would remain the owner of the property for the next two years until I paid the balance in full through a refinance. The $700 wouldn't be amortized but instead be entirely applied to the principal balance. The property is in a really good location and has been on the market for less than a week. 

To give some detail on the property, it is a 2 bed 1.5 bath townhome for sale in Bowling Green, KY. The list price was $140,000, and is for sale by owner. Rents will be between $975 - $1,050. 

Does anyone know why this deal would make sense for him? I haven't been able to figure out why he would sell to me under these terms and essentially lend me $130,000 interest free.

[Account Closed]

Originally posted by @Mark Stice:

I recently verbally agreed with a seller in my neighborhood to purchase a townhome from him for $130,000. As I understood the deal, he would finance the purchase and I would pay him $700 (542 in interest and 158 in principal) per month for 24 months at 5% interest. After the 24 months were up I would go to the bank and refinance the property to pay him off. The total balance after 24 months that I thought I would need to pay off was $126,000 which I saw as reasonable considering the property is worth between $145,000-$150,000. I had a contract drawn up and when I presented it to him he said this isn't at all what he wanted. 

Here is how he wanted the deal to work: He would remain the owner of the property for the next two years until I paid the balance in full through a refinance. The $700 wouldn't be amortized but instead be entirely applied to the principal balance. The property is in a really good location and has been on the market for less than a week. 

To give some detail on the property, it is a 2 bed 1.5 bath townhome for sale in Bowling Green, KY. The list price was $140,000, and is for sale by owner. Rents will be between $975 - $1,050. 

Does anyone know why this deal would make sense for him? I haven't been able to figure out why he would sell to me under these terms and essentially lend me $130,000 interest free.

You lost me at "He would remain the owner". Bad deal.