Owner/Seller Financing Terms?

Question

Has anyone ever done "owner/seller financing" either as the buyer or seller?  What was the length of your term (5 years) with a balloon payment at the end?

I might have to take this route to purchase a condo, and while thinking about this further if there is no bank involved all the "interest" is essentially going to the owner of the unit as additional income.  So would it be right when negotiating the sale price of the condo to actually think of the selling price as "listed sale price + interest"?

My thinking is if the listed price is $300K the owner would make at least and additional $30K+ from interest; depending on the agreement, so the total selling price would be at least $330K+.

Thank you!

Luke Carl · Answer

@Dennis Gallof

Did you listen to this weeks podcast then? Lol

It's 2019 you're not likely going to make this scenario work.  And why condo? Where is this condo? Is it even legal to STR this condo? Are you aware of the giant insurance price tags? Have you googled non warrantable condo?

Just keep saving until you can afford a conventional loan. Cash out your 401k. Call your rich uncle. But don't tell him it's a condo he'll say that's crazy.

Josh Bakhshi · Answer

Dennis,

Before you sign anything, you would need to pay a lawyer to review it to make sure everything is kosher and you know what you are getting into.

That being said, I did one owner-finance deal.  I was the seller.  I got 10% over asking, 7.5% down, 12% interest and a balloon at 5 years on a 30 year loan.  Buyer was happy b/c it was still better than renting and gave him 5 years to fix his credit and improve his income.  I turned around and sold the note to another guy at 92.5% of the face value (minus down payment that I kept), which means I got my original sales price plus the 10% premium.  And the guy I sold it to got 5 years of about 12% on his money.

It was a win-win-win situation.  That is how you need to sell it to the seller