Offering a cash-out option to seller financing?

Question

I debated what category to put this in, but I was hoping you guys had some input for me.

I have a seller who needs cash ASAP. I have enough cash to do the rehab, but not enough to buy the house and rehab it.

I was hoping to convince the owner to take a note for the sale price, that they could then sell to get the cash they needed. We'd allow them to get their full asking price on the note, so they could wait for the 1 year balloon payment, or sell it at a discount to a note buyer.

I'm wondering how hard it would be for the seller to sell the unseasoned note, and/or what they'd have to do to get it sold. I don't know much about buying/selling notes, so any advice would be greatly appreciated.

Loc R. · Answer

Marc,

If the deal is right, hard money should be quick to finance, so time shouldn't be an issue.

In terms of time on the market, you should probably read some of the blogs, articles, and posts on this site with regards to building up your buyer list and generating buzz on your property.  Assuming that it's going to take X weeks to buy & close, fix up and sell your property, you should be generating leads on selling the house the moment you enter an agreement.  Simple things like having a FOR SALE sign on the front yard while it's being fixed up, finding the area's best agent for the demographic that would most likely buy your house, and online media are all things you can do to drive potential buyers to your house.

Private funding is IMO the best route to go, if you can find the right terms that go along with your timeline.  There is plenty of $$$ out there, you just need to convince those people as to why they need to put their money with you.  Simply put, flip the situations:  You having all the money and someone wanting to borrow it for investment purposes.  What would convince you to open up your checkbook?

Loc R. · Answer

Marc,

How quickly do you think you can get the rehab done and the property sold?

Off the top of my head this sounds like a hard money scenario, as your seller is going to need 20% down from you and 3-6 months seasoning if he is to sniff .80 on his note (which still leaves him at 64% of his asking price + your down payment).

Try to see if he REALLY needs the cash now or if just wants out from underneath it.

Richard J. · Answer

LR we are looking to partner up with an honest person, like the fact that you are a Type A, let us know what you've accomplished and let's see if we're a match!  Thanks! -- Dawn
PS, like the fact that you're a PRO, shows that you don't mind spending a few bucks to support that which you utilize, indicates character in my opinion.

Marc Freislinger · Answer

I wouldn't mind hard money but for 2 things, I'm worried about the amount of time it would take to get the financing arranged, and how long the house will be on the market.
          
          It's not a bad area, but I'm expecting 90-120 days on the market.

I'm looking into some private funding also, I was just curious if this was a route worth looking into, but it doesn't look like its going to give enough cash to the seller by your numbers.

Offering a cash-out option to seller financing?

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