Need advice on an seller finance offer
Hi,
I am selling 2 four-plexes . I got an offer but was asked for seller financing. I have never done a seller financing deal before. So, if the BP community can help me and share any advice/wisdom/gotchas to avoid.
The numbers are:
- I am selling each fourplex for ~$200K .
- I owe about 85K on one of them and on the other one, I own free and clear. My bank will not allow wrap mortgage so I will have to pay off this loan.
- I believe that closing costs will be about $28K (6% comm + closing costs)
My realtor mentioned that the buyer is willing to purchase for 25% down.
I am thinking that the variables are: purchase price, % down, loan term, and interest rate.
I would like not to have to put any money in to close so I am thinking that I should ask for at least $115K down ($85K mortgage payoff + 28K closing + 2K buffer).
My realtor mentioned that a typical interest rate would be between 8-12% and recommended 9.5% on a 30 year amortization and I could request a 3-5 year term.
My questions are:
- On the purchase price, should I push for a full purchase price since I am accepting the seller financing.
- What loan term should I push for? 3 years, 4 years, 5 years or longer?
- What interest rate should I push for? Is 9.5% about right? Too low? Too high?
My motivation for selling the fourplexes is to re-invest the capital into another investment. So, this is not an ideal offer but its interesting. I am also looking at it as great learning opportunity.
I welcome any advice.
Thanks,
Dean