How to seller finance this deal ?!

7 Replies

I have a coworker who has a property in Phoenix Arizona and his wife lives there but wants to move to California. He has 5 years left to pay off on his loan, and I am planning to offer him that I can pay off the rest of his mortgage and then do the rest through seller financing. How would I initiate this conversation? To get seller financing, so I need an agent, a bank, or just a simple contract? Anyone have any advice before I approach this? OR, is there a better way to offer on this property? He is a motivated seller and wants to sell to me. Side question: if an agent sends me a property and I want to offer seller financing, would it be the same process? Would I still need to go through agent? Thanks in advanced! Peter

Hey @Peter Bui ,

I've never done a seller financing deal but I'm trying to get into one.  I regularly give seller financing offers in with my bank financing offers on properties.

When you do sit down and talk to him about it try and frame the conversation in terms of what it will do for him - he will get the mortgage paid off but then have a deed of trust on the property while you are paying him.  Show him a calculation of what you will pay him monthly and what you will pay him in total (sum of all payments) to show him that he'll earn so much more with seller financing than doing a straight sale.

Here are some resources you might find helpful:

https://www.investopedia.com/articles/mortgages-re...

seller-financing-home-sales-30164.html

@Peter Bui ,

I also forgot to mention you may want to have a quick chat with a closing company and/or attorney where the sale will occur to talk to them about specific documents your state may require.  Either should be able to help you with the practicalities of getting the papers in place.

The simpler and more streamlined you can make it for the seller the greater chance of success you will likely have.

Originally posted by @Josh Stack :

@Peter Bui,

I also forgot to mention you may want to have a quick chat with a closing company and/or attorney where the sale will occur to talk to them about specific documents your state may require.  Either should be able to help you with the practicalities of getting the papers in place.

The simpler and more streamlined you can make it for the seller the greater chance of success you will likely have.

Gotcha will do!

Ok so follow up question. So he has the house 83% paid off (25 out of 5 years). and I am planning to pay off the house for him. Then would I even need seller financing? I can just create a contract and pay him monthly after if he agrees correct? 

I might even try to sell the property through seller financing for a higher price so that the property isn't my problem anymore. Do you think that is a good idea? 

Or do you suggest any other ideas? 

Thanks!

Peter 

You need a contract he won't sell it for essentially nothing if that is what you were implying by only paying what is left on his mortgage. Unless he is very close to you he will probably charge more in interest than a bank so if you qualify for a traditional loan that would probably be more cost effective. The only time to consider owner financing in my opinion is when you can't qualify (in which case you should seriously look at whether REI is the right decision) or owner financing is a way to make the seller happy or get around loan limits.

@Peter Bui   You still need to agree on a price you're buying it for, and determine if that's a good deal.  So for example, the house is worth $100k and he owes $15k on it.  You give $15k for a down payment, which the closing attorney / title company uses to pay off the bank.  A new note is created for $85k and you make payments to the seller on that $85k (so yes, there's still seller financing involved).  The seller would have a 1st lien on the property.

Whether or not it's a good deal depends on the price of the property, work required, etc.  If it's only worth $80k then there's not much point in pursuing it, if it's worth $130k (and you're paying $100k total) then it could be a good deal.

- Tom

Originally posted by @Peter Bui :
Originally posted by @Josh Stack:

@Peter Bui,

I also forgot to mention you may want to have a quick chat with a closing company and/or attorney where the sale will occur to talk to them about specific documents your state may require.  Either should be able to help you with the practicalities of getting the papers in place.

The simpler and more streamlined you can make it for the seller the greater chance of success you will likely have.

Gotcha will do!

Ok so follow up question. So he has the house 83% paid off (25 out of 5 years). and I am planning to pay off the house for him. Then would I even need seller financing? I can just create a contract and pay him monthly after if he agrees correct? 

I might even try to sell the property through seller financing for a higher price so that the property isn't my problem anymore. Do you think that is a good idea? 

Or do you suggest any other ideas? 

Thanks!

Peter 

As Tom indicated, yes, you'd still be required to pay the Seller the balance, so, unless you got your own mortgage from a different Lender, then the Seller is still your Lender. As for "selling the property through seller financing for a higher price so that the property isn't my problem anymore", unless you'd already paid out your co-worker, the same thing applies!

It really does come back to: is it a "deal" from the start?

Would your co-worker be happy with the idea of you (immediately) wholesaling the property for a profit, when he could just have it listed for full market value in the first place? Just sayin'...

@Tom S. @Brent Coombs thanks so much that makes absolute sense. Thanks for the feedback. And Brent Coombs, sorry I forgot to mention that I will rehab it after it’s sold to me! And of course he hasn’t given me a number yet but the numbers have to work out cash flowing to begin with.

Thanks!
Peter