Potential Seller Finance deal to purchase primary?

Question

Hello BP,

I currently reside in Valencia, CA, I own my Primary residence (townhouse) and a 4-plex here in Valencia. I have been thinking for a couple of days now that I want to purchase another townhome / SFH in the San Fernando Valley, would it be possible to find a seller finance deal to purchase another home in the area that I want? If so, what would be the first few steps in the right direction? Would I just need a realtor?

Thanks!

David Ross · Answer

Hi Brandon,

I'm not sure you need seller financing from the sound of it.   If you have your VA eligibility and you're looking to buy a new place to live in and then rent out your existing property, that should be no problem.   As you already touched on, you won't have a down payment as a Veteran.   If you're concerned about closing costs, you can place your offers requesting the seller to cover your costs.   Here's a simplified example of how this can work (or at least a good way to wrap your head around it):Let's say the property you're interested in is listed for $100k and for whatever reason, you think the seller would accept an offer at $90k (maybe it's been on the market for a bit and they've recently reduced the listing price).    You might write up your offer at $100k purchase price, asking the seller to contribute $7k to your buyer closing costs.   In this super simple example, the seller nets $93k ($3k more than you were estimating they might accept which is a win for the seller).   For you as the buyer, you come to the closing table with $0, instead of $7k because the seller is covering your closing costs and you aren't putting any money down because you're a Veteran.   Win/win.     Since you're not allowed to finance closing costs on a purchase transaction, this is a way of essentially accomplishing the same thing.   Instead of negotiating for the absolute lowest price, your focus is on getting into the deal with little to no money out of pocket.

Let me know if you have questions or need help qualifying.  Happy to help.

Brandon Chen · Answer

I don't need a downpayment because I have yet to utilize my VA home loan, I want another townhouse or SFH in the San Fernando Valley because of where my job is currently located, just makes everything way more convenient for myself. I would rent my Town home out right now and cash flow really decently. I do not want to let any property go though.

Jonathan Greene · Answer

Anything is possible, but most of the time people are looking for seller finance, it's because they don't have enough money for a downpayment. But they forget they need money for upkeep and maintenance and reserves. Why do you want another property right now if you only want it via seller finance?