Creative seller financing terms / options?

Question

What are some of the most creative seller financing terms / options you have done to get a deal?

Marisol Gallegos · Answer

@Michelle Tolentino Seller financing can open up some interesting possibilities when the buyer and seller are willing to negotiate. Some options worth exploring include seller carryback financing, interest-only payments with a balloon payment, lease options, and wraparound financing where the existing loan structure allows it.

I think the key is understanding the seller’s motivation. Some sellers value a steady income stream, while others want a faster exit or a specific down payment. The terms can often be structured around those priorities.

Don Konipol · Answer

Unless the seller is holding the note in a tax deferred or tax free retirement account, or is in the 0 tax bracket.

Chris Seveney · Answer

Amongst both parties in a transaction, of your experience, the more complex you make a transaction, the less likely it would be to occur. You want something that all parties can understand. Sometimes getting too creative convolutes things, makes it more difficult, and also can have significant tax ramifications down the road.

For example, 0% financing for a seller is a very bad idea because they still pay taxes on interest even though they're not collecting interest.

John Clark · Answer

None. Seller financing for family members, fine. They’re blood. Joe blow off the street — come back when you have the wherewithal. Strangers and I am down on my luck? That’s why God invented bankruptcy.

And don’t get me started about subject to financing. If you think concealing facts is necessary to your transaction, then your business is wrong.

I don’t care how many snakes you see in the road.

Nicholas L. · Answer

@Michelle Tolentino

i've bought on seller finance. do you have more specific questions? in general i recommend seller finance only if you're well capitalized, and i don't recommend sub-to unless you're a highly experienced HNWI in a situation where it makes sense for all parties

Michelle Tolentino · Answer

Seems like a lot more that goes into it it , I didn't even think that far ahead into it.! Thank you

Don Konipol · Answer

0 or very low interest rate, substitution of collateral, subordination of mortgage note, right of first refusal if note holder sells note at discount, split note into 1st and 2nd and sell 1st, package a number of seller financed notes and syndicate package, etc,

Michelle Tolentino · Answer

Thanks, Nicholas! Quick context: this would be a brand-new seller carry, not sub-to. I'm trying to keep my cash-in low, but I don't want a balloon.

I'm thinking small down payment, interest-only for the first 2 years, then converting to amortizing until it's paid off. Have you seen sellers go for that? What would make a low down payment feel safe to a seller?

Or is there another loan structure I'm not aware of that would work better in my situation?

Michelle Tolentino · Answer

Thank you! It's my first time possibly trying this out, so I'm exploring what options there are!

Adam Summerer · Answer

If there's any chance you'll want to refi out of the seller note later, talk to a lender before you sign anything. Pay the seller in a way that leaves a paper trail (bank transfer, not cash) because they'll usually want to see the payment history, and how long they need to see it varies a lot by program. Setting it up clean on day one makes the exit so much easier.

Creative seller financing terms / options?

Creative seller financing terms / options?

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