Why Do Some Investors Walk Away From Good Deals When th Seller Is Willing to Finance?

Question

I've seen this happen repeatedly in my 30 years of creative-financing experience.

An investor finds a property with potential, negotiates a good price, and then walks away because traditional financing doesn't work.

But what if the seller is willing to help finance the purchase?

Here are three possibilities worth exploring:

· Seller Financing: The seller accepts payments over time instead of requiring all cash at closing.

· Terms Over Price: Sometimes the down payment, interest rate, and monthly payments matter more than negotiating another $5,000 off the price.

· Creative Structures: Seller Financing, Subject-To, Wraps, and other financing arrangements may create opportunities that traditional lending cannot.

The key is knowing how to recognize, negotiate, and structure these opportunities while understanding the risks.

I've spent 30 years doing creative-finance deals and passing on creative ways to other investors.

How many good deals have you passed up because you couldn't make the financing work?

Ametria Chaney · Answer

John, this is a good question, and the answers here already cover the main reasons. From the agent side, the investors who walk away from seller-financed deals usually do it for one of two reasons. First, the terms look good but the property still has to carry the payment — if the rent doesn't cover the note, taxes, insurance, and a reserve, the financing structure doesn't save it. Second, the exit doesn't work: the buyer can't see how they'd refinance or sell out of it later, so the deal feels like a trap instead of a bridge. The other reason is simpler — some people are window shopping and will find a reason not to close no matter what the terms are. The ones who do close are the ones who know their numbers before the seller ever offers terms. Have you had a deal where the seller's terms were great but the numbers still didn't work?

Kevin Rapport · Answer

John, this comes up a lot with small storage. The deal doesn't fit the bank's box, so the buyer walks without ever asking the seller one question: would you carry part of this?

With seller financing, a $500K storage facility might need $25K to $75K down depending on the seller and the deal. That's a very different conversation than bank terms.

The catch is the same as any creative deal. The property still has to carry the note, and if there's a balloon, it still has to get paid. Terms don't fix a bad deal. They just make a good one possible.

When a seller says no to carrying paper, what's the objection you hear most?

Noah Wright · Answer

Thirty years of doing these means you've watched the part most buyers never get to see, and it's usually where they back out. Of the seller financed deals I've seen passed up, most are ones where nobody checked whether the rent could carry the loan that pays off the seller note. A lot of seller notes come with a balloon, and most DSCR lenders size that takeout loan off the property's rent. If the rent doesn't cover the new payment when the balloon comes due, the investor is looking at a forced sale or a renegotiation with the seller. Cautious buyers sense that risk even when they can't name it. How safe a seller note is depends on whether someone tested the payoff before anyone signed. When you set up a seller note, do you run the refinance numbers before you pick the balloon date?

Chris Colton · Answer

Hi John, thanks for posting this. I am still early and learning owner finance here in San Antonio, and the part about terms mattering more than price matches what I keep seeing. A deal can look fine on price and still not work if the monthly payment does not leave room. I am trying to slow down and understand the full picture before I move on anything.

Chris Seveney · Answer

You also find a lot of window shoppers in real estate. What I mean by that are people who claim they're real estate investors or want to be real estate investors, but will find every excuse why they should never close a deal.

Why Do Some Investors Walk Away From Good Deals When th Seller Is Willing to Finance?

5 Replies