Talking directly to seller about creative financing or agent?

Question

So this duplex I want is for sale. The person selling is the realtor and the owner.
Checking they have about 118,000 on their loan left. They are asking 515,000 but I am certain they are going to get offers over that.
I can not afford much over 515,000 with a bank loan. How would I go about asking the seller about creative financing? I was hoping to get a bank loan for let's say 200,000 and pay off their loan, give them a down payment, and then seller finance the rest. Would this be reasonable if the numbers work? If so, should I ask my realtor about it and have them pass on the info? Should I call or email the seller?

I'm not sure how to go about this with contacting the owner.
Thanks all

David M. · Answer

@Tyler J.

No problem.  FYI:  I don't normally hear of seller financing AND a bank loan.  its two liens, and how often nowadays do you have two loans on a property --- just notionally...  Good luck.

Nathan Gesner · Answer

You should communicate through your agent. They should be experienced in communicating objectively and negotiating, without giving away the wrong information.

Bobby Nilsen · Answer

@Tyler J. I would reach out to the owner/agent. You never know what’s possible if you don’t ask.I would not bring in another person unless they are the ones that brought the deal. Chat with the owner and let them now your thoughts and you’ll find out real quick if what you I think you want to do is realistic. Have a conversation and see where it goes. You could spend unnecessary time talking to your agent getting a hold of them running circles trying to see if what you want to do is possible when you may have your answer in one call or a short meeting with the seller/agent. You may get more success as well when the seller is double ending their own deal. We have done a seller financed deal with a loan in the SF Bay Area just because we got creative and asked. Everyone would have told us it’s not possible, and they would have been correct if we didn’t ask or listened to their opinions, even our agent told us it’s not likely. Do you and roll with it. If you want to chat always open to hearing what you have to say and seeing if I can help.

Bill B. · Answer

Did you pick $200k out of thin air? You say you can’t afford much over asking. Why not start there? If you can afford asking and it’s worth at least that, offer a traditional deal at list. You can bring up increasing your offe to match other offers if the seller will finance the amount over. Asking. You might find out it’s a 1031 and they need all the money. Or that they like the idea of charging you 6-8% on a safe loan if you’re bringing 20-25% down. (Anything you get as a loan is worth nothing to them and they’re already facing $100k+ in commissions and taxes, may $150k+.)

So when you offer to get a loan for $200k, unless you also bring $100k in “cash” they’re actually upside down the $100k MIGHT make them even. But it’s certainly worse than selling for list.

This is my property and I was choosing between “just list” at traditional terms (which you say you can afford) and some kind of seller financing, the WORST deal I consider is $600k with $150k from you, $350k loans and the $100k due in 5 years. I’m risking $50k to make $50k in 5 years 14%. But you’re saying it might go over list with a traditional offer? Then just tack the amount over list on to sales price (Still $50k higher) and on to your downpayment (to cover taxes and commissions and keep my risk at $50k).

Tyler J. · Answer

You’re absolutely right though. My hopes is that the seller does not need ALL the cash right away and would be interested in the additional interest income. I was not aware of the 2nd position lean. I now see how that can cause issues, and if I was the seller I probably would not take that deal.

Thank you for the feedback. I may bring up the idea to my agent if my initial offer is not accepted. Thank you again!

David M. · Answer

@Tyler J.

First of all, you need to find out if the seller is even interested in seller financing.  Maybe they need the funds for their next deal, or home.

Personally, I wouldn't lean so hard on your own agent.  People seem to think agents are supposed to be able to do everything super well--- it depends on what you need or want your agent for.  You can always ask for a meeting with the seller, which is nicely thelisting agent, and the three of you can sit down (or teleconference) and negotiate this aspect of the deal.

Getting the initial $200k loan will be difficult assuming you are going with the selling price near the asking price.  You will need to disclose to the lender how the remaining $300k will be settled.  Seller financing SHOULD be more expensive than a conforming loan so the bank won't be able to approve you given what you've said.  Also, the seller would also be taking a second position lien which will be much riskier for them.

Lets face it, anything could work since most everything is negotiable.  But, in this seller's market I'm not sure why he would take this deal.  You said it yourself, he will probably get more than asking.  Why bother taking less than what the market can give, have a 2nd position lien, and become a lender???  We just had a similar thread and the board was of the mindset of "gotta bea  way to make the deal" and/or "find a better agent to represent you.."  etc.

Put it another way:  if you were the seller why would you accept this deal?  ---- That being said, you need to figure out what the other party really needs/wants.  If it doesn't match up, it doesn't match up.  That's business, sometimes unfortunately.

Sorry I couldn't be more positive.  Good luck.

Sergey A. Petrov · Answer

Go through your agent, that’s why you hired them. If you don’t believe he/she is up to the task, hire a new agent to represent you. Even if you strike a deal directly with the seller your agent won’t know how to navigate it if they are not qualified

Talking directly to seller about creative financing or agent?

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