Seller financing

[Kevin Rademacher]

I have been analyzing a lot of properties and came across a few that talked about seller financing. What does that mean from a process standpoint. I haven't come across this topic a lot while looking at properties. So could someone explain the seller financed process too me? And how that would affect me buying the property. This one specifically is a fourplex. I appreciate any help so much! Thanks.

[Bill Gulley]

Wooooo! Seller financed notes usually aren't reported but they should be done so  that you can show or prove when payments are made! A loan servicer or a deposit account set up for deposits. 

The idea of not reporting a liability to a lender can land you in freaking jail, that is mortgage fraud, you disclose every loan you have be it a bank loan or private. Besides, they can find it through your name search on filings and other ways!

Being new to real estate finance here is what you need to know.

1. Ask for seller financing in your offer.

2. Negotiate the note terms, the amortization, the note rate and any balloon payment as a commercial note. The down payment is not in the note but in your purchase contract.

3. Once basic terms are accepted, go to your attorney or your title company who will have an attorney who can draft the documents.

4. You don't draft financing documents!

5. You don't get involved with guru junk like zero  interest or any other ploy, financing is not real estate!

You really do need to see an attorney and run the numbers, make sure you never pay more for a property than its market value because someone is financing it, financing does not add value to any property.  

Look  at the amortization schedule, if you have a balloon payment in 5 years, see what needs to be paid off, consider the property value, make sure you can refinance it and you  should start looking for financing 6 months before it is due, you may have to sell it!

That's really all you need to know at this point. And, as mentioned, landlords selling are your best bet, generally not Harry Homeowner who has to move. Good luck :)