Please Help Understand/Analyze Seller Financing Offer

[Brandon Bass]

I have one of my rental properties listed for sale. I received an offer to sell it for full price with seller financing. I never really considered going the seller financing route, and know little about it, but it does seem to offer some good benefits to all involved.

Here are the terms of their offer:

415k Purchase Price (full price), 20% down

Finance the remaining 332k at 8% amortized over 30 yrs with a 3 yr balloon

Here are my questions:

1. Are the seller financing terms being offered good given the present day market? I feel like 8% is around what someone with good credit could get on a 30 yr fixed loan these days. Is it common to charge a similar rate or should I being charging more/less? 

2. Do I just have to take a leap of faith that the buyer will pay as outlined and not walk away at some point? For proof of creditworthiness the buyer is only offering current bank statements and proof of having paid off a seller financed loan before. The buyer's Realtor said she's done several such deals with this person and that because he's very private and doesn't like banks is why he prefers these types of deals. I don't think I can get any kind of credit check out of him. Should I try to get more down payment money to give myself more protection?

3. The buyer intends to occupy the property. I will only do this one seller financing transaction in a 12 month period. Does Dodd-Frank apply and I need a mortgage loan officer, or does it not? I've read several articles on Dodd-Frank and SAFE act and I'm still confused about when it applies.

Thanks for any help you can give.

[Joseph Gozlan]

@Brandon Bass A few things to ask/consider:

1) Why do they ask for seller financing? Some people are not bankable just because they are a business owner and conventional lenders don't really know how to comprehend complicated tax returns. Others, on the other hand, are not bankable for a good reason! Figure out the reason.

2) Texas is a homestead state. If they move in, eviction can be more challenging than if they were buying it as an investment.

3) Like was mentioned before, if they can't get a conventional loan today at 8% what makes them think they will be able to get one in 3 years?

4) with a 20% down, conventional loan for someone with good credit would be in the 6.5%-7%  (which makes their 8% offer another flag)

5) No matter what you do, make sure it's YOUR attorney that writes up the documents for the note and VERIFY the note got recorded by the title company after closing.

Good Luck!