Owner finance deal set up too good?

[Josh C.]

I was all set to close today, but the bank waited til the 11th hour to tell me the comps were too old (2 years old) and there's no way they could take the loan. This was a small bank who is supposed to be innovative, but couldn't do it. I know some people at chase bank and they gave me the same story. The house appraised at purchase price so I'm a little confused. Either way, doesn't matter, deal is dead. So I thought. The house is great, so I called the seller directly and asked if he would sell it to me 0% down, 5% rate, 30 year schedule with a 3 year balloon. He say sure thing.

I was surprised as he is not motivated being a well to do investor and the property is fully rented, but repairs have been neglected and I'll drop 15K in the next 90 days.

Since I've had under contract for the last 45 days I've done my DD. Tenants are great and I've climbed all through that place. Very comfortable with my numbers.

Sorry for the long post. My question is how does this actually work? The gritty details. Can he give me a land contract if he has an outstanding mortage? (my realtor says he did have one of 140k) What are my risks?

Thanks in advance.