Feedback on my creative seller financed offer?

Question

We went to look at a house a few months ago -

About 15 minutes out of town, 5 acres, 5,000+ sq ft house, built in 1985.

It does need work. We aren't sure how much yet. There was a deep dive indoor pool that was dug out and never finished for example. We'd want to just fill it in. It's in an amazing room of almost all windows.

The lady who owns it and lives there bought it from the bank 30 years ago when the builder couldn't finish the house. She did a lot of the work herself to finish parts of it. Some things were never finished like it needs trim.

I connected with her on an emotional level about raising kids and how excited I would be to have that wonderful yard and forest for our kids to play in (all true! It would be amazing)

We are coming up on two years at our current residence and have some great equity already (close to 200k if we sell for asking price)

The owner of the house took it off the market but told me she'd still be open to selling it to us (her kids don't want her to sell but she doesn't want the upkeep of the place anymore)

We'd like to offer her something like what I'll outline below but I've never put together a creative offer like this before so want to make sure I am not missing something.

Offer:

Asking price of $495k (this seems reasonable to us since most houses of this size and acreage are closer to $750K-$1M - we are going to look at it again and will get a better idea of what work needs to be done and then possibly offer lower, also, of course we'll have an inspection done)

Take over her mortgage - she said she still owes about 60k

Down payment of $X - not sure how much to offer but she had previously said she wanted to get $150K down if she was going to carry so she could pay off the 60k and still have some cash to get into a new place. We could offer her the difference of 90K if we take over the 60K mortgage

Differed payments of 60-90 days so we can sell our house (with 4 kids we feel we need to move out to be able to stage and get the most for our house!)

The owner seems very willing to work with us and I want to be fair to her but also get a great deal. We are excited to live there for at least the next few years and fix it up. It has a huge yard for the kids to play plus 5 acres of gorgeous lush forest.

Any tips or things I should consider that I'm missing?

Jeff Stephens · Answer

Hi @Aloma Murray, it's good to meet you. I'm writing from just up the street in Portland.  It sounds like you've got an interesting opportunity here, and are off to a good start with it.  I think the most important thing here is that you've done an excellent job securing a relationship with her, and connecting on that emotional level.

There are lots of ways to go about deals like this, and I think there's an opportunity for you to gather even a little more information from her about her vision for her life moving forward, so that you can craft the perfect plan for you both. For instance, I'd want to know:

• where exactly does she want to move? Does she already have a place picked out, and does she want to buy it (rather than rent it)? Have her paint a picture for you of her vision
• when exactly would she like to make that move? Often moving out of a 5,000 ft2 house doesn't happen quickly; what would her ideal timeline look like? You can add value to her by giving her the flexibility she needs
• exactly how much cash will she need to make her move, and when will she need it? It sounds like she is implying $90k will do it, but is that just her estimate or is that based on something specific she's got her eye on?

I like your thought on deferred payments, and I think that one of your points of leverage/argument for that would be that it needs work. She may understand that you need a few months to fix it up a bit before you can live there.

Keeping her mortgage in place is certainly possible, but adds a little layer of complexity.  One structure that might work well for you both would be a lease-option structure. In this case, you would lease the house from her, with the option to buy it.  This would get you into the house for an affordable upfront cost (you'd make a payment of 'option consideration' to her) and start living there, while having the time to sell your other house.  Then, once you sold it, you could exercise your option and buy the house from her with a new mortgage, and take our her existing mortgage.

Whatever you decide to do, I'd recommend you frame it as a "proposal" to her rather than an "offer."

Good luck!!