13 Objections to Seller Financing.......

[Mike Watson]

Over many years of real estate investing, I have done many deals involving seller financing.  I have learned that seller financing is actually better for the seller than it is the buyer, for many, many reasons.  

However, if you want to be a rockstar at seller financing it is important to know all the seller objection out there and how to overcome them all.  

I won't list all 13 objections here, I doubt anyone would read the post, but I will list a few of them.  I use what I call the "5 Great Neutralizers" to overcome any objection on the list.  Great knowledge that has taken many years and deals to acquire.  

1.  Due on Sale Clause.  Most people think of this in their mind as the "Don't on Sale Clause."  The DOSC is a lot less difficult to navigate than most investors know.  Banks don't want to call the property due, they just have to feel comfortable about what is happening with the property and they will allow the wrap or subject to, to continue. 

2.  Seller wants to avoid the capital gains tax that comes with selling a property.  Keeping the property allows them to avoid capital gains tax.  However, when described correctly, most sellers that have owned their property for years will actually pay more taxes overall than they would selling and paying capital gains.  Lot of lost opportunity cost potentially too.  

3.  The seller thinks that you don't have the credit or income to get a bank loan.  

4.  The seller needs their equity to buy another property and therefore won't seller finance.  

5.  The seller needs to pay the mortgage off that you want to "wrap" to qualify for another. 

6.  The seller believes that you won't make the mortgage payment.  

Anyway, there are 7 more that I run into and overcoming them with the neutralizers that I use makes for a lot of fun deals where I don't have to deal with the bank and raise more capital.  The sellers love the deals too.  

[David Dachtera]

Seller financing is most successfully proposed when it meets the seller's need rather than the buyer's.

I'm listening to a mentor's noon conference call where in he described a scenario where the owner of a probate house staunchly asked a price that the condition of the property did not support.

Turns out, the seller's need was money to pay his bills. The buyer negotiated seller financing to help the seller's cash flow situation during the rehab with the seller being paid off on the ultimate flip of the repaired property.

That's just one example. I hope it helps illustrate the point, at least.