Seller financing, deal analysis.

[Martin Cozzi]

Hi,

My neighbor is, unfortunately, getting too old to maintain his property, and has decided to move 5 miles away to a new house that requires less maintenance (no trees on the new property). Here is what I know about the situation:

• He somewhat got in his mind that his house was worth $280k.
• Comps show that similar houses which were remodeled sold for ~$240k a few months back.
• The house he's moving to cost him $260k, so that's what he's looking at getting out of the one he's selling.
• The house needs about $15k of renovations.

It's not currently listed, and the market has been fairly hot in this area, so I am trying to figure out a way to make this work, throughout conversations, education, and some reasoning.

I'm thinking about ways to:

1. pay less than what the house is worth.
2. make sure he gets the amount of money he needs out of this deal.
3. close on it before they put in on the market (saturated with California cash buyers)

I am thinking about telling them that I am willing to pay "$260,000", which is what I know he wants, by offering him seller's financing. 5% interest rate over 5 years with a balloon payment.

If I reverse the $260000 after 5 years, it looks like this:

Seller finances $200000 over 5 years at 5%:

Downpayment: $12,000

Seller interest over 5 years: $48,076.10

Principal paid over 5 years: $15,268.85

Balloon payment after 5 years : $184,731.15

Total:  12,000 + 48,076 + 15,268 + 184,731.15 = $260075.15

That would help him get to his $260k price.

Now for my side of the deal:

Down payment: 12000

Seller financed loan: 200000

Repairs: 15000

Total = $227,000

That house will appraise at about $250-260k after repairs.

Am I headed into the right direction with this proposal? What would you do differently? Anything I should be aware of?

Feel free to ask me any questions!