Seller financing during corona times

[Karl Platzer]

Hello Bigger pockets,

In need of some help in these crazy times.

I came across a nice off market property in Washington state. The seller is able to seller finance part of it. It’s a good enough deal that there is a fair amount of interest in it. So I’m moving quickly. I'm writing a few “options” and would love to hear your take on the terms. Buyer needs a 40 percent down payment so that leaves us with term, rate and price to negotiate. Since we’ve never had a pandemic like this before this is what I have so far.

Full asking price 99,500

Options:

A.

Price 99,500

Down payment 39,800

Note 59,700

Term 7 years
Rate 4%

Monthly payment 285.02

Balloon due on term 51,662.29

B.

Price 92,500

Down payment 36,800

Note 55,200

Term 5 years
Rate 4.5%

Monthly payment 279.69

Balloon due on term 50,598.87

C.

Price 85,500

Down payment 34,200

Note 51,300

Term 5 years
Rate 5%

Monthly payment 275.39

Balloon due on term 47,383.53

From what I gather common terms are 5/7 years on balloon mortgages. This seller is a professional.

Rates? With 30 yr fixed rates at sub 3 as of this writing I think that should be attractive.

Price the 99500 is full asking. So I dropped it as I wrote more favorable terms. Thoughts on the market? Don’t be shy I would love some input, what do you guys think of this market? Thank you!

[Brant Jones]

If the property is a value add opportunity, I would negotiate a much lower down payment, closer to 10%, with a higher interest rate (8 - 12%), then use the capital to improve the property so you can do a cash out refi, and take out the seller financing within 12 months (or sooner). The seller benefits from getting full asking price (or close to it) and a higher return during your rehab/holding period. Run the numbers and the math will tell you what to do.