What Are Good Seller Financing Terms

[Brian Mackey]

Hello,

I have an off market deal on a duplex right across the street from me.  The seller and I have agreed on a purchase price of 288k.  The top unit is good to go, the bottom unit needs work, and there is actually a 3rd kitchen in the bottom unit, which I will close walls up to make this whole thing a Triplex.  This will be my second House Hack.

The seller does not want a realtor involved, and I want to do the transaction without one to learn the process.

THE QUESTION: IF I have to go the Seller Financing route, what would you guys expect to be a good set of terms?  I imagine once all the units are good to go, and without me living in it, I could collect close to 3000-3500 in rents.  I want to be ready with a backup plan just in case the Lender does not see it as a financeable property.  

Id like to put as little down as possible, I understand there would be a balloon, and a higher interest rate.  What should I look to offer to make it beneficial for both of us.

P.S. I have been pre-qualified and everything, so I can go the conventional route if necessary.

Thanks in advance BP Fam.

[Account Closed]

Originally posted by @Brian Mackey:

Hello,

I have an off market deal on a duplex right across the street from me.  The seller and I have agreed on a purchase price of 288k.  The top unit is good to go, the bottom unit needs work, and there is actually a 3rd kitchen in the bottom unit, which I will close walls up to make this whole thing a Triplex.  This will be my second House Hack.

The seller does not want a realtor involved, and I want to do the transaction without one to learn the process.

THE QUESTION: IF I have to go the Seller Financing route, what would you guys expect to be a good set of terms?  I imagine once all the units are good to go, and without me living in it, I could collect close to 3000-3500 in rents.  I want to be ready with a backup plan just in case the Lender does not see it as a financeable property.  

Id like to put as little down as possible, I understand there would be a balloon, and a higher interest rate.  What should I look to offer to make it beneficial for both of us.

P.S. I have been pre-qualified and everything, so I can go the conventional route if necessary.

Thanks in advance BP Fam.

Seller financing is always totally negotiable. There doesn't even need to be a balloon. Interest rate could be the same as a bank. Talk to a mortgage broker first to see if it even can be financed later.

Then, once you have a price set you offer zero down and 4% interest on a 30 year mortgage. Why? Because you don't know what he will accept. He will reply with something like, "Well, I need something down" and you say "Ok, how about 5%" and it goes back and forth until you hammer out the details. Then you put it down on a purchase and sale agreement and contact an escrow company or attorney, get a title report, and set a closing date. The escrow company or attorney will draw up the appropriate paperwork. And then get landlord insurance and a flood certification.

I'd have a plumber scope the sewer line (blockages, cracks) and look for any nasty weak spots in the house in the plumbing (mold, water soaked walls, dry rot, termites, stains) just so you know what you are getting into. I'd have an AC guy check heat and AC and I'd have a peek into the attic to see what kind of wiring I have and if there are any water leaks from the roof. Remember, you are in hurricane country and wind and rain blow horizontally so check to see if the roof has been properly repaired and that there isn't any slippage in the foundation.