Seller Finance in Commercial Real Estate

[Kesete Thompkins]

Hello all. I’m working on making an offer for an apartment building where the seller is offering seller-financing. I am trying to think about how to structure the offer, as this is my first time dealing with this type of finance option and my first time working to acquire a commercial property. Any help with how to structure this offer/deal would be extremely helpful. 

Thanks! 

[Gino Barbaro]

@Kesete Thompkins

Find out what the seller is going to do with the money he receives from the sale. If he is going to put in the bank, then you can offer him an enticing rate of return in comparison to .05%.  

Start out by asking what he wants, and then begin to negotiate.  We always try to get th going interest rate, which is around 4.5%. The amortization we ask for is 30 years. Try to get the longest term. If it is a refi, then 5 year term is okay. Ask for 10 years, and then go down reluctantly to 7.

The only way seller financing works is if the seller is motivated. On our last seller financing, the seller held the 20% down on an $11 million purchase. We had no money of our own in the deal. The only reason it worked was the seller was extremely motivated and he had limited options.

Good Luck, and you can do it!

Gino