😵‍💫HELP!!😵‍💫 SELLER financed "agreement for sale/ contract for deed" multi-family

[Johnny McKeon]

Hi biggerpockets 👋

I'm working with an off Market seller who has five 4-plex's (20 units) in Mesa Arizona.

Him and his wife are selling off all their properties except for a beach front property that they purchased in Madera beach Florida. They are selling everything because they are in their 60s and don't want to be in the rental business anymore and don't want their rental properties anymore and don't want them back and they want to move to their new property in Florida to redevelop it and they said they needed approximately $900,000 in their pocket to renovate their Florida property.

For the five 4-plex's they want to seller finance them. The buildings need interior renovations and the seller has approximately 6 empty units out of 20 and the rents are all below Market so this would be a value add project

Originally, they wanted to seller Finance doing a deed of trust and promissory note but now they want to seller finance doing an "agreement for sale" or "contract for deed"

because they said they are worried about foreclosure. they don't want to go through a Lengthy foreclosure process and they just want to get their properties back easily if i was to default.

They said part of selling to me is though they don't want their properties back and they just want to be done with them

I currently on 10 properties with 45 multi-family units in the Phoenix Arizona Metro Market and I showed them my bank account balance and I've showed them my credit score and that I've never missed a payment on any of my mortgages including the anyone deal that I did sell her financing and I paid back that seller. And the current seller finance deal that I have that I make payments on time every month

I am a licensed realtor here in the Phoenix Metro and I also am helping my 20yr old brother find a 4plex to house hack so he can follow in my footsteps. He's pre-approved with FHA 3.5% down at $600k so a little less than what some of the 4-plex's are selling for in the valley.

The seller wants $720k for all 5 buildings but he agreed to sell one 4-plex to my brother for $600k but the $120,000 difference will be tacked on to my seller financed loan amount

Here's the seller financed purchase price when i buy the 4 buildings and my brother Purchases 1 building with FHA. The seller is not paying any commissions or any concessions

Purchase price: $3,000,000 (4 buildings at $750k per)

Down payment: 10% = $300,000

Loan amount: = 2,700,000

Interest rate: 5.5% interest only

monthly payment: $12,375 (due to sellers every month)

My main question and concern is does anybody have any familiarity with doing

An "agreement for sale" or "contract for deed" that they can shed light on ?

I have done two seller financed deals where we just did a deed of trust and promissory note and I have some other properties that I just purchased out right using conventional loans, DSCR loans, VA and FHA for my house hacks

What are the pros and cons as a seller wanting to sell as an agreement for sale?

And what are the pros and cons as a buyer wanting to buy as an agreement for sale?

How would this affect me remodeling the properties, getting a HELOC or doing a Cash out refinance later? From what I was reading it says I wouldn't actually own the property.

would you personally want to do an agreement for sale? Or Would you just explain better how a deed of trust and promissory note work?

Thank you so much to everybody for your help! I appreciate any wisdom or guidance that you can share

[Chris Potter]

Johnny,

The difference between a DOT and contract for deed is that with a DOT you take title to the property and with a contract for deed you don't, it's that simple. A contract for deed benefits the seller a thousand times over but adds that much more risk to the buyer's down payment. A DOT is recorded and that's your security. In a contract for deed you could record the contract, but it doesn't secure your down payment the way a DOT and title to the property would. As a buyer I would never go into a contract for deed situation. Those are usually done on land deals and some sellers that talk buyers into it with buyers that don't have as much experience. Borderline predatory in my humble opinion. I would definitely stick to my guns on this one and demand seller finance or walk away. Just my two cents for whatever it's worth.