Writing Terms For Seller Finance

[Jandy Stiff]

Trying to get a seller-financed deal under contract and they've raised 2 things that I don't really know how to address.

Part 1: Understand the seller's perspective. 

I know the bank has to appraise the property when I try to get a mortgage 2 years down the line. However, he said, "it must appraise at the timing of your new mortgage application. This can be problematic for both parties."

1. 1. What do you think the seller is saying here. I don't see how it's problematic for both parties, this is a very appreciating market.
2. 2. If the seller doesn't think it'll appraise at the end of the 2-year seller finance period for the agreed purchase price, what terms do you write in the contract?

My thoughts are that we agree on a price after appraisal, maybe 5-10% under ask? And then at the end of the 2-year term, it gets reappraised and I get the loan. If it's less, then we'll write terms in the contract that allow for renegotiation?

Part 2: Seller Brought Up Taxes On Their Gain and Added To Selling Price

I don't know about anything the seller goes through after they've agreed to seller finance. Can someone help me understand the seller's thoughts here? See quote below:

"I can do a 1031 C, however a seller-financed option for even a year or two wouldn't provide the cash for me to invest into another market. So, I would estimate the tax to be in excess of $20k." Then he added that 20k to the most recent all-cash offer he got, plus or minus the appraisal.

Did quick research and found something about installment taxes. So I'm not sure why they brought the sum of taxes up altogether. Can anyone clarify to why they brought this up?

Overall, I just want to make them comfortable and know where they're coming from.