Where can I learn more about seller financing?

Question

Hello there,I am reading the multi-family millionaire. And, I have read other basic books. I also listen to some of the BP podcasts and occasionally I hear praises about seller financing. I found a really interesting listing where the seller is open to seller financing.I qualify for a conventional loan easily, but with the higher rates and 20-25% down, it kills my returns, so seller financing at maybe 5-10% down, I could have a good return with appreciation.

From what I gathered,

- I would need to hire a real estate attorney to be able to close the deal. The seller would also have to hire an attorney.
- As long as I can sell myself to the seller, I could be an appealing option since I have strong job stability and financials. The seller would probably be a retired investor who doesn't have the energy or desire to continue managing the property and want to collect a paycheck.

So my questions are,
- Where can I learn more deeply about this? Any books or podcast recommendations would be appreciated.
- What's a good offer?
- Assuming I am working with a retired investor, what happens if the seller perishes? Does the note get passed down to the family?
- From forbes.com, it sounds like they typically have balloon payments. Does it always have to be the case? Can it just be a 30-year loan?
- If at some point I want to refinance to a lower interest rate, I could do that freely, correct? As long as the loan principal is paid in full?

Thanks ahead of time! 🙏Have a great weekend.

Marco Bario · Answer

Be careful with balloons. You don't know how the property will perform, what natural disasters (or pandemics) might occur, or what the credit markets will look like when it comes due. If the seller won't let it go, see if you can negotiate an upfront option to extend.

Beth Johnson · Answer

Check out Cody Davis' episode # 621 on BiggerPockets.com. He's a seller financing superstar! How Cody Davis Acquired 81 Units By The Time He Turned 21 (biggerpockets.com)

Facundo Gauna · Answer

@Ryan H. Thanks! I listened to several episodes already and it's been super useful. I appreciate it!

Ryan H. · Answer

Jeff Stephens over at https://www.thoughtfulre.com/ loves to talk about seller financing and I've learned a lot about it from him.

Facundo Gauna · Answer

@Marco Bario that's a great tip. How could I forget about pandemics? 😅

Chris Seveney · Answer

You could either use an attorney or a title company as they can create all the documents. The only difference between seller financing and traditional financing is who the bank is (which in this case the seller). You can negotiate the terms and then the title company can write up the mortgage and note. I would say do not overthink or overcomplicate things.

David M. · Answer

@Facundo Gauna

As mentioned above, don't over think it.  Instead of the "bank" holding the Note, the seller is holding the Note.  When it comes time for you to refi, its like any other refi (unless your Note conditions says something about prepayments...) .  Yes it could become difficult to get a payoff statement and any other coordinating documents to close.  For example, what if the seller is away on vacation overseas for a couple of months and has limited availability?  At least with a "regular' lending instutitions there is a "company" of people to help handle these mundane requests.

Yes, if the seller passes away, its still his asset so will be governed by his Will or governing State laws.

The Forbes article is just an example.  Lets face it, you can pretty much negotiate anything --- it just has be legal of course.

If you have a savy investor, he could also resell the Note by the way.  There is a huge investor market for owner-occupied seller Notes.

Are you looking to purchase to live or invest?

Also, remember seller financing in my experience is still a higher rate.  There is really no free lunch in this world.

David M. · Answer

@Facundo Gauna

Yes, that to me is a good interest rate for an investment property.  As long as you are fine with the other terms, especially the 5yr term, it doesn't sound too bad.

I am not sure if its necessary for your interests, but one might want to have a company make sure the Note docs are properly handled.  I did speak to one company that deals in seller financing, but I think all that stuff really protects the seller / Note holder.

Good luck.

Facundo Gauna · Answer

Thanks @Beth Johnson. I saw that in my queue. I'll take a listen.Also, thanks, @David M. and @Chris Seveney. Just trying to figure how what I don't know. Sounds like it should be straightforward. Also @David M. to answer your question, I am looking to invest. I just learned that the seller is asking for a 5.75% interest rate, amortized over 20 or 25 years, with a balloon payment at 5 years and 33% down. The interest rate seems lower than what I've been quoted for conventional loans.

Where can I learn more about seller financing?

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