Seller Finance | Seller Getting Cold Feet on $600K Purchase 10% Down 3% Interest

[Charles Schram]

Seller saying they now need a bigger downpayment after agreed upon terms per subject line as they are worried we don't have enough skin in the game with 10% down down. I think this is a bluff to get more money down which they want to use to rehab their other projects (owns long term rentals nearby). They previously had it listed on market $100K higher and it didn't move. We got in touch as they took it off market to work direct. They currently run it as an STR but want to move out of STR management as they are getting older. We are purchasing this to use as short term rental.

LOI we sent was for 2 years at 3% interest then another 2 at market rate, 15-year amortization. We plan to put $300K into a rehab.

Seller, who owns the house outright, thinks they can now just sell for same price and put their money into the bank and earn 5% interest. They don’t have any other buyers and I think just want to strengthen their position. 

Trying to creatively assure them we will pay them back the balance in 2-4 years. Seller claims there are uncertainties with lending to a short term rental with the uncertainty of regulations, as always is the case. I assured them we are investing money into rehabbing the property to value add and BRRRR which we have successfully done in the past.

They claim at the very least their attorney advises getting 20% down from us for more skin in the game. 

Any useful language out there for reassuring a seller per a strong contract (which we are drafting with attorney as seller doesn’t want to do it), that can help ensure more security for doing a seller-fi deal?

[Jonathan R McLaughlin]

Ah attorneys…they are giving your seller business advice, not legal counsel. I wonder how much real estate investing the attorney has done. 

I would hold firm. Tell him he can take a 20% down offer if he has one.