First time Investors here considering Seller Financing

[Levi Hibbard]

My wife and I are looking to purchase our first investment property. We are considering seller financing as an option for getting started as a way to get around the current interest rates being so high. The questions we have are the following.

1. Is this a strategy that would cause real estate agents to not want to work with us?

2. What is the best way to structure a Seller finance deal? I know this needs to be structured and presented to benefit the seller, but I am just not sure what structure seems to be most successful. 

3. How do we write up a contract like this? Is a Lawyer needed? 

[Ben Firstenberg]

To answer your questions:

1. I wouldn't say it'll cause agents to not what to work with you, but I would say the bigger problem is most sellers in the Atlanta metro don't want to pursue seller financing. You'll have a very hard time finding someone who's even willing to consider it and then they'll probably want very seller friendly terms. Most sellers would rather just wait for a stronger offer. 

So from the agent's perspective, I'm happy to work with you but basically, we'll just be firing off offers and hoping one hits eventually. Very similar to blasting out low ball offers. 

2. The EASIEST way to structure it would be as a first or second mortgage. You agree on an interest rate and payment timeline. The most "buyer friendly" terms would be something like 4% rate, 30 year payment. More "seller friendly" terms would be something like a 9% rate, with a 30 year Amortization and a balloon payment in 5 years. 

When I have clients interested in seller financing, I advise we submit two offers. One at whatever price the deal works for you without seller financing and one at a higher price with the seller carrying the first or second mortgage. 

And that's another concern I often have. If the property is worth $300k and you need to offer $325k in order to get it with seller financing, I'm not convinced you're better off. You're signing up to be underwater on a property from day 1. 

3. It's easy to include seller financing in purchase and sale agreements. The hard part would be writing up the mortgage documents. A lawyer would be needed for that. Whoever is the closing attorney working on the deal would be able to help with that. (You'll need a closing attorney anyways to transfer title)

Hope that helps! Sorry to be a buzz kill, but want to offer honest market information. Feel free to reach out if I can help any more. My contact info is in my bio