Seller Financing Family Sale - How Can I Purchase a $400K Home for $275k from Parent

[Harry Shmelts]

Hello everyone,

I have a unique situation regarding a real estate transaction within my family, and I'm seeking some guidance and advice. I hope you can provide me with some insights or share any experiences you may have had with seller financing.

Here's the scenario: A family member is willing to sell me their home, which has an appraised value of $400,000. However, they are offering it to me at a discounted price of $275,000. While this is an incredible opportunity, I'm facing a challenge in securing a loan for the $275,000 due to high interest rates from traditional lenders.

I've been exploring the option of seller financing, where my family member would act as the lender and provide me with a loan to purchase the property. I'm wondering if anyone here has experience with this type of arrangement or can provide insights on how it could work in my case.

Specifically, I have a few questions:

1. Lets say they owe $40k left at 3% would I just pick up this loan? Where would they get the $275k they want?
2. How should I approach negotiating the terms of the seller financing agreement? What aspects should I consider?
3. What would be a reasonable down payment percentage or amount to propose to my family member?
4. Are there any potential pitfalls or risks I should be aware of when engaging in seller financing with a family member?
5. What would be a fair interest rate for both parties? Are there any resources or guidelines to help me determine a reasonable rate?
6. Is there any specific documentation or legal process I should be aware of to ensure a smooth and legally sound transaction?