4 & 5 Unit Buildings that advertise “Seller Financing” but want 40% down

[Darnell Robinson]

New investor here. As I try to explore Seller Financing, I’ve come across 2 situations. 

2129 Clinton Ave, Alameda is a 5 unit building asking $2,350,000. Seller Financing available at 3.5% over 9 years left on current term & they want 41% down.

3868 Maybelle Ave, Oakland is a 4plex asking $1,460,000 at 5.25% over 5 years(agent says this is negotiable) and they also want 40% down to clear the first. 

I’m new on this seller finance area and called to find out what the terms were on each. The Alameda agent was very nice and professional as I explained I was new to this and had questions. He immediately sent me all the info I asked and said if the buyer that they current had in escrow didn’t get approved, he would call me asap.

The Oakland agent was rather condescending and told me that if I didn’t “have $650k to put down then I shouldn’t bank on getting any deals of this size done.” I explained to her as nicely as possible that I have had many conversations with private lenders and hard money lenders and boom 💥 she cut me off and scoffed at me that “neither of those wants to take a second position so I don’t think you know what you’re talking about!” I didn’t get upset I simply replied that I wasn’t so sure of that. To this, she got a little condescending so I I told her to have a nice evening and that I’d probably meet her at some point in the future and looked forward to learning more. (I’m also an agent in Oakland).

When a seller is asking for 40% down, is this because they want to take care of the first lien? 

Am I wrong for calling and trying to learn on the fly? 

[Osazee Edebiri]

Quote from @Darnell Robinson:

New investor here. As I try to explore Seller Financing, I’ve come across 2 situations. 

2129 Clinton Ave, Alameda is a 5 unit building asking $2,350,000. Seller Financing available at 3.5% over 9 years left on current term & they want 41% down.

3868 Maybelle Ave, Oakland is a 4plex asking $1,460,000 at 5.25% over 5 years(agent says this is negotiable) and they also want 40% down to clear the first. 

I’m new on this seller finance area and called to find out what the terms were on each. The Alameda agent was very nice and professional as I explained I was new to this and had questions. He immediately sent me all the info I asked and said if the buyer that they current had in escrow didn’t get approved, he would call me asap.

The Oakland agent was rather condescending and told me that if I didn’t “have $650k to put down then I shouldn’t bank on getting any deals of this size done.” I explained to her as nicely as possible that I have had many conversations with private lenders and hard money lenders and boom 💥 she cut me off and scoffed at me that “neither of those wants to take a second position so I don’t think you know what you’re talking about!” I didn’t get upset I simply replied that I wasn’t so sure of that. To this, she got a little condescending so I I told her to have a nice evening and that I’d probably meet her at some point in the future and looked forward to learning more. (I’m also an agent in Oakland).

When a seller is asking for 40% down, is this because they want to take care of the first lien? 

Am I wrong for calling and trying to learn on the fly? 

 Agents will be agents. Some will take the time to give you more info, some will expect you to know most everything in advance. I had an agent who got mad at me for asking for disclosures yesterday, and I just realized that he doesn't do much business here in the Bay and realize that most listings provide inspections. You just have to roll with it. The 2nd agent you mentioned could also be frustrated with their seller or the situation of trying to sell their listing and took it out on you. 

 As far as seller financing, my experience is since most homes in the Bay Area can get a seller who moderate to well qualified, paying with a standard financing or even cash, why would a seller want to finance? Most sellers want to get their money and go on to the next. Therefore, it is helpful to understand a sellers motivation when they are offering it. So 40% maybe paying off the first loan, but it could also be the minimum the seller needs to whatever they plan to do next. Also, a lot of seller financing, especially in the bay, arises when their as issue that obscures the more traditional sale.