Seller Financing Negotiations - Need Help

[David Siegel]

A property I listed on the MLS had the listing expire after 6 months. Shortly after an investor reached out wanting to take the existing loan subject to and purchase my property at full list price but do seller financing. I'm open to it. We are not needing lots of cash right now and were looking to sell to wind down operations as we just had our 2nd baby and life is hectic so I think this should be consistent with our investing goals.

I've never been a part of this kind of transaction and have no idea how to negotiate. I assume I'll also need a lawyer at some point. Who would be good at advising us for this transaction? Is anyone aware of what is normal in terms of down payment, interest rate and term for the seller financing loan? Any guidance is greatly appreciated! TIA!!

[Chris Seveney]

@David Siegel

Happy to assist as we buy and sell notes as well as do some private money lending. I have an attorney that can draft docs or a local title company could also do the same. Depending on the deal size I can give you more info on down payment etc. One thing not to do is to lend at below market rates - as if a time comes where you need capital, selling a low rate note will sell at a steep discount

[David Siegel]

@Chris Seveney thanks so much for your reply! I sent you a DM. If you're open to speaking with me more about this or making a referral to a lawyer familiar with these kinds of deals it would be greatly appreciated! 

[Eliott Elias]

There are only a few things you can negotiate here. Purchase price, interest-rate, down payment, monthly payments, & the handling of escrow.
Once all those are settled, you will write up a contract and open title to ensure it closes with title insurance.

[Peter Walther]

If I'm reading your post correctly, you're selling the property subject to your existing mortgage and taking back a second mortgage to secure part of the purchase price.

If that's correct, I believe your 2nd mortgage will be subject and subordinate to the 1st mortgage.  If the 1st mtg goes into default and foreclosure, you'll probably be named as a defendant and your lien extinguished, unless you pay off the 1st.

Also, unless you obtain a release of your personal liability for the 1st mtg, I believe you may remain liable for any portion of the debt left unpaid from the proceeds of the sale.

[Christian Ehlers]

You can do a "Mirror Wrap" instead of straight Subject To on the existing mortgage (it's basically creating a new mortgage where the terms are exactly the same as the first, so there is something to foreclose on if your buyer stops paying) this accomplishes the same thing as subject to but gives you more protection. 

Then for the seller finance portion you and the buyer determine the purchase price, down payment, interest rate, loan term, balloon payments, prepayment penalties or anything else you can think of (the first 4 terms are usually the most common and important). 

Typically a Buyer on seller finance is willing to pay a higher price, but in exchange are looking for lower down payment and/or interest rate than they could get at the bank. Most investors I talk to IDEALLY want 10% down or less, but everything is negotiable, if you are going to require 20% then you'll likely need to bring down your price or rate to make it worth it for them.  Hope this helps and good luck