Structuring Seller Financing

[CJ Pilon]

I am looking at a deal that i think is perfect for seller financed but I need to get a better understanding of some details. 

The seller is relatively young, about 50 , but is forced to sell her home because she is disabled and lives in an assisted living complex. Her intention is to set up an annuity with the proceeds from the home to provide a steady income going forward. While her parents have been helping manage her affairs, they are older and wish to put the funds on auto-pilot. It seems to me that seller financing will provide a higher, more secure return than nearly other investment strategy

I want to structure a 30 year  mortgage (about $100,000) that would pay the seller  4% to 5% per year. Because income security is important to the seller, I need to understand how I can structure this deal so the sellers are not put off buy the risks of carrying a mortgage. Specifically how do you manage a sale tto avoid an unscheduled  lump some payout, or the possibility of getting the house back.

While I'm asking, what else do I need to think about?

[Doug McLeod]

If you are going to buy the deal and the numbers/terms work for you - including giving up the possibility of early payoff, then a seller finance deal should be as good or better than any 30 year annuity she'll find.

If you are only thinking about the seller, but not really planning to be the buyer, I think you will have a hard time finding a buyer to accept the terms.  I would never want to be locked into a 30 year loan with no early payoff option.

You can write terms in the note either prohibiting early payment or at least putting in a stiff penalty to make the seller feel better.  As for getting the house back, that is normally the only reason for the seller to do owner financing at all - if you don't pay, they get the house back.  You might be able to find some kind of insurance policy that will pay off the seller if you cannot pay at some future point to avoid her having to foreclose on you, but you'd need to find some clever folks to figure out how to set that up.