Owner Finance Offer ~ Negotiation Advice

[Veronica Brock]

I have property listed for sale in Tennessee, $76K.  It is improved land; there is no house. There is no mortgage.

I have just received a verbal offer requesting owner financing.  The offer is $72K with a $25K down payment, interest only payment.  They have asked for a Balloon in 4 years, but offer that they will likely pay it off in 1 year.  They want there to be no prepayment penalty. They volunteered a negotiable interest rate.

Does an "interest only payment" suggest they are agreeing to pay $25K in interest, no matter when they pay it off?  Or am I misunderstanding these terms? 

Does this sound like a fair offer, and/or what should I counter?  I have never sold property, and certainly have no experience with owner financing.

Advice?

[James Wise]

@Veronica Brock

Welcome to the site.

$25k is the amount they will pay you up front.

They will pay you the remaining 47k in the form of an interest only mortgage with a principal payoff at year 4.

Lets use an example. $47k @ 8% annual interest is $3,760 per year or $313.33 per month. So if this were the case they would pay you 48 payments of $313.33 ($15,039.99) then at the end of year 4 pay you the remaining principal balance of $47k.