Seller Financing Structure/Terms

[Tim Farmer]

What type of creative seller financing structures have BP members used to get a deal done?  I'm in Los Angeles and I think the only way I'm going to be able to put together a deal that cash flows will be to do some sort of seller financing/installment setup.  Can someone share the details of the structure/terms of their creative deals?  

I've also heard about outlining several financing options when submitting an offer (i.e. 1 traditional financing, 2 creative/seller financing options) where you show the value of seller financing to the seller (quicker close, tax savings of spreading income over several years, interest earned, etc.).  Has anyone done this?  Would love to see an example if so (with sensitive info redacted of course).  Thanks!

[Loren Clive]

Never closed on it after 9 years in biz, but have offered seller financing for some of my clients. Sellers need equity to do it. Usually it's more popular in a down market. Sellers much prefer to sell to qualified buyers and get their cash immediately.

Typically buyer needs 10% down, or cash equal to the cost of litigation should they default on the note, then buyer agrees to interest only note at a couple of percentage points higher than bank interest rate for 3-5 years with balloon due at term. Negotiable as to who pays for property taxes, HOA, other maintenance in interim.

The idea is the buyer will be able to refinance at the end of the term and thus officially close on the property.

When I represent buyers here on Maui I can tell you seller financing is VERY hard to come by, and I take it as a red flag that the buyer's not qualified. So if you have the 10% down, be sure to let any sellers/agents you speak with know that via proof of funds so they take you seriously.

And remember, you can't have price AND terms. Don't go writing a lowball seller financed offer; you have to make the seller financing really attractive to the seller for it to work.