Seller financing on a junker.

[Ivan Reyes]

There’s an old house in disrepair in a transitional neighborhood near where I live.

House is 4br/2.5 bth 2500 sf, built 1920 and Victorian in style. Its listed with an agent but it’s a private seller. It’s on the market for $30k and needs $30-40k in repairs to bring it back.

I want to offer full price with $3k down, seller financing and a 2yr balloon. My thought is this thing will be on the market for ever before someone buys it.

I want to repair it and then live in it. In a few years or so when the neighborhood development improves (and receives historic designation) it should be worth $150k or so.

How would the agent get paid if this were to actually be accepted? Is this a long-shot based on your experience?

[Loc R.]

You need to get more information from the seller before you make an offer. The biggest mistake everyone makes in negotiations is to assume that money is the biggest factor driving the seller's sale.

For example, suppose the seller doesn't need a lump sum upfront and just wants to to be out from under it, you could offer $1 down and buy it on a total seller carry back. That leaves an extra $3000 in your pocket to do other things.

As for the agent, you could always ask the agent to take his/her commission in the form of a note. Something like 5-8% on the note over 3-5 years. Once again, less money out of your pocket.