Offering seller finance to current tenants

[Lee Eckert]

I own a few properties in Memphis and am currently listing them for sale, one of the properties has had the same tenants in it for 15yr and they have always paid on time.  The house is valued at less than what a bank would loan.    I am considering a 5yr seller finance at 6% with insurance and taxes included their payment would actual be about $10 cheaper than their rent.  

It seems that I would have less responsibility from maintenance and management fees and could actually net more, and a family that probably never thought they could own a house can become home owners.  

Contract would be written up by a lawyer and the loan secured by the property. 

Question?:  Is this a win-win situation or is there other aspects that I'm completely not seeing or considering?  Does this seem like a fair deal to the tenants?  To me?

[Douglas Skipworth]

Hi, @Lee Eckert and @Account Closed.

If your tenants are interested in home ownership and your willing to help them by selling and carrying the note, I think that's a great opportunity for both parties.  I'd just make doubly sure that the tenants are truly ready for the responsibilities of being an owner rather than a renter.

That said, I have bought many houses here from foreclosure and with seller financing.  Having been through both processes dozens of times, the event of default is not scary at all.  There are several really good real estate attorneys in town who can help.  Plus, if you ever have questions about it, I (and several others) would be happy to talk you through it. 

The biggest risk is that you take back the house and it's is worth less than the borrower owes (primarily due to deferred maintenance).  Hopefully, periodic inspections can prevent this.

Best wishes and please keep BP posted!