Lubbock, TX · Member since 2017 · 9 posts · 3 votes
Suppose you get a seller to agree to seller financing, and part of the reason the seller agrees is because the seller wants the tax advantages of not getting all the sale proceeds all at once.
Now suppose you want to refinance with a bank at a later time. Is this refinance going to mess up the seller’s plan of getting paid out over time? Additionally, is it common for all seller financed deals to allow for refinancing?
Seems like bad form if you spent time pitching a seller on the benefits of seller financing only to refinance the deal and the bank pays off the balance of the note all at once.
But yes, when you refinance the seller would get the entire chunk of money. Usually, they aren’t looking to finance for 30 years, but expect to have you refinance in a year to five years, at least from my understanding. This isn’t my specialty though, so maybe someone that does seller financing will chime in.
But yes, when you refinance the seller would get the entire chunk of money. Usually, they aren’t looking to finance for 30 years, but expect to have you refinance in a year to five years, at least from my understanding. This isn’t my specialty though, so maybe someone that does seller financing will chime in.
Q: Is this refinance going to mess up the seller’s plan of getting paid out over time?
A: If their plan was to spread out potential capital gains tax, yes. But also consider that by the time you refinance, you've been paying the earliest loan payments which are primarily interest. If you pay for two years (let's say) and then pay off the remaining principal, their annualized return typically becomes quite high. If you want to share actual numbers I can show you the results.
Q: Additionally, is it common for all seller financed deals to allow for refinancing?
New to Real Estate · Midwest · Member since 2020 · 4 posts · 3 votes
6y
@Marco Bario I would love to take a look at the numbers on this. I've been asking myself this question on the thread for awhile now too and it was great to see someone asking exactly what I was thinking! Lol! Appreciate any feedback.