Seller financing: benefits and liabilities to the seller

[Steve Mcmahel]

I have come across an opportunity to purchase a SF home before it hits the MLS. Owners are retired and home is paid off. They are wanting $150K but they know it could sell for as low as $140K with repairs needed. Tax value is $129K and other similar homes in the area are selling for $200K and up after nice rehabs. It would probably appraise for $150K currently in our market. Rents would approach $1100 to $1200 with some slight rehab. I would like to make them an offer to avoid using a realtor and maybe save them some $$... My question is what would be the best strategy to make them 2-3 offers that benefit them and me at the same time. (I can make a sizable down payment -$30K -but could not offer all cash upfront without an investor ). Thanks

[Adam Rasmussen]

Off the top of my head here are some of the benefits that I am aware of to the seller:

- Able to spread any taxable gains over the life of the note instead of all at once. Typically resulting in much lower overall tax bill since they would be in lower brackets each year (assumed).

- Able to get much more interest on their money through seller financing vs parking the money at a bank. 

- If you default, they essentially get their house back and resell again.

A combination of different terms, interest rates, and downpayments is usually the way I look at those 

strategies. Maybe they want a higher downpayment and are willing to take less interest? And the opposite, if they don't really need a bunch of cash right away they might be happier making more on the interest side of things. Are they willing to stretch the payments out further and take a higher interest rate? 

Definitely a lot you can do.