Seller Financing Structures and Setup

[Brad Mirkovich]

I want to move forward with setting up a seller financed deal, but am unsure on how to approach and how to structure the deal. I’ve heard of two structures and want to know if there are any others that anyone has used. 1. Seller carries a note similar to a conventional loan ( x% down payment, y% interest rate, 15/30 year mortgage) 2. Seller carries a shorter term note at a higher interest rate and accepts interest only payments for the term. At the end of the term a balloon payment for total amount of the property price is due. The buyer then refinances the property with a conventional loan to pay off the seller. Are these typical setups? Are there other structures work? Once a structure is selected, what’s the best way to present that to a seller? Informally or should a contract be drawn up and presented? Any advice is appreciated!

[Derek Dombeck]

We buy and sell with seller financing.  I would not let just any title company draft a note and mortgage. It's extremely important that you understand your documents in the event of a default and the standard language in a boiler plate note and mortgage is structured primarily for consumers, not investors. As far as structuring goes, you can set the terms anyway  that makes sense for all parties involved. We utilize leases, options, land contracts, notes, and mortgages all in different ways depending on what we need to accomplish. If you really want to be able to explain it to sellers, you need to learn all of the different structures well enough to be able to educate them. Seller's need to have confidence in your ability to do what you say you will do and if you can’t explain the process, that won't happen . 

Happy Investing 

Derek Dombeck