Seller Financing example and questions

[Ryan Doyle]

I've got a deal on my radar, but don't know if I can swing it without some sort of seller financing...and even then, I'm not sure I have the concept down 100%.

To make the numbers easier, I've rounded everything off, but these are close to what I'm assuming right now:

Asking Price $400k

Existing loan $288k

Assuming that the $400k is a reasonable price:

If I were to try and get a bank loan for that amount, I would be required to put down 20% or $80k (which I don't have).

If I get SF, I would get a bank loan for the $288k which is less than the 80% LTV, and the seller would hold $112k. Would this require a down payment on my part? And if so, who does it go to?

[Jon Holdman]

A bank is not going to give you a loan at any LTV and let the seller carry the entire remainder. The bank will want to see some of your cash into the deal before they will make the loan.

A possibility is to buy the property subject to the existing loan and have the seller carry the difference. That has risks of the loan getting called, but would let you buy with a smaller down payment than a bank. But it is very risky for the seller. You have no investment, so if things start looking bad, you walk.

Because this is a mobile home park the loan won't be a conventional mortgage. Commercial loans do often have assumption clauses. So, you may be able to get the lender's approval to assume the loan.