Need to know the nuts and bolts of seller financing

Lender · Fremont, CA · Member since 2014 · 292 posts · 102 votes

I have a SFR that i would like to seller finance. Is there a website or a doc that outlines each and every step to do that ?

Where do i start the process ?

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Curt Smith

Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes

11y

If you finance to an investor, Dodd Frank is not in the picture at all and it;s a standard Note and mortgage. Literally any closing Attorney has boiler plate notes and mortgages he'll edit up per your term, interest rate and late fee. I suggest you use at least $120 late fee. My notes started out with $30 late fee and the darn borrowers just considered that cost of convenience of being late!! LOL

I wrote a terse ebook (1 page actually) on seller financing to an occupant following Dodd Frank. PM me.

No one is posting helps here because we are all worn out on the 1.5 years and zillions of posts on this subject. LOL. We're all pooped on the subject. It's simple enough especially for a one off like yours to an occupant. You have to be very careful in interviewing buyer prospects that they have good jobs, low debt payments and are credible and reliable payers. Folks who don't qualify for bank loans can be good payers but often they are not. Which is why they can't get a bank mortgage. So you have to put effort into the face to face interview, credit checking (mrlandlord.com or http://www.ctcredit.net/tenant_screening.html) where you get the full credit report, fico, pays on time (or not) past rentals that you MUST match up with the rentals they give you on the application. IE folks being evicted will drop past or current rental address from the app. And so much more.

There's more work in the step of being a landlord interviewing the buyer, than there is in originating the note. So your focus should be on finding a reliable payer buyer. Preferably an investor, but ok if an occupant.

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Samson Kay
Investor · Chicago, IL · Member since 2013 · 227 posts · 31 votes
11y
@Pari Thiagasundaram I guess we need to know more about the deal and what you are trying to do.
Are you trying get the current owner to finance 100% of the deal? or are you getting a conventional loan and having the seller finance the down payment?
The two seller financing deals I did were the hardest/longest transactions I've had to do to date. Its almost not worth it. Theres alot of legal footwork you have to go through, and if you do involve a conventional bank, it further complicates things.
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Pari Thiagasundaram
OP
Lender · Fremont, CA · Member since 2014 · 292 posts · 102 votes
11y
I have a property free and clear. Would like to find an investor or a first time home buyer to whom i can seller finance and hold the note.
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Fred Heller
Real Estate Agent/Property Management · Houston, TX · Member since 2014 · 1k+ posts · 827 votes
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Seller Financing - How It Works
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Brian Gibbons
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
11y
www.IRS.gov
Search installment sale residence
Free and clear properties
Search imputed interest
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Pari Thiagasundaram
OP
Lender · Fremont, CA · Member since 2014 · 292 posts · 102 votes
11y
@Brian Gibbons, Who would do the paper work for me to make sure that I am Dodd Frank compliant ?
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Brian Gibbons
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
11y
Www.sellerfinanceconsultants.com
1 Reply
Curt Smith
Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
11y
If you finance to an investor, Dodd Frank is not in the picture at all and it;s a standard Note and mortgage. Literally any closing Attorney has boiler plate notes and mortgages he'll edit up per your term, interest rate and late fee. I suggest you use at least $120 late fee. My notes started out with $30 late fee and the darn borrowers just considered that cost of convenience of being late!! LOL
I wrote a terse ebook (1 page actually) on seller financing to an occupant following Dodd Frank. PM me.
No one is posting helps here because we are all worn out on the 1.5 years and zillions of posts on this subject. LOL. We're all pooped on the subject. It's simple enough especially for a one off like yours to an occupant. You have to be very careful in interviewing buyer prospects that they have good jobs, low debt payments and are credible and reliable payers. Folks who don't qualify for bank loans can be good payers but often they are not. Which is why they can't get a bank mortgage. So you have to put effort into the face to face interview, credit checking (mrlandlord.com or http://www.ctcredit.net/tenant_screening.html) where you get the full credit report, fico, pays on time (or not) past rentals that you MUST match up with the rentals they give you on the application. IE folks being evicted will drop past or current rental address from the app. And so much more.
There's more work in the step of being a landlord interviewing the buyer, than there is in originating the note. So your focus should be on finding a reliable payer buyer. Preferably an investor, but ok if an occupant.
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Pari Thiagasundaram
OP
Lender · Fremont, CA · Member since 2014 · 292 posts · 102 votes
11y
Thank you @Brian Gibbons and @Curt Smith.
My deal is more favorable (easy on me) for investors as the rental in this Milwaukee neighborhood is anywhere from $1200-$1400. On a 30 year mortgage this works out to $966 for a loan amount of 120K with 10K down for qualified buyers. The next uphill task for me would be to find "qualified buyers" if they were individuals. I ve started talking to local realtors in that area so they can give me better idea of the job market situation there and what kind of buyers i can expect.
Im learning as i start doing this. Either way, I am also considering a quick turn around (backup option) as well like selling for out right cash / renting etc.
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Curt Smith
Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
11y
Oh,, I forgot to mention a very VERY important tax issue. The IRS wants you to pay 100% of the capital gains from a sale of inventory in the year of sale. Inventory is a house you bought, fixed and did not rent. IE a flip. But if you seller finance this flip you are getting killed financially. You have to pay the gain at tax time, yet you are getting the principal from the borrower a little each year.
The IRS allows taking an installment sale treatment of capital gains when you sell an investment property. IE a rental or was once a rental.
Bottom line: rent this house first, or just sell to a cash (or financed) buyer and pay your gains in the sale year.
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Pari Thiagasundaram
OP
Lender · Fremont, CA · Member since 2014 · 292 posts · 102 votes
11y
@Curt Smith, That was a great insight into the business ! Thanks.
This is the reason why I love BP !
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Pari Thiagasundaram
OP
Lender · Fremont, CA · Member since 2014 · 292 posts · 102 votes
11y
If i were to sell this property to another investor using seller financing, is there anything that i need to keep in mind ?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Curt Smith I don't think your correct.. at last count there are 17 states that do not differentiate owner Occ and investor ... if its a 1 to 4 units dodd frank applies reguardless of the buyer.
However most states have a 1 to 3 transaction exclusion IE you only have a one or a few your allowed to do those .. In Oregon its 2 and can't hold more than 3 at anyone time I believe.. but anyone else who does it as a business must do the whole dodd frank mumbo jumbo.
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Curt Smith
Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
11y
@Jay Hinrichs
Thanks Jay. No one will disagree, 17 states or not, CFPB etc. that it's insanely complicated.
But it simplifies somewhat if you ingore the exemptions and assume no mater what you follow DF: use a LMLO, qualify to 43% or some DTI, full doc for ATR, use a servicer, get an appraisal, do only 3 per year in a person's name.
The remaining hitch is the CFPB's "lending as a mater of course of doing business". IE doing loans year after year, even if only 3 per. This last catch is the remaining problem.
I never really understood the meaning of "exemption". Yes being exempt from having to be licensed. Yet DF text says: you have to follow the "intent" of DF and doc ATR, use some DTI standards etc even if using an exemption. So why not just use a LMLO, full doc, use some reasonable DTI, and use a servicer. It seems to be much simplier doing these minor steps then parsing for what it means to just do one off and what steps. Just do them all, it;s not that much.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Curt Smith I am nmls licensed in Oregon and I am just repeating what I read in a bulliten that came out of the Oregon corporate secuirtes dept that regulates us. I think they did this to allow for the one off deal like the OP is contemplating.. its not intended for those in the business of seller financing to use or get around DF
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Pari Thiagasundaram
OP
Lender · Fremont, CA · Member since 2014 · 292 posts · 102 votes
11y
@Brian Gibbons, it looks like sellerfinanceconsultants.com will not do any paper work for the state of WI. Do you know anyone else who will do the paper work for seller financing for a milwaukee property ?
My realtor told me that the house is worth $150K ARV. What would be a good down payment for a property worth this amount ?
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Brian Gibbons
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
11y
Investor to Investor there is no Dodd Frank, only for NOO.
Have the Investor sign something that says,
"The Dodd–Frank Wall Street Reform and Consumer Protection Act requires that buyer must not live in the property. Buyer initials here."
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Pari Thiagasundaram
OP
Lender · Fremont, CA · Member since 2014 · 292 posts · 102 votes
11y
Yes, i do understand that there is no Dodd frank for investor to investor. At this moment i dont know if another investor would buy my property or a home owner. Do you have any recommendation for someone would do the paper work like sellerfinanceconsultants in WI?
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Brian Gibbons
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
11y
@Pari Thiagasundaram
Start with your REIA in Madison WI
Call all of these
WI REIA

Appleton REIA
Contact Person: Jacci Konkle
Meeting Location: Skybox at The Bar
Meeting Address: 2435 W Nordale Dr.
City, State Zip: Appleton, Wisconsin 54913
Meeting Time: 3rd Tuesday, 6:30 p.m.
Phone Number: 920-740-3599
Fax Number: 877-327-8231
Website:
www.appletonreia.com
Email:
[email protected]

Central WI REIA
Contact Person: Derek Dombeck
Meeting Location: Holiday Inn & Suites
Meeting Address: 1000 Imperial Ave
City, State Zip: Rothschild, Wisconsin 54474
Meeting Time: 3rd Monday, 6:00 p.m.
Phone Number: 715-574-4666
Fax Number: 715-454-6662
Website:
www.cwreia.com
Email:
[email protected]

Green Bay REIA
Contact Person: Jeff Cichocki
Meeting Location: Holiday Inn
Meeting Address: 2785 Ramada Way
City, State Zip: Green Bay, Wisconsin 54304
Meeting Time: 1st & 3rd Wednesday, 6:00 p.m.
Phone Number: 920-676-2809
Fax Number: 888-341-2282
Website:
www.greenbayreia.com
Email:
[email protected]

MadisonREIA
Contact Person: Chris Hake
Meeting Location: QUALITY INN & SUITES
Meeting Address: 2969 Cahill Main
City, State Zip: Madison, Wisconsin 53713
Meeting Time: 2nd Monday, 6:00 p.m. - 9:00 p.m.
Phone Number: 608-852-4403
Fax Number: 510-280-9781
Website:
www.MadisonREIA.com
Email:
[email protected]

Midwest Investment Club
Contact Person: Chrissy King
Meeting Location: Coliseum Bar
Meeting Address: 232- Olin Ave
City, State Zip: Madison, Wisconsin 53704
Meeting Time: 4th Wednesday, 6:00 p.m.
Phone Number: 608-333-2373
Fax Number: 608-833-8865
Website:
www.midwestinvestmentclub.com
Email:
[email protected]

Milwaukee REIA
Contact Person: Dan Kurszewski
Meeting Location: Brookfield Suites
Meeting Address: 1200 South Moorland Road
City, State Zip: Brookfield, Wisconsin 53005
Meeting Time: 2nd Tuesday, 6:00 p.m.
Phone Number: 414-791-4420
Website:
www.milwaukeereia.com
Email:
[email protected]

Milwaukee Wealth Builders
Contact Person: Sean Walsh
Meeting Location: See Website
Phone Number: 262-510-8870
Website:
www.meetup.com/Milwaukee-Wealth-Builders/
Email:
[email protected]
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Cindi Anderson
Investor · Sun Valley, ID · Member since 2015 · 16 posts · 0 votes
10y
www.sellerfinanceconsultants.com is recommended above, but all the links on their website are broken, and their two other websites listed on LinkedIn are defunct. Proceed with caution.
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