Seller finance

[Dominick Carney]

If the seller dosnt want to sell at the price I am offering and the next choice is a sellers finance how exactly does that work?

Thanks!

[Duncan Taylor]

The whole imputed interest discussion is one where a grain of truth gets really distorted.

I have done a lot of seller financing. I have done a lot of deals with a stated interest rate of 0% and then both the buyer and seller depending on the imputed interest to make the deal extra sweet.

See, the IRS doesn't add interest to your deal. They simply reduce the principle to generate the correct difference in interest based on the AFR.

Using a simple example (The current AFR is a little over 3% if memory serves me correctly but, to have easy numbers to work with, assume the AFR is 10%)...

$10,000 note carried by seller at 0% interest for one year.

The IRS does not step in and say, "Hey, since you didn't charge any interest on that $10,000 we are going proclaim you made $1000 because of the AFR."

Nope, what happens is you received $10,000 when the note came due. But, $9090.91 of that was return of principle and $909.09 was interest you received as ordinary income.

Seller financing is ALWAYS the way to go because you can accomplish just about anything they need or want if they don't need or want the cash right now.

You can pay a premium and have purchased at a discount. ;-)

Not convinced? Take the example above and increase the amount, spread it out over 5 years or even 10 years, with and without regular payments. The benefits to the seller are astounding. The benefits to the buyer are astounding.

Yes, a good CPA and lawyer can help you in ways you might not be able to imagine. :)