Bottom line for which there is no substitute: you have to understand what the seller wants. Why are they selling now? Does he think the prices are going to go down or is it that he just needs the total cash right now? Is it that he has too many properties and wants to reduce his overall risk by selling...something? All of these will dictate how you can rearrange your offer to meet his needs. It's not about putting together another package and throwing it at him, guessing and hoping you hit the mark. Just talk with the seller about what it is that they want out of this and see if you two can't come to a mutual agreement. Ask him, does he want the cash now or the most out of the investment over the long term. Here, below, is one suggested alternative if the seller is just concerned about a housing bust and wants to sell while prices are high:
The owner may be willing to supply seller financing to you. The generic description is that you draw up a promissary note for the sales price, financed by the seller at an agreed to percentage rate (6%? 8%? depends)--seller pretty much plays the role of bank. You then pay monthly 'mortgage payments' to the seller. You own the property and have full rights for its use; the seller cannot meddle as long as you comply with the terms of the mortgage payment. The payment process for you is identical to paying a regular mortgage except it goes to a different 'Pay To' address. Given your needs (low payments, eventual ownership, willingness to refinance) you could offer a balloon mortgage structure where your payments over the first years are very low but then the remaining sum (principal plus amortized interest) is due, let's say, within five years. This gives you several years to refinance with a traditional bank--at whatever time rates are most beneficial to you--at which time the seller gets paid the remainder of their note and they are on their merry way, and you are able to use any increase in appreciation (since that's what you are banking on) to cover your 'money down' problem in the future, aka if 'market value' for the property goes up by 20% over five years, then the refinance will cover the 80%, which would in this example be identical to your initial sales price.
The benefits are: the seller gets the sales price they want--his hesitation may be because he thinks the market will drop between now and two years from now; you get to purchase the property and may be able to negotiate lower payments through the seller with a balloon mortgage arrangement, reducing your monthly payments below what you would get from a traditional bank; seller should get enough 'income' from your debt payments to cover their own debt payments--this will not be sufficient incentive if the seller truly just needs cash for some other reason and isn't looking at how to make the most, long term, out of this property; seller holds the title on the property until you have paid in full (once you refinance within a few years) and if you default on your payments, they retain that title so have really lost nothing other than time, etc.
Down side is: you need legal help to do this; and if interest rates go up and housing prices go down over the next five years, you may be forced to buy the property at today's price which, five years from now, may be well above the then-market value, and your monthly payments might soar. In this worst case, you would be forced to refinance at bad rates and if you can't afford it, the property might revert to the seller. [Even still, you got to rent it out for two years while 'buying the property' at low rates so it isn't the worst thing ever.] This is the gamble with investing, though: do you think prices and rates will go up or down over the next five years? You are betting up; seller is betting down. If you can live with that, great.
That is an outline of what might work but really my best advice would be to seek the services of a qualified, reputable real estate attorney with experience who can help devise creative solutions. Paying him/her several hundred dollars in fees will net you at a minimum the property you want (which you currently aren't getting on your own), and at best thousands of dollars in returns. No, I am not an attorney and abhor having to use them, but they have their place in all this for sure. If you have never done seller-based financing, you really, really need to solicit outside help on your side. Also, my personal risk tolerance says that if you cannot afford the 20% down, then the property is out of your price range unless you know something specific, and fundamentally amazing, about this property that nobody else does that makes it the one-in-a-million find. Best of luck!
