Quote from @Robert Bell: As a private lender, we use reserve funds as a way to gage whether or not someone is financially ready to take on a real estate investment. 

. - That sounds like assuming the loan.

But maybe that's just me...In your case, it sounds like they have buyer's remorse and are ashamed to tell you after signing, but also don't be surprised if they show up on the 31st. 

The concern arises when you're acting as an agent for others—there, the law is stricter.Since you plan to use the agreement for future properties too, it might be worth getting legal guidance upfront, even though the $1000 fee sounds steep.

Sounds like a good place to start (for both of us).  

The potential issue is that he may have gotten his interest rate when rates were lower and you may get the deal at a higher interest rate which can potentially have the deal at break even or at a loss.The quality of the deal will depend on what your net income is and what you are putting into the deal.If in the above example and you have the same net income, the deal sounds amazing if you are putting in $200,000 because you have a 10%+ rate of return.But if you are putting in $2,000,000 the deal is horrible because you are making 1%

It sounds like you have a solid strategy in place for scaling up your portfolio quickly with seller financing and focusing on properties that cash flow immediately.

Sounds good, thank you!

Being a tax professional I would say currently it doesn't sound like something you need just yet.

With rates dropping, it sounds like a great time to tap into your equity for a new investment.