100 seller financing?

[realnew]

What' s the likely hood?  And if so, what would be a good interest rate to propose?

Thanks everyone.

[Iron Range]

I've never done seller financing, but I have discussed it with a dozen or so sellers who were willing to do it. The sellers I've run accross never seemed real concerned with the interest rate, they seem to be more concerned with the length of the loan.  

I think the biggest problem is that sellers don't want to finance more than 5 years, typically 3 or less years amortized over 30 years don't let them tell you amortized over 15 years. This gives you enough time to build equity and refinance. If your financing for less then five years then I wouldn't go crazy and offer a high rate.  But the deal killer with seller financing seems to be the length of time, and not so much the interest rate.

With 100% seller financing there typically can't be realtors involved.

Hope that helped

[realnew]

Thanks, Iron, yes it is a big help.  The house I'm interested in is on the MLS, so an agent is already involved.  So I guess that's ruled out.  

If I understand you correctly, I would be entering an agreement to pay off the loan in 5 years, based on payments over 30 years... payoff being refi or some other financing in place.

Thank you very much, helpful information.

[71tr]

Seller financing is a great tool if available.  Basically you are cutting out the middleman (the bank).  The buyer/borrower might pay a bit more interest rate but generally avoids the bulk of closing costs while the seller gets a market rate of return on their equity.  I have used seller financing and as stated the greatest obstacle is not the interest rate but the time period their funds will be tied up in the note on the property.  Negotiating a balloon mortgage of say 5-10 years with a 30 year amortization works well and is easily refinanced when the time comes.  As for realtors being excluded from 100% seller financing deals I have never heard this.  The realtor is there to get the house sold, not primarily as a financing tool.  Does the seller own the property free and clear?  If yes tell the realtor that you want to make an offer contingent upon seller financing.  Give them terms that they will find attractive, rate, term, price etc.  Another benefit, time to close can be shortened since no bank is involved.  The seller gets to convert their non-earning equity into a market return note just like that.

[Iron Range]

If a seller is willing to do 100% seller financing that is a small miracle in itself.  But if you have a realtor and the seller has a realtor then you would have to ask the seller to do 100% financing and pay the 6% realtor fees out of their pocket.  Probably a very unlikely, but not impossible senario.

Example on a $100,000 home

The seller would turn the property over for nothing down, and then have to write the realtors a check for $6,000.  I'm not saying its impossible, but it would be a very difficult thing to ask from a seller.  You're probably better off looking for properties that do not involve realtors.  p.s. if the seller is the realtor then that's ok.

[thailanddave]

In the 80's these were called a wrap because the seller doesn't pay off his current loan and wraps the note he writes to you around the banks note. Today they are called All Inclusive Trust Deeds.

As the other poster noted, the realtor is trying to figure out where his/her commission is coming from.

This type of financing can trigger the lenders due on sale clause. If the lender calls the note due, the buyers will be forced to get new financing immeditately and may not qualify and could lose the house.

Also you should try to get a company to handle the disbursements. It is not unheard of for the seller to get your monthly payment and pocket the money and not pay his bank. You wont know until the foreclosure notice is posted on your door.

For this reason, many realtors and escrow have been sued for putting buyers/sellers into an AITD and some will refuse to do it. You can go on most escrow companies sites and download the blank note you need to fill out.  Just do a search on their sites for AITD or AIDT.

[Iron Range]

I think 100% seller financing will limit your opportunities. I would be concerned that you may sacrafice cash flow for whoever will over 100% financing.  For example, I'll 100% finance all six of my properties to you.  You can buy one of my duplexes that is worth $130,000 for $180,000. What a deal for you! My point is to becareful about over paying on a property just because the seller will finance.

If you are finding it difficult to get a loan, then find a different lender.  I think I went to a at least five different mortgage companies before one was able to push a loan through.  If you do 80% loan and have the seller finance 20% then that can help with getting a difficult loan through.  

Sellers where I live are always trying to seller finance duplexes for $400,000, even though it's only worth $250,000.  There must have been some real estate seminar that came to our town and taught how to make money on seller financing.

[jsparks]

Usually when someone offers seller financing they try to get 10-20% down or more from the buyer, this tends to make it harder for the buyer to walk away if they run into financial difficulties because they have invested a substantial amount of money in the down payment. Many sellers that have created a seller financed or privately held mortgage can sell these notes for immediate cash. It is also a veeeery good idea to check the buyers credit scores & history. Hopes this helps.

[shark]

seller financing is gold when you find it. 3 of my properties are financed by the seller. these are my terms..
prime+2 for the rate
0 down
10 yr term
and to make it lucrative for the seller, ask the agent if you can pay the comission but only if it can be spread out over a year or so with a small amount of interest added...
it can be done
good luck

[Stjepan]

I like this thread as seller financing is always the way I sell my properties.  

Realnew your on the right track but in my opinion your a little over zealous.  You have an extra piece here that you should get rid of-- the realtor,  when your trying to do these types of transactions you should target fsbo's.

[Denise]

When you do sseller financing, do you report the payment history to the credit bureau?  If yes, how do you get that started?

Denise

[NoMoneyDown]

In the 80's these were called a wrap because the seller doesn't pay off his current loan and wraps the note he writes to you around the banks note. Today they are called All Inclusive Trust Deeds.

Actually, isn't a wrap short for wrap-around mortgage and exists in states with mortgages?  An All Inclusive Trust Deed is the exact same thing except it's for those states that have Deeds of Trust instead of mortgages.

[Stjepan]

They are still called wraps in mortgage states.  All inclusive trust deeds was always the term in trust deed states.

[dwj469]

If the seller owns the property free and clear. If the property will cash flow with 100% financing then by all means owner financing is the best way to go. I think its pretty hard to find owners that will hold the paper on their properties now a days with all of the litigation going on a lot of "everyday people" are just afraid to do it. They dont want to deal with it and would rather take a lower cash price than make a nice profit by holding paper. Payments are not shown on your credit report if the owner holds the mortgage, unless the owner reports them. I wish I could find some owners that will hold the paper on their property. Much better than dealing with banks and less costly.

[real estate 001]

 8) i agree people are not as trustting as they were once>>>>  but what if you as the buyer had  the means to get  the owner to do the mortaget  >>>> and could get there paper sold with in 30 days for  80 to 90%  of its face value  do you think this was a good deal all around ???