Need creative financing ideas on a prop we're selling......

I posted this on the financing forum and haven’t had any replies, so I thought I’d try it here, too:

We are selling a 4-plex in IL, as we have since moved away (to TX) and want to have property locally. The property cash flows, has a history of basically NO vacancy, and is above average in quality and condition.

The buyer is a friend of a friend who is buying this as their first rental property. I referred them to my mort. broker and she has been able to get 100% financing for them. (an 80/20 deal) They didn’t know this was possible, so now they’ve latched onto the idea of possibly being able to buy this w/out bringing ANY funds to closing. We’re willing to sell them the property at a higher price and pay their closing costs if it turns out the lender will allow that (we’ll find out Monday.) But then the appraisal comes into question. The higher value will be there with the income approach and cost approach, but this property is so much nicer than anything in the area the sales comp approach could be a problem.

Can anyone think of any good, creative ideas? We’re basically needing to come up with about $10,500 to close the loan. I’m guessing they’ll go through with the deal even if they have to come up w/ the $$ (they have it, it’s just all tied up in various investments), but I’m a little afraid to take the chance. This is just such a “fall in your lap” deal for us, at the price we wanted, I haven’t had to spend anything on advertising, a trip up there, etc…I’d just really like to help it along if possible.

What other details do y’all need to help me figure this out?

(Yes, I’ve already tried to gently talk them out of financing the property this way, but they’ve latched onto it and think it’s the best deal for them.)

Karla in Amarillo

There’s nothing “creative” here to do.

Has the deal been made? In other words, have you actually signed a purchase and sell agreement with these people? If so, and they qualified for the loan, then it’s pretty much done. They could back out but you’ll get the deposit money.

Now, if you’re just trying to negotiate this, either to be nice, or to finish signing the deal, there are a couple of options.

  1. Investing DOES cost money. IF all they are having to pay is closing costs, they’re doing great. Tell them so and let it ride. Doesn’t sound as if you’ll have much trouble selling if they don’t buy. In fact, don’t stop looking for buyers just because someone is interested/contracted to buy. Get others lined up behind them “just in case.”

  2. Simply pay the closing costs for them. If there is no agent involved and you got full asking price, you should have room to do this. Don’t know the sale price, but using the $10.5K as an estimate, it should be between $300-350K. If it is, then you would have paid an agent $18-21K to sell the property. Paying $10.5K is a deal.

  3. Finance the $10.5K. This is the worst solution as you’ll be in a 3rd position mortgage. Still, it gets you the money over the long term. And if they stop paying, you could either write it off as bad debt (tax savings) or foreclose and resell the property (not worth the trouble IMO).

Hope it helps,


Thanks! Those are pretty much all the options we’ve thought of. Thought maybe I was missing something.

It’s not a signed deal yet, just trying to get it to that point. Like I said, I think they’ll realize that bringing $10K to the table is a steal and just go with that. I’m just trying to do for them what people have been kind enough to do for me - share tips, ideas and knowledge that you won’t have until you start owning investment properties.

It’s not COSTING us the $10.5K. We’re netting price WE want for the property without having to invest ANY time or effort into selling the thing. I’m just trying to help them figure out ways to not have to come up with that amount since that’s what they (think) they want to do. I’ve already advised them against it.

Thanks for your suggestions!
Karla in Amarillo