Seller Financing Question

Hi everyone,

If I am the buyer and I’m asking the seller to finance, what is the interest rate that I should be paying him back at? Is it PiTi? And what usually is the time limit?

It all depends on numerous factors … What is your exit strategy? How flexible is the owner? Are the properties owned free-n-clear, or is there one or more mortgages/DOT’s (and, if so, how much)? Etc.

Also. use the interest rate as a bargaining chip.

Lower the sales price by raising the rate or vice versa. Need more time to close? Raise the rate to compensate, etc. There are lots of ways to make the deal sweeter for all involved.

Here is the situation.

Seller is asking $500,000
Owes bank $350,000
Approximately has $150,000 is equity.

The seller is not willing to negotiate anything below $500,000 but is willing to seller finance.

The seller would like to have $10,000 cash at closing and will finance the rest to me.

So, based on this information, what kind of financing terms can I put on the table to start with? And when it’s time for me to write up the contract, do I put down $500,000 as the purchase price or something different?

Thanks for the help folks.

if you are receiving financing from a bank or mortgage company. the standard rule is:

you can not have a balloon before 5yrs
Your interest rate can be what ever is legal, if too low in the lenders oppinion then they will underwrite with the prevailing rate.
Make sure the first mortgage lender knows what you are doing and the first mortgage will allow the combined LTV (CLTV) that you are negotiating …ie (80% first = ltv with a 20% second = 100% CLTV)

I guess you didn’t read my post carefully. The seller is the one financing. It is not through the bank or any other lender. Instead of me having to pay him the $150,000 equity at closing, the seller will instead finance it to me.

In this scenario, what kind of terms can I present to him that works for the both of us?