Seller Financing

Im curious… what have some of your deals looked like with seller financing as a buyer?

Also where have you found good helpful information on seller financing as a buyer?

Cheers :beer

Somehow you perceive a seller financed transaction as being as strange and odd as seeing Liberace with a girlfriend.

There’s nothing particular about these transactions, except that a lot of money is saved by not going to a bank for financing.

The purchase contract and the deeds of trusts are all the same regardless. That is, if the seller has any equity to finance.

Yes, you are negotiating with a seller over interest rates and repayment terms in that case, as opposed to a bank. However that’s the beauty and flexibility that a seller can offer you, that a bank can’t/won’t.

And if the seller has no equity, then there’s nothing to finance. You just agree to take over the existing loan payments, get the deed, and call it a day. There is no deed of trust, or notes to create with the seller. He’s out of the picture from then on.

Meantime, a sub2 deal can literally bypass every major conventional expense.

For example, I take over loans and get deeds routinely. I don’t buy title insurance. That saves several thousand right there.

I never buy through real estate agents, and therefore no real estate commissions to pay.

I don’t use escrow companies to close for me, so no closing costs.

My total recording costs have been less than $200 bucks (the notary’s signatures were the bulk of the expense.)

Sometimes I have to pay the seller to move out. They don’t all have money to move… So, you can add that as an expense.

Sometimes, I have to bring the seller’s payments current AND pay him to move out.

However, I can use the proceeds of my buyer’s down payment (whom I seller finance) to bring the loan current, so that I can avoid more out of pocket expenses on the buy side.

Typically, you can buy houses ‘sub2’ that have practically no equity.

This is important, because if the seller doesn’t have enough equity to pay for the normal costs, he’s got to come out of pocket. Some seller don’t have a pot to pee in, much less ten grand to pay a real estate agent, etc.

That’s probably my major selling point, when it comes down to it. A seller with no equity, can get out of his debt, without coming out of pocket …if he sells to me, without an agent, that is.

I think Rob mentioned this little caveat… Non-qualifying seller financing, which helps make a no-equity sub2 deal even more profitable, allow you to charge a premium on the resale.

As far as I’m concerned, and especially with the Dodd/Frank crap in place, I charge 10% over retail in return for non-qualifying financing. I also charge (ask for) 10% down.

So, say I buy a $200K house for 90% of it’s retail value (10% discount) for $190K.

I resell it on a five-year note for $220K. I ask for $20K down and charge 8% interest for 30-years (fixed rate). When the buyer pays me off sometime in the next sixty months, I make another $20K. All that, after paying practically retail on a house I took over the loan on?

Now, imagine doing that on a $500K house, with the same numbers? That’s $100K in sixty months, or less (with $50K up front).

Then just to get you really excited… Do that three times a year for the next five years and see how your finances change. And that’s while keeping your day job.

Hope that helps.

Javipa… hahaha your totally right. The thought of seller financing seems so foreign to me. When you explain it it seems so common place. I really love the idea of it. I guess I really just need to run the numbers on different properties and if its a good deal and find out if they are interested in seller financing. We’ve chatted be for. This woud be my first deal. Im excited yet nervous about all of this. Your input and knowledge is huge to me.


Josh :banana

Javipa, how dangerous is not buying title insurance and how does one safeguard themselves against any risks?

Are you buying foreclosures and reo’s to bypass rea’s? Or can you use the mls to find sellers then just convincing the seller to deal directly with you?

Btw, can a seller do that? How does that work with their relationship with their agent? Thanks. Great info so far.