The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Archipelago on September 23, 2019, 06:17:07 PM
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For those of you who have been on the purchasing end of seller finance deals, how did you go about determining interest rates, downpayment, pre payment penalty, etc.?
I have a potential seller who is interested in carrying the note and selling to me.
Thanks,
Arch
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It's a negotiation, nothing more nor less. Good luck!
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US Bank terms are typically set by bank policy, which is often set by the federal rules for a policy so it can be sold off like any other policy.
Owner terms are set by the owner's motivation, ability to bargain, and whim. Same with the buyer.
I've even heard of properties bought with simple (not compounding) interest.
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give us some details - what is in the realm of possibilities on the deal?
Variables include down payment amount, interest rate, simple or compound interest, term, does it amortize or is it a balloon payment, your credit, your balance sheet, the seller's motivation as to why finance it versus insist on a cash sale.
Also, what is your motivation? Buy and flip, hold long term, etc.
How easily can you refinance this in the future? Prepayment penalty concerns too?
You can call some hard money lenders, and also some more conventional lenders and your bank to get a range of terms for investment property purchase.
I guess it gets back to why the seller wants to or is willing to carry paper, and why this is something you'd want to do as well.
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I bought land when I was 19 or 20. Financed through the seller and the rate and type of interest....I don't remember. I do remember that I decided to leave my job and go back to college full time and put the land up for sale and found a buyer. My dad helped there and negotiated a lower full payoff number with the seller. As she was in her mid 80's, I think she was looking for whatever she could get at that point. Every seller has their own motivation.