Seller Financing

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jmatthew_IHB

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We have our house on the market in Newport Coast. It's not a distressed sale. We're trying to sell because we want to move out of state. We bought in 2002, so even in this market, we're going to make a profit. Today I heard of a potential offer, but they wanted to know if we'd be open to financing 10% of the price ourselves, which would be about $70,000 if we sold at our full asking price. Even deducting that amount and the broker's cut from our profit, we would still be getting over $100,000 at closing. The pay-back term would be about 2 years. Does this sound like a good idea? Or is seller financing too risky these days? Opinions?
 
[quote author="jmatthew" date=1233822975]We have our house on the market in Newport Coast. It's not a distressed sale. We're trying to sell because we want to move out of state. We bought in 2002, so even in this market, we're going to make a profit. Today I heard of a potential offer, but they wanted to know if we'd be open to financing 10% of the price ourselves, which would be about $70,000 if we sold at our full asking price. Even deducting that amount and the broker's cut from our profit, we would still be getting over $100,000 at closing. The pay-back term would be about 2 years. Does this sound like a good idea? Or is seller financing too risky these days? Opinions?</blockquote>
Stay away from seller financing, especially if it causes the total LTV on the property to be over 80%. You will be in the second position behind the first mortgage and if property values tank in the next few years which would wipe out the equity that the buyer would put down, you'd be left holding the bag. Way too risky IMHO.
 
[quote author="jmatthew" date=1233822975]<strong>We have our house on the market in Newport Coast. </strong> It's not a distressed sale. We're trying to sell because we want to move out of state. We bought in 2002, so even in this market, we're going to make a profit. Today I heard of a potential offer, but they wanted to know if we'd be open to financing 10% of the price ourselves, which would be about $70,000 if we sold at our full asking price. Even deducting that amount and the broker's cut from our profit, we would still be getting over $100,000 at closing. The pay-back term would be about 2 years. Does this sound like a good idea? Or is seller financing too risky these days? Opinions?</blockquote>


This is a question your broker should be answering for you, not an anonymous or semi-nonymous (I have no idea if that's a real word) board.

It could be a great deal or it could be lousy, depending on the intimate financial details of your buyer, your risk tolerance, and the deal.

-IR2
 
[quote author="IrvineRealtor" date=1233825379][quote author="jmatthew" date=1233822975]<strong>We have our house on the market in Newport Coast. </strong> It's not a distressed sale. We're trying to sell because we want to move out of state. We bought in 2002, so even in this market, we're going to make a profit. Today I heard of a potential offer, but they wanted to know if we'd be open to financing 10% of the price ourselves, which would be about $70,000 if we sold at our full asking price. Even deducting that amount and the broker's cut from our profit, we would still be getting over $100,000 at closing. The pay-back term would be about 2 years. Does this sound like a good idea? Or is seller financing too risky these days? Opinions?</blockquote>


This is a question your broker should be answering for you, not an anonymous or semi-nonymous (I have no idea if that's a real word) board.

It could be a great deal or it could be lousy, depending on the intimate financial details of your buyer, your risk tolerance, and the deal.

-IR2</blockquote>


My opinion is that his broker is motivated to close the deal so the broker's advice is suspect. I would not ask a car salesman if the financing was a good deal. Get advice from non-conflicted third parties, such as the folks on this board, and family and friends, especially anybody whose financial advice you respect.



IMO, you have a 40/60 chance of getting paid back in full.
 
I would want to know why they need your financing, i.e. their credit profile.



I might be more inclined to do it if, for instance, they had a lot of equity in another house that they were in the process of selling, for example
 
People who want selling financing are usually not the kind of people you want to finance. I wouldn't do it in this market... If they go under, you ain't getting paid.
 
[quote author="CapitalismWorks" date=1233882981]So long as you can take their firstborn child as collateral, I say go for it!</blockquote>
I don't know - I have some friends that are willing to pay me to take their first child at times. :coolsmirk:
 
They are going to get 100K at closing. They are taking a gamble w/70K.



I say go for it. If you are really a 2/3 dog the way Awgee says (I have my doubts you are that good, it's probablly worse) you're still money ahead, and you get to move.



If you wait six months you might give up more than 70K.
 
Thanks for all of the advice. After talking to our Realtor to get some more information, we decided against it. There were just too many red flags.
 
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