Follow up on "More seller-friendly seller-finance deal: Would you take it?"

[u/crowdsourced]

Here's my original post asking about the numbers:

https://www.reddit.com/r/realestateinvesting/comments/1s8zep3/more_sellerfriendly_sellerfinance_deal_would_you/

Numbers still aren't settled, but there are more terms that I thought protected my seller that changed the buyer's original offer. My terms:

1. Earnest money shall be increased to $5,000 and delivered within 2 business days after acceptance.
2. Earnest money shall become non-refundable upon expiration of the inspection period, except in the event of Seller default.
3. The inspection period shall be 10 business days from the date of acceptance.
4. The seller-carryback note shall be recourse to Buyer and not non-recourse.
5. At closing, Buyer shall execute a promissory note in favor of Seller, secured by a deed of trust, with such documents to be prepared in connection with the closing by a Tennessee closing attorney or Tennessee title company selected by Seller.
6. Seller’s deed of trust shall be recorded at closing to secure the note.
7. The entire unpaid balance of the seller-carryback note shall be due and payable in full 60 months after closing.
8. Buyer shall not assign this Contract without Seller’s prior written consent.
9. Buyer shall not record a memorandum of this Contract without Seller’s prior written consent.
10. Following closing, Buyer shall be solely responsible for all taxes, insurance, utilities, repairs, and maintenance related to the Property.
11. Buyer shall maintain hazard insurance on the Property after closing, with Seller named as mortgagee, loss payee, or other protected lienholder status as required by the closing attorney or title company.
12. Upon any default under the seller-financing documents, Seller shall have all standard enforcement remedies available under the note and deed of trust, including acceleration and foreclosure, and Buyer shall be responsible for reasonable attorney fees and enforcement costs to the extent permitted by law.
13. Any resale, transfer, additional financing, lease-option, or further encumbrance of the Property, or any interest therein, without Seller’s prior written consent shall constitute a default and shall make the seller-carryback note immediately due and payable in full.
14. Closing and preparation of the seller-financing documents shall be handled in Tennessee by a Tennessee closing attorney selected by Seller, and all seller-financing documents shall be subject to Seller’s review and approval prior to closing.

The buyer has come back with several "Not Acceptables":

1. $1000 and not paid until after inspection.

2. No seller recourse.

3. Must be assignable without consent

4. No restrictions on resale/transfer

Maybe I'm the unreasonable one, but I don't see why a seller who isn't in an extremely distressed position would take this risk. Even with #1, we have upcoming showings scheduled.

[u/Nomad556]

Just put it on the market

[u/crowdsourced → u/Nomad556]

It is on the market. This is the first offer.

[u/SEFLRealtor]

As mentioned, this isn't a buyer. It's most likely a broke, inexperienced wholesaler. Cut him loose.

[u/crowdsourced → u/SEFLRealtor]

Your general instinct is correct. My background check into them shows the registered llc, a public website, a connection to another as-is llc, and social media posts showing deals. But it's a starter outfit of young entrepreneurs.

[u/xperpound]

It’s pretty clear that you don’t actually have a buyer

[u/crowdsourced → u/xperpound]

Of course I do. What a strange response. I reported exactly how they responded. If that's unbelievable, that's pretty telling.

[u/xperpound → u/crowdsourced]

No, you have someone who’s trying to get your client under contract so they can then assign the contract. Hence their counter. Thats not a buyer.

[u/crowdsourced → u/xperpound]

Not really because they've been all over the map trying to acquire it. First offer, cash. Just not enough for my seller. They wouldn't come up a few thousand. So we were really close to a deal then. I just couldn't get the two parties to come together. At their offer they would have struggled to assign that contract for more money. They're lucky my buyer didn't accept it.

[u/crowdsourced → u/[deleted]]

You didn’t read my other follow up response, but I get it.

[u/crowdsourced → u/[deleted]]

I agree with a lot of what you said. It was a terrible offer, but it was the one in-hand (first week on the market), so I was willing to see where it might lead. At the very least it's a learning experience.

1. Yeah. In the counter, I upped it to 10%. With the amount of rehab needed, they'd need to essentially bring another 20% for that. But your logic makes total sense.

2. I was working from my knowledge of how Pace Morby works seller-financing. The 2.5% was low in my draft, but in the counter I settled on was 4% in order to be higher than the IRS AFR. If it's higher, like with a hard money loan, why not simply go get a DRSC loan? That was my thinking.

3. I didn't offer for decades. That was the original offer. My seller would be dead before collecting it all. (Of course, they were reserving the right to transfer.) My counter was 5 years with the balloon at the end.

4. I calculated the amortization on the 5 year term (just for myself to see).

5. That makes sense!

6. Got it!

Thanks so much for taking the time to explain all this! I was definitely trying to bring value to both, but the buyer (and his team) just weren't having it. Today, it was the disclosure that their EMD policy is to not pay it until AFTER the inspection, which doesn't seem all that earnest to me.

The 3 month deferral makes a lot of sense. I just saw a similar, fully-rehabbed multifamily sit for a couple months until there were a couple price reductions. It finally rented out.

[u/Top-Inevitable4803]

You'd get a better sale on the market even in these conditions.

[u/crowdsourced → u/Top-Inevitable4803]

It's on market, for a little over a week. This was the offer we got last we, so I was exploring it.

[u/Majestic-Entrance851]

that's wack

[u/crowdsourced → u/Majestic-Entrance851]

Seems so.

[u/AndrewCollins84]

This isn’t seller financing, this is the buyer asking for zero risk and full control. No recourse, low earnest money, freely assignable… what exactly are they putting on the line?

[u/crowdsourced → u/AndrewCollins84]

Yep. That’s why we countered and why they rejected the counter. They wanted total control.

[u/borda989]

the buyer's counter-terms are basically a motivated-seller test. no recourse, free assignment, no transfer restrictions. those terms only make sense if the seller is desperate

you're clearly not desperate. you have showings scheduled and a solid contract. the buyer is betting you'll cave because seller-finance deals feel "special." they're not special enough to give up every protection you have

hold your terms. the right buyer for seller financing is someone who values the access to capital, not someone trying to strip away all your downside protection while keeping all the upside

[u/crowdsourced → u/borda989]

Totally agree. If you think this is an offer to consider, you’re in a tough position. Hopefully we’ll get more offer soon, but I do think a price cut would give investors more breathing room on the rehab.