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hyonboko · Aug 24, 2007, 11:35 PM

Hello everyone,

I'm in process of selling an apartment and buyer wants seller to finance 10%. I'm not really familiar with this, and want to know what are pros and cons. I was hoping to use the proceeds in different investment avenue. The buyer wants 10 percent ($28,400)financed over 5 years at 8 % interest. Any info would be greatly appreciated.

BK

ScottGem · Aug 25, 2007, 05:35 AM

The cons are that you have to collect. If the seller defaults you may have to foreclose. If the seller has other financing your interests may be secondary to them.

On the other hand an 8% return over 5 years is pretty decent.

Your decision needs to be based on the risk of the buyer defaulting. If you are comfortable in the buyer's ability to pay, then it might be a good deal.

Fr_Chuck · Aug 25, 2007, 07:35 AM

Cons, this will be a second mortgage, if he does not pay you of the first mortgage and it is foreclosed on, you most likely will never see any of the money back.

On a second mortgage 8 percent is OK but I would not personally settle for less than 10 or 12 on a second I did not really want. I just did a 1st mortgage on property that I am selling, and I got 8 on a first mortgage

This means that the buyer does not sound like they have a lot of money in the bank. I would look closely at their credit report, and at their job security to know I was going to get paid.

excon · Aug 25, 2007, 07:56 AM

Hello hy:

You really didn't provide enough information for us to make a considered opinion. If he's putting 90% down and wants you to finance the last 10% at 8% interest, then go ahead... That's GOOD for you.

However, if he's financing the 90% (which I think he is), then he's not going to have a NICKEL in this property. You're going to be taking 2nd position with an 8% loan ,which is too low for a second with all the risk you'd be taking. This is BAD for you.

excon

hyonboko · Aug 25, 2007, 07:15 PM

First of all, thank you all for your reply. Here's detail info. This is an investment property that I'm selling at 284,000. The buyer is putting down 10 %, financing 80%, and wants me to finance 10%. He is in process of acquiring several investment properties so he wants to put down only 10%. Realtor said he has something like 780 on his credit score. Granted he has good score, but what if something happens and he decides not to pay me and only pays his first mortgage? Is it possible to forclose when there's still first mortgage? If he doesn't pay botgh mortgage, I was told I need to keep first mortgage current and then file for forclose. Can I just keep the property then? Thank you again in advance for any replies.

BK

ScottGem · Aug 25, 2007, 07:30 PM

Reread the advice you've previously gotten your answers are there.

Fr_Chuck · Aug 25, 2007, 07:58 PM

You would not want to forclose if you had a second, esp if it is finaced at 80 percent on a first. *** even if you could force a foreclosure, many states in the US does not allow it, some do, you need to find out the law in the state this property is located in.

I guess the question is, what is your profit in this 284K sell, you are getting 90 percent in your pocket, so he will only owe you @ 28 K on a second mortgage. If you bought this for 200K and are gong to make a 84 K profit, and will only be risking 10 percent of your money on the deal.

So the overall profit, if you could lose that 28 K and still have a good deal.
Then great do it, If you can't afford to lose it,? Not sure what to tell you, it is just a risk,

I risked 15K on a man I did not even run a credit report on, but a man did the same for me a few years ago. ** these were on first mortages.

So only you know if you can afford to take the risk, but I would not take a risk without very above prime interest rates.