How to Structure a Seller Financing Deal
Seller financing is one of the most preferred ways to sell property, but what’s the best way to do it? Learn how to structure a seller financing deal so you can make the most profit!
The name of the game is to make money and do so honorably and ethically.
Real estate has many advantages compared to other investments. Usually, customers can tangibly see or walk through the real estate they are purchasing, or they can drive by.
Or they could use the GIS (Geographic Information System) satellite which is usually provided by the local county. My point is these are investments you can touch and feel. They are unique.
Stocks and bonds are much different. Investors must rely on management to always clear the investment and make sure it works. With real estate, many strategies, mostly financial, can be employed.
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How to Structure a Seller Financing Deal – Selling Options
The advantage of real estate, which other investments don’t have, is the sellers of real estate have many options.
Sellers of real estate can create options, unlike with stocks and bonds, what if there are no buyers? With real estate you can create buyers with financing.
Real estate sellers don’t need brokers; they don’t need exchanges, and they can do many creative things.
Brokers represent buyers and sellers. Banks and title companies represent buyers and sellers. There is always a paper trail so you can see what happened.
How to Structure a Seller Financing Deal -Title Companies
Title companies do a lot more than shuffle papers. The title company has the ability to search and find the history of loans, encumbrances and past ownership.
Title companies contract with surveyors and appraisers, and they will ensure you get what you pay for.
Yes, many attorneys can do the paperwork and the documentation however, title companies can do the same.
How to Structure a Seller Financing Deal – Real Estate Transactions
Today, I’m answering your question about how to structure a seller financing deal.
Real estate transactions are written contracts for the benefit of the buyers and the sellers.
That means there is a paper trail you can follow and learn almost anything that happened regarding the transaction.
Of course, you won’t hear or read the exact transaction, but you will read and understand what happened and why. These are all advantages.
How to Structure a Seller Financing Deal – Tax Liens and Tax Deeds
For the past 30 years, I’ve been involved in the alternative side of real estate. I’ve specialized in tax liens and tax deeds.
In a brief capsulized form, tax liens and tax deeds are unwanted properties. Property owners may have walked away or maybe they experienced sickness or some crisis in their life that kept them from paying property tax.
How to Structure a Seller Financing Deal – Property Tax
State and county governments do business with millions of property owners, and a small percentage of property owners will default on property taxes. The default creates difficult times for both the property owner and the local county.
Property taxes pay the county employees, police and sheriff departments, and school teachers. They fix the roads and pay many other bills.
The legislature of the state mandates that local counties levy property taxes. County supervisors or county commissioners authorize the treasurer to levy property tax and collect property taxes.
How to Structure a Seller Financing Deal – Tax Delinquent Property
If property taxes are uncollectible, the treasurer is mandated to seize the property and resell it at a public auction to the highest bidder and use the revenue to pay back taxes.
Properties are sold with huge discounts of 60%, 70%, 80% or more below the assessed value. Basically, for pennies on the dollar.
How to Structure a Seller Financing Deal – Tax Defaulted Auctions
Savvy investors buy at tax defaulted auctions.
County treasurers do not want these defaulted properties. They want property owners that pay on time.
For that reason, the starting bid at tax defaulted auctions is usually the back-delinquent taxes which could be as low as 10 cents, 20 cents, or 30 cents on the dollar.
Buying real estate is easy. After all, if you could buy for 20 cents on the dollar, more than likely you would buy as many as possible.
On the other side of the equation, it takes a genius to sell property. That’s why you want to learn how to structure business deals and give yourself a competitive advantage.
How to Structure a Seller Financing Deal – Selling Property
Other investors fail to learn how to finance properties to their advantage.
Selling property means using your business savvy and entrepreneurial skills.
For example, if you bought low at an auction, then my strategy is since you bought low, then sell low, make the sale happen quickly and get to the bank.
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How to Structure a Seller Financing Deal – Buy Low, Sell Low
My #1 strategy and selling rule is buy low and sell low. Thousands of people are bargain hunters.
Here’s a perfect example. A big advantage in real estate is you can structure any transaction you want that’s acceptable to the seller.
Let’s assume we have a single-family home which the tax assessor values at $100,000.
Savvy entrepreneurs purchase those properties at auction for considerably below the $100,000. For instance, they may pay 30 cents on the dollar. That would be $30,000.
How to Structure a Seller Financing Deal – Marketing the Property
Selling the property means you’ll do multiple promotions, not just hire a broker and pray they sell it.
You may make announcements and advertise on Craigslist, Facebook Marketplace, Zillow, Trulia, the Multiple Listing Service and dozens of electronic sites. Signs on the front lawn will generate eager buyers.
You may use newspapers and place ads that are filled with key words like bargain pricing, installment contract available, and seller financing. All of the above will attract buyers.
How to Structure a Seller Financing Deal – Installment Sale
Eager buyers, especially those that have been rejected by the banks, will be attracted to the seller financing installment sale key words. Bargain pricing below the tax assessed value will also be appealing.
So how does seller financing work? Here’s an example of owner financing contract terms showing how to structure a seller financing deal.
The math works this way:
• Tax assessed value – $100,000
• Tax auction buyer pays – $30,000
• Tax auction buyer follows a strategy of buy low, sell low.
• Asking price – $65,000
• Down payment – $10,000
• Structure seller financing – $55,000
• Installment sale payments – $700 a month plus taxes and insurance
• Annual payment – $700 times 12 = $8,400
• Terms – 10 years at $8,400 each year = $84,000
• Add back down payment – $10,000
• Total new seller – $94,000
◦ Bought for $30,000 and sold for $65,000 = Profit – $35,000
◦ Profit on deal structure – sold for $65,000
◦ Customer pays – $8,400 for 10 years = $84,000
◦ Financing Profit – $19,000 interest
• Total profit – $35,000 plus $19,000 interest = $54,000
• Deal structure makes a difference.
How to Structure a Seller Financing Deal – Conclusion
We hope you enjoyed Ted’s lesson, “How to Structure a Seller Financing Deal”
Seller financing provides a unique opportunity to profit not only from the sale of a property but also from the financing.
Here’s Ted’s tried and true and highly lucrative method for selling property quickly via seller financing and how to structure a seller financing deal.
30-years ago, Ted discovered that he could get amazing deals on tax delinquent property at tax defaulted auctions.
These auctions are held by counties all across the USA, and the bidding begins around the amount of the unpaid back property taxes. There Ted found that he could purchase tax defaulted real estate for pennies on the dollar, leaving him with an enormous profit margin.
Since he could purchase the properties at a bargain, he could also sell them at an under-market price, and bargain hunters would snatch them up quickly. Additionally, he could make even more money if he sold these properties using seller financing.
If you want to sell a property utilizing seller financing, a title company or an attorney can provide you with a contract for deed and advice on how to structure a seller financing deal.
Typical owner financing terms are items like price, down payment, interest rate, monthly installments, duration of the contract, and who pays taxes and insurance. To mitigate risk, you, as the seller, should hold the title.
If you’d like to know more about how to make huge profits in bargain real estate, there’s no one more qualified to teach you than Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing.
Ted Thomas is the only one who provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops & web classes, and personal one-on-one coaching.
Get started today at no cost with Ted’s FREE Master Class, that reveals the incredible opportunities available in tax defaulted real estate. The class is only about 1 hour of streaming video and contains life-changing information! You can’t afford to miss it!