What is Seller Finance? Creative Real Estate Explained
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- เผยแพร่เมื่อ 27 ธ.ค. 2022
- I’ve told my famous F-150 story about 1,000 times (that’s why it’s famous). But what exactly is seller finance and how can you use it to build out your real estate portfolio? Watch this training - creative real estate explained - to learn how you can buy anything with creative finance…
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❎ I am not a CPA, attorney, insurance, contractor, lender, or financial advisor. The content in these videos shall not be construed as tax, legal, insurance, construction, engineering, health & safety, electrical, financial advice, or other and may be outdated or inaccurate; it is your responsibility to verify all information yourself. This is a TH-cam video for entertainment purposes ONLY ❎
Yoooo! This is EXACTLY what I’ve been needing to learn! Thank you! 🙌🏾🙏🏾💪🏾
Just came across your content, it amazes me how you don’t put money down. I’m over here trying to save up $40k to put down 20% down for a rental property that I will like to purchase this year if possible. I’m currently informing myself through TH-cam. I have not graduated from TH-cam yet 😂 … will keep on watching your content and see what happens.
I was listening to Biggerpockets and this other groups and all I hear is for your second property is 20% down so that’s where I get my 40k number from…
instead of trying to “SAVE UP 40K” you could always use business credit to fund it especially if it’s going to be generating passive income.
YT University is riddled with ignorant and deceptive and greedy "teachers/professors", just like this guy pace.
Stop being the textbook naive viewer. Pace is the textbook lazy man and selfish greedy slippery salesman. The F150 Story is a age old Sales Mantra of "Facts Tell, Stories SELL"
Prices can go up real fast. Homes I was looking at 5 months ago are $40,000 more now today. They likely will go back down but then again they might not any time soon. Always a gamble. So a decision like this may result in a home price going up 10s of thousands of dollars.
Great explanation on creative finance and seller financing! I love how you used the F-150 story to make the concept relatable. It's crucial for sellers to understand that they don't always need to settle for lowball offers if they can find buyers willing to structure deals creatively
Exactly
Awesome example of seller financing, though I wished it was always as good as this example
MAN COME ON BROTHER ❤❤❤ LOVE THIS!!! I CAN ACTUALLY FOLLOW AND UNDERSTAND YOU…. THANK YOU SO MUCH
Right on. Thank you for sharing.
Thanks for this video bro! Great break down!
Pretty powerful stuff thank you
Pace I like your style. Priceless information.
I appreciate that bro!
Legend has it he’s still talking
Love this story! I'm sending this to agent friends to expand their minds.
Awesome!!
Susan got hosed!
LOL you are obviously not in real estate.
@@PaceMorby nah bro, you gotta own this one..Susan got had, if Susan exist at all 😂 Why would she sell to you only to wait weeks/months for you to collect 4-5x more than what your paying her? At that point I’d imagine she’d list it on Airbnb herself.
But your video was very well edited 💯
@@justadrumPoint is she wants to sell. She wants to sell and travel, nobody is biting on her $110k price, he (in exchange for 6 months grace period, her paying closing fees, and the ability to make payments) buys her property for her asking price + $10,000. She charged him $10k for accepting payments, no problem because he actually isn’t “paying” anything, the rental income covers the payments and then some. Everybody wins!
@@justadrum Susan doesn’t exist that’s the point. Bro is clearly blowing smoke all over in the form of glitter and BS
This is amazing 🔥
I want to learn to tell stories like you. Great skill!
You can do it!
Pace you changed the game!
Absolutely brilliant!
Thanks Patrick!
Pace you're a HONEST GENIUS my friend ✌🏽️🐊
I appreciate that
Love your content brother! I was Able to make $20,000 last week with creative Financing.
Henry. That's dope!!!
💥💥 fire Pace 🔥🔥
Dope content my brother. Came at the perfect time. #GodsWork
I'm loving it
This dude is goated 🙌🏽
Thank you bro!
This was so helpful
Glad you like it!
Great video Pace
Appreciate it!
always appreciate the value you bring!
Hey Samara! My pleasure!
great vid!!
Does this only work i they've already paid off the house? Cause usually they're relying on the big payment to pay back the bank
Yes seller finance is when there's no existing debt - everything is paid off
This man and his creative financing tips are about to make me a fucking multi millionaire
Simply genius!
Abel. Thank you!
Love it 😍
Wow. You just blew my mind. Learn so much in 18 min video. Thanks
G status babyyyy🤑✌️
Really appreciate you
Appreciate you more!!
Bravo!!
EXCELLENT
That's bad ass man.
I appreciate the content. I do have one question. How is the "wholesaler" that brought you the deal paid?
You are awesome
How do you structure deal , in case buyer is delinquent on payments , like 3 months late repossess car ? Or stipulation and conditions ?
Thx
Poor Susan. Would’ve made more money hiring a property manager. Still would’ve made $800+ a month.
So what’s your approach when you’re dealing with commercial when it comes to seller financing.
8:09 “Susan, I am crazy, just like you, I’m belligerent. I want a specific price” LOL #saleshumor
Does this strategy works better for off market or on market?
Phenomenal
Thank you brother!!
It’s hard to believe she would’ve let the house go without any skin in the game upfront from you. Mazel tov 🍾
I'm speechless... you are amazing! Thank you for your content!
Glad you enjoy it!
This is great explanation for seller (creative) finance. I am assuming if she did not have it paid off, the payment would be for the payment amount?
Hey I have a question about this, how do you get someone to trust you when doing seller financing because the thing I can't still understand is why would they trust you to make payments and pay off the whole house. Also could you please explain what would entail in a contract when doing seller financing or maybe give a sample contract to make it easier for us to understand the exact terms.
The thing is either they can A put a lien on the property or you can have a part in the contract saying that you will do arbitration for any case where you dont make payments.
Pace, could you say how often you get a seller willing to do principle only payments at such low prices? It just sounds too good to be true.
And the F150 story only works if she doesn't catch on that the guy actually paid 3 times your blue book price. Shouldn't she, by the same logic, ask you for 3x her house around 300k?
You paid 110k for a home that, by the time it's paid for, will have probably appreciated to be worth double that price.
She can ask for 3 times but if the only person willing to pay what you want is at your number and it’s not worth your number do you take the loss and sit on it and keep getting low balled and never get a good sale even close to wat u want or do u raise it and never sell it just because it’s a contract for 10 years don’t mean it will take that long to pay in full if you need to sell it u get rid of the property
She gets the 10k down payment plus a monthly payment also from month 1 by month 6 she already collected $7250 by the first yr she already made almoast 15k not just the 10k for the down payment
What in the world are you talking about? $375/mo is what agreed to pay her. That's $4500 a year. @ThreeBelvedere
He paid her down payment with the cash flow he got from the property. He said it cash flows 1k. Which is insanely good.
So he walks into a deal where he pays nothing but closing costs, makes 1k a month, and pays her at the end of 6 months 5k. He does that twice to get her 10k. So he's out of pocket his monthly payments of 375/mo for the first year, which is 4500, and closing costs for a cash flowing property.
I'm skeptical that this story is real, is what I'm saying. When she's fully paid back, her home will have appreciated double, and she was already cash flowing like crazy so she could've hired a property manager or just found a way better deal for herself.
@ThreeBelvedere how you would ACTUALLY come to with the monthly payment is dictated by the rent that you think the property can confidently accrue. You typically want to cash flow at least $300/mo. This example Pace gives on how to figure out the payment is not practical it's anecdotal and, as far as I'm concerned, a lie.
Fire 🔥
Can I text from my messages or should I use Whas app?
@@scottw.6609 fake, that’s not Pace.
Do you still get title and deed at time of closing, and are you able to refinance before paying Susan off?
This hit different Pace! Such a great educator!
Brilliant. When does Susan get paid off in full? Thanks for all you do! You’re awesome! ✌🏽
Most seller financing deals (at least on the commercial side dealing with savvy sellers) will have a ballon payment due at some point (5 years, 10 years, 15, 30 etc) though that isn’t a requirement.
For us, (not associated with Pace) we typically kick it out 5 years minimum allowing for market appreciation and equity to be built up so we can then refinance (either private money or from a conventional lender) pay the seller the outstanding balance owed, and roll the cash equity we pull out into another deal.
And there's lots of time work and energy to get to someone who finally agrees to all this for a small amount does it work yes however it's a lot of work and you can only do that after you're making a lot of money and have time to do this all day long
Always bringing value and your demeanor explaining/telling stories is incredible! What I'm trying too wrap my head around, in this case Susan or any seller in Susan's shoes, won't receive the full amount of $110,000, until its paid off in over 20 years..
_What I'm trying too wrap my head around, in this case Susan or any seller in Susan's shoes, won't receive the full amount of $110,000, until its paid off in over 20 years_
All you need to do is make sure ahead of time that Susan would be fine with that. Since Susan and you negotiated what she wants out of the deal, then she would be fine with that. Nothing stops you five years into the deal from doing a refinance with a community bank and paying off the balance that you owe to Susan at once (a "balloon payment"). It's all in what you negotiated.
@@jalabi99got it! Its all in what you negotiate with the client. Anything is negotiable to work in favor of both parties. I appreciate your feedback!
The reason you can't get your head around it is because its not possible to do..
@@jalabi99 dang! 100,000 balance divided by 375 monthly = 22years and 2 months! and a net cash inflow of $625 a month! WOOOOOOOOOOOOW!!!!!! was that really what happened??????????/
yea... I am confuse as well. I get the overall method of how seller's finance this work, so thank alot for conveying the message; well appreciate! But number wise i don't see why Susan would agree to $375/month when she is cash flowing $1000 or more (depending on whether she has a mortgage or not). With these numbers she would be better living off the cash flow from the renters and allow her house to continue appreciating in value.
I don't have any liquid at the moment but have an opportunity to acquire a single family for under $20k. How should I set up a seller finance deal with this?
So how seller trust to buyer, what kind agreement involves, sign paper and notarized? What if buyer dies etc? Do you take property back, any insurance? Or just limbo?
but how do you wrap the deal in the contract what clause do I need to write or what should be there that doesnt affect anybody ?
Dude...yes.
🙌
Awesome video @Pace Morby. Would this be good to send to realtors explaining creative??
it all sound great but who owns the home title and deed ? PLEASE ANYONE LET ME KNOW TO UNDERSTAND LOVE YOU ALL GUYS
Thanks for sharing. I agree with first comment, ofcourse we should ready to answer such questions or back away. Some things not clear. This should be closing in Title company. Who holds the title? Title be transferred immediately with the contingency of loan? or you finish paying, then you will get the title?
What is needed to make this deal legally binding? What if the tenants can’t make payments and therefore you can’t make your payments to the seller? How does each party protect themselves?
Hey man! I’m a bit confused with loan servicing and was wondering if you could explain a bit? I saw your video with Robuilt and was following along until the loan servicing came up. Who takes over the loan payments from the previous owner once you have the deed? You or the loan servicer or the previous owner? Or is it that the previous owner still makes payments collected by the loan servicer (not you) but the loan servicer then takes a percentage to manage the and collect the previous owners payments? When you say you “hired the loan servicer” what does that mean. Thank you so much!!
Our title company services the loan on our subtos and handles all that for a $25 fee.
When does closing normally happen on a deal like this?
What happens if they don't fulfill the obligation of the full amount? Wouldn't that be a loss on the truck deal? ❤
Literally just clicked. Thank you so much!
My pleasure! Hope you like it
💯💯💯
My understanding about seller financing is that there should an interest rate for the loan / mortgage just like the bank. In this case if Susan is not charging any interest (principal only) then what is her benefit in this entire deal? Rather she should have hired a realtor and sell her property and get the money at once, don't you think so?
Its either sold at 50k at "whatever"% interest that leads up to about 110k anyway, or she just takes the 0% interest with 110k principal.
But here's the kicker...
That 50k that it would be sold for? The extra interest goes to the LENDER... NOT her.
By doing it with 0% interest, she MADE an extra 60k (or whatever the interest projection would end up being) on the mortgage she financed that would have normally gone to the bank.
And nobody else is gonna buy it at 110k with interest.
Win/win.
Well, except for the lender of course, he's out of a job...
Love how you explain that pace! Really makes sense👍🏽
Tx, much appreciated
?… I the or a real estate scenario like this,
a) At what point in the process are the deed / title put in the buyers name
b) Is the seller required to hold any of the monies received in an (untouchable) escrow account?
Yes… but… what about a seller that needs the full amount upfront and can’t wait for payments? It doesn’t apply to everyone , only if you come across someone who is not in a rush to get the amount they want
How do you protect yourself from them not paying you on the payments and they still have your car? Or house? Or thing… that they seller financed.
holyyy this is crazy 😏
Right?! It really opens up your world when you start learning creative finance.
Hey guys! Appreciate your response to my question: Seller asked me what if you stop to make me a monthly payment? She says: "I don't want to go to court if you don't pay me" Please advise!!! Also if someone can touch base with me to provide high level of preparation to make this deal done - i would highly appreciate it!!!
Man I love this fucking video 👍🏾👍🏾👍🏾🙌🏾🙌🏾🙌🏾
And it's difficult to find people with these special scenarios yeah you could do the postcard thing like he did but let's be realistic that's few and far in between
Does anyone know of these methods being used here in Australia?
How do i structure Seller Financing if i have a mortgage on rental property ? ( i am the seller with mortgage)
🔥
🔥✌🏽
Seems like it's better for the seller
since your seller is up there in age, what happens when she passes? how long is the term for you to pay off the remaining balance?
What if they default on the payment? What is the legal recourse, if any?
The owner legally takes back the house. All the payments + down payment would be total loss for the defaulting buyer, while seller only wins in this situation. Similar story in a lease option. If the buyer/renter default on their obligation, the owner reclaims the asset.
How does the AFR (Acceptable Federal Rates) work when structuring below the IRS acceptable interest rate? Right now the IRS has it set at about 4.3% and I have my offer to the seller at 2% interest. He is asking if he will run into any gift tax issues or etc. ??
It how do you hold the buyer accountable and when does the seller transfer the title??
So if i buy the house seller financing and im paying the previous ownwer do i have to pay anyone else? After deal is closed?
This sounds like a rental agreement. Do they not still retain of the property untill paid in full?
@Pace Morby, do you have a video to send to sellers?
PaceMorby
How do you ask a seller to do owner finance, any rejections you need to overcome? I guess more seller will not think you are serious with no money down, no skin in the game.
Where can I find how this looks on paper at?
How will seller finance will get affected with US or global currencies going digital?
Awesome lesson brother! 💪🏼 One question I have is did you begin to make the $375 pymt from the start or only once you paid off the down after the first year?
I think this is where we learn on our own. But I would have to say he probably did start paying 375 on the first month. He made is money back quick shortly after🤯
Yes you have to start making payments immediately the down payment was just staggered to buy the time to get the original asking down payment needed for deal
What does principle payment means?
Damn you smart
What was the mortgage on the property?
Is this possible in the uk
how can the buyer get new mortgage to pay off (balloon) the seller, if they only have a deed a trust?
The only piece in your calculations would be the payment of property taxes and insurance? Who pays for that? Also, what if the Seller wants to exit the deal in three years for example? She no longer owns the asset just the debt so how could she exit?
But the question is, why would Susan sell you the property for $345 payment instead collecting $1000 from the rent??
‘Most’ people do not want to be landlords. In this scenario Susan wants to travel and doesn’t want to manage a property, she makes her money regardless of if Pace has the property rented or not. Susan, just like a bank/financial institution is guaranteed payment each and every month, regardless of property vacancy.
Could Susan hire a management company to manage rental for her? Of course she could. However, in that case she is then also responsible for the expenses associated with that rental property and income is dependent on having a renter. By Susan ‘playing the bank’ financing to Pace, she assumes a set income without any downside risk like unknown expenses popping up that Pace (the new owner and landlord) must assume.
Your question is absolutely valid - the main take away here is to fully understand your seller’s jumping off point (their motivation). In doing so, you can create a deal that makes the most sense for all parties involved.
Every single deal is completely different that’s the beauty of real estate.
A dumb seller
@@NAUTILYFE the deal is absurd for Susan to take. It will take this dude 22 years to pay that 100k with yearly payments of 4500.
She could just take 60k cash from one of the other bozos that Pace mentions and invested that cash into ANYTHING that yields 3% and she would come out ahead after 22 years.
Or as the fellow you responded to says, she's probably far better off highering a management company and keeping the house.
@@bradleystoldt318 seller finance deals generally always have a balloon payment within the first 5-10 years (though it varies of course). If you’ve ever looked at an amortization schedule, most interest is paid to note holder/financial institution within first 10 years, so not only is she collecting interest but she’s getting her full asking price in 5 years when ballon payment on note comes due.
Seller financing is typically used by investors during high rate cycles as a temporary fix. 99% of the time these would be refinanced out before the balloon is due in 3 years or so. If you’ve never bought property like this it’s fair you wouldn’t know or understand. The end game is never to pay Susan for the next 30 years it’s again a temporary solution to get her her asking price (that she’s been unable to get) and as a buyer get a better rate than a bank would offer and cash flow it.
Also she said she wouldn’t take 60k she wanted her number at 100k and wouldn’t move off of it - he offered it and she got it. She also said she didn’t want to hire a PM company, she doesn’t want to be on the hook for repairs and dealing with months where there’s no tenants. As the ‘bank’ you get paid regardless of occupancy status. Would a PM be smart, sure, if that was the situation, but it’s not here. That’s real estate, every situation is unique and this just happened to make sense for everyone.
I agree