I need some good real estate advice regarding an offer with seller financing! (agent, sellers)

[celebrationowner]

My husband and I live in Celebration, FL, the town Disney built and owned and now partially owns but has Lexin Capital managing it for them.

This is what I need help with, IF there is help to be gotten.

Celebration is EXTREMELY expensive. We found a home we want REALLY bad. The agent says the owner will do seller financing up to 20 years. Problem is they want a down payment and this was a spur of the moment thing, so we are not prepared. The house was purchased in 2000 for 1.2 million dollars, it then sold for $690,000 in 2001. The seller started out with an asking price of $880,000 six months ago and it is now $739,900. There are two parties that are making offers tomorrow. Our thought was to offer exactly what their asking and do a interest only 7 year seller financed loan. Because it would be interest only, the seller would make approximately $285,000 for those 7 year and then at the 7 year mark when we buy the house, they would get their full asking price too! The agent doesn't think they will go for it because they want money down because they attempted a lease purchase option and the potential buyer walked out after 7 months, leaving them to start all over. She also says they are from the UK and don't understand seller financing well and have just seen that banks sometimes want 20% down and think that is what they need to do.

Please, any real estate specialist out there!, what can we offer that may comfort them more, or what can we say. Should we mention the fact that with the interest only loan, that essentially is a huge down payment. What about offering more than what they are asking for now? They originally wanted $880,000. We had identity theft and have all kinds of police reports, but it is sooooo hard to get this all fixed. We have a 22% debt ratio which we have been told is excellent. We make Plenty of money, so that wouldn't be an issue on getting a loan down the road. Right now because of the identity theft, our credit score has plunged to 612. We have to do a seller finance and this is our dream house, therefore, that is why we are not prepared with a down payment.

We are desperate! PLEASE, any ideas on what can be said or done to make the deal sound better or not scary to the sellers?

Any help would be majorly appreciated.

[Mark Brian]

Originally Posted by celebrationowner

Please, any real estate specialist out there!, what can we offer that may comfort them more, or what can we say.
We are desperate! PLEASE, any ideas on what can be said or done to make the deal sound better or not scary to the sellers?

Any help would be majorly appreciated.

Honestly you will need to offer 10-20% down. Without any skin in the game, what assurances can you give the owner? By making a down payment, the owner knows you are motivated to NOT lose your down payment and will do everything you can to keep making the payments. No money down can mean to the seller that you have nothing to motivate you to keep making payments.

[learningCA]

The aftermath of the banking crises is not an auspicious time for creative financing.

An interest only loan is not an attractive feature these days.
This kind of loan got many people in trouble with their mortgages in the first place: lured by the low payments they overlooked the fact that an interest only loan actually increases one's loan principal.
So now, after many payments, many owe more on their mortgages than their houses are worth, they are 'upside down' with their home financing.
Some of these people just walk away from these houses, I hear.

Your low FICO score is another red flag.
You make good money now but the future is uncertain in these troubled economic times.

If these people are from UK they have been hit on two fronts, so to speak, as UK suffers a plunge in home values as well.

Who knows where home prices will be in seven years when the sellers would finally receive the full sale price?...

As the previous poster pointed out, with no down payment what will stop you from walking away from this house if you will owe more on it that it might be worth then?

Meanwhile, with interest only loan payments substantially lower than on a fully amortized loan, you would be able to live in this house of your dreams for a low monthly payment = rent.

Sorry, but the sellers would be ill advised to accept your offer instead of going with a regularly financed offer.

This scenario would be a win for you not a win/win situation for the two parties involved.

[learningCA]

Alright, there could be some advantages for the sellers on this deal if they are not pressed for cash at this time:

- If you offer a very good interest rate that may assuage their fear of inflation and devalued sale price seven years down the road;

- If they are concerned with the current year tax liability of a "cash" offer;

- In a seller carryback transaction the buyers do not get title to the property until the loan is paid in full, so the sellers could easily foreclose on their loan to you if you do not perform.

That is all that I can do for you.
Maybe others would entertain some thoughts on the topic.
Good luck!

[learningCA]

Correction.
I wrote in my first post on this thread that "an interest only loan actually increases one's loan principal."
Technically, that is not correct.
An interest only loan keeps the loan principal the same, unless late payment penalties, for example, add to it.