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Lately, I\\u2019ve been talking about seller financing. In Episode 319, we explored what seller financing means, how to identify scenarios where it works best, and why it works for both the buyer and seller. Today let\\u2019s talk more about how to negotiate seller financing. If you haven\\u2019t listened to Ep. 319, I recommend go give that a listen \\u2013 it\\u2019s less than 15 minutes. For a quick recap, let\\u2019s revisit first what seller financing is.

Seller financing is when the seller finances the property for the buyer. Sometimes this is called \\u201ccarrying the note\\u201d, \\u201cholding the paper\\u201d, and even sometimes \\u201crent-to-own\\u201d, although that last term is oftentimes misused. Seller financing entails the current owner/seller letting the buyer make payments directly to him or her, rather than requiring the buyer to go out and get a loan from a bank and paying the entire purchase price upfront. As such, the seller is financing the property for the buyer, hence the term \\u201cseller financing\\u201d.

To successfully negotiate seller financing, it helps to understand the benefits to not only you but more importantly to the seller. These benefits include:

1. The seller will make a return on the money they lend the buyer. Rather than taking the proceeds from a traditional sell and putting it all in, let\\u2019s say a savings account earning 0.01%, the seller could lend you the money earning 4%, 6%, or whatever interest rate that you agree to. Whatever that rate is, it\\u2019s likely much higher than what they could expect by putting that money back in the bank in a savings account, CD, etc.
2. The seller can still get a large initial payment in the form of a down payment.
3. Carrying the note allows the seller to still \\u201cinvest\\u201d while being more passive. Rather than managing the property, collecting rents, and being responsible for maintenance, the seller can instead sit back and cash your mortgage checks every month, while earning a return on their money.
4. Tax deferral. This may be the biggest benefit to the seller of any. If the seller sells their property for all cash (assume the buyer is borrowing the purchase amount from a bank), then the seller will be responsible for paying capital gains tax (assuming they owned the property for greater than 1 year). By agreeing to seller financing, they spread their tax liability out over a greater amount of time. I highly recommend you talk with your CPA and urge the seller to do the same. Everyone\\u2019s tax situation is different. But this can often help the seller avoid a large tax liability, and that point alone should always be highlighted.
5. There are costs with selling any real estate. Agents fees, bank fees, closing costs, title work, etc. With seller financing, many of those costs are minimized and some are avoided altogether

Once you have a good understanding of the benefits of seller financing you can begin to craft different pitches and selling points. Remember, just because you\\u2019re buying a property, doesn\\u2019t mean you\\u2019re not selling both yourself, as a reputable and knowledgeable investor, but you\\u2019re also selling the idea of seller financing.

You\\u2019ll also have to overcome objections and concerns from the buyer. Knowing these common objections and concerns from the seller\\u2019s perspective will help you be more prepared in overcoming those and being able to provide solutions to them. Some common objections are:

1. The dreaded \\u201cDue on sale\\u201d clause in many mortgages. This is a clause in many mortgages that says the mortgage can be called due upon the sale of the property. In other words, if you sell your property, you have the pay the bank. Makes sense, especially from the bank\\u2019s perspective. I\\u2019ve personally never heard of a note being called due, especially if it\\u2019s performing (or being paid in other words). There are many more experienced people than I that will tell you the same thing. There are even attorneys that refute the notion that seller financing is a sale. They'