4 Pitches to Get your Seller Financed Offers Accepted

Are you tired of getting your seller finance offers rejected, or do you not even know how to start phrasing them so you can buy more real estate? Now, I've done over 20 seller finance transactions over the last 5 years. I've done a lot of this, and a lot of these structures are easier than you think. But how do you actually win the discussion? How do you convince someone to give you seller financing? Now, this is a common question. I've been asked it on BiggerPockets many times. The answer is simpler than you might think. On this video, I'm going to go through 4 different ways that you can win on seller financing in actual real-world situations. So I'm gonna give you what you come up against and exactly what you say to make it through. By the end of this video, you will be able to close more seller finance transactions. Here we go. Hey, welcome back to the channel. My name's Christian Osgood, your channel host. I've done a lot of multifamily transactions. 20 of them have been seller financed. The model is so simple. There's a few different triggers that allow it. The first thing before we even get to that though, I need to tell you, you are never, ever, ever going to convince someone who does not want to do seller finance at all. They want to be cashed out. You are not going to sell them on the idea of doing seller financing. It won't happen. So you're not going to sell them on the tax benefits, the extra interest payments. It has to make logical sense. That being said, there are situations where you can win on this even when you didn't think they would say yes. First of all, and this is how I won on my 38-plex, this is how I got into real estate. They had a set price. They were married to that price. The bank would not lend. So there was no way to cash them out unless you came into the deal with $2 million of cash. Everyone who has $2 million of cash doesn't want to do that deal because it's heavy value-add. If you're already rich, why do the difficult project? You don't need to. If you're getting started in real estate, it's like, cool, I would love to do that. But where's the $2 million coming from? The seller. Now, what we did on this particular deal is we went ahead, we walked the entire property, we took a bunch of pictures, we took it to the bank, and we had the bank actually write us a letter of this is the condition, the rent roll, the maintenance that needs to be done before we are willing to finance this deal. And we were able to bring that to the seller. Now, before we even got in front of the broker and the owners, we crafted how are we going to get the financing that we want. We brought this letter to the agent who had listed the property and said, look, we have brought this through a couple of banks. None of them are willing to lend in the current position. We have a proposal. We can give them their price, but we need them to carry a note for the next 5 years at 4%. Interest only. If they will do that, this deal will work for us and we can get this closed. The broker got back to us and said, okay, they're actually open to this. How much are you able to put down? They still owe $200,000 on the property and they want to walk away with $100,000. Perfect. Now we're negotiating right there. We got the concept accepted because it's the only thing that made sense. So that's the first way to frame it. The property needs it to close at your price. It's the only way that it could happen. Therefore, our proposal is logical. Notice we're not coming at this as, oh, there's all these benefits to you as a seller, or this is why we have to do it for us. It's the bank's fault. We're positioning it as it is unlendable. Therefore, if you want to sell it and you want this price, this is the way that it must be. Now we're just negotiating down payment. We ended up doing $300,000 down or 15%. Easiest capital raise of all time. Found a fantastic deal, a fantastic custom debt product, seller financing. Accept it. Reason number 2, the financials just aren't there. That first deal, it was mostly down to the physical disrepair of the property. There was a lot of work that had to be done. I had a property in Stephenville, Texas, also happened to be $2 million purchase price, nicer building, but 25 units. Here's what we did. We presented that price, or we presented a lower price and he said no. We came back to the $2 million and said, hey, for the $2 million, it does not have enough income. And we played a very similar game. We had a bank look at it and say, hey, this is the DSCR, debt service coverage ratio, that we need to lend on the property. If you want a quick cheat code to do this, literally go into ChatGPT and just type in, at what price would I need to buy this property at a 1.25 debt service coverage ratio? It will literally tell you the price. You don't even have to know the math. You go in, this is where a bank is going to want to lend. If that doesn't look like the price they want, now you instantly transfer into the seller finance conversation. So I propose seller financing, 5% interest. So we proposed the full price seller financing and an interest stair step. So we go, hey, in year 1, we're going to go ahead and do 3%. In year 2, 4%. In year 3, 5% interest. And we'll do 5% interest only for the remainder of the loan. He said, no, I'm not willing to do less than 5%. I'm like, huh, we still don't have cash flow. We need cash flow. We proposed what's called a reverse amortization. We simply said, hey, how about this? We'll pay you 5%, but it's going to accrue on the back end of the loan. So we're going to pay you the equivalent of 3% interest, then 4% interest. Than 5% interest, that excess interest will be paid for you at the end of the loan. So our loan balance will go up just a little bit over time, but it will allow us to cash flow the entire time. Perfect solution. But notice it's the same thing. It's the simplest solution solves the deal. Scenario number 3, they want to be cashed out, but you can't quite cash them out with conventional debt. So we're close on terms, but we're not quite there. We can't get the deal closed the way it's proposed. We have to get creative. We just did this, 81 units. This was a stellar negotiation, absolutely loved it. So 81 units, it's been on market for a little while. We're trying to take this deal out and we're this close to negotiating it. I need about 6 months to finish the leasing of this project. It's at about 85% occupancy. We need to push it to above 90. So we're stuck. It's not quite closable. It's really close. We did a 1-year seller finance note. I am not a fan of short-term debt, but if all I have to do is fill 4 or 5 units Over the course of 6 months, I own a PM company, so I know what I'm doing in this market. We go, hey, how about this? You do seller financing. We're going to try to get this done in a new debt product in less than 6 months. And I already have a bank committed who's fine refinancing early for the situation. So we line up our debt products. We have a very clear proposal, which is the most important thing. And we say, look, you're going to seller finance for 1 year. The first 6 months are going to be very inexpensive for us because we're just trying to get this thing finished and refinanced. If we don't refinance in the first 6 months, it goes to 7.5% interest and it goes to a 25-year AMM. So the payments go up quite substantially. In the event that we still can't refinance, it has an extension, so it goes up in price again, but we can extend a whole nother year. So for a project that we want to complete and believe that we complete in less than 6 months, we have up to 2 years to complete in the note structure. Now we closed that deal. We're almost done with the refinance already. Awesome process, super simple, but again, it's simple little tweaks. I don't like short-term debt, but it has to make sense with what you're doing in the project that you have. Find the solution, land the pitch, never come in and just open with, hey, are you open to seller financing? There has to be a reason for creative finance and it has to fit the scenario. Otherwise, absolutely, you are going to get rejected or they're going to ask for a huge down payment or ludicrously high interest. Guarantee you, if you're running into that, it is not a valid fit for the real estate deal that you're trying to solve. And lastly, and this is my favorite way to negotiate them for a majority of my deals, the seller's proposed seller financing. So the method here is instead of going after the specific deal, you actually go into the market and meet the owners. I get coffee with these people. Oftentimes they plop me in their truck and they drive me around town and they show me all of their properties and they talk about how they built their portfolio instead of trying to buy Form relationships with the people who currently own. If everyone who owns in your market knows you, likes you, has had conversations with you, they know your goals, even if you've never asked anything of them, they will reach out to you. And if you've already shared, hey, you don't have a lot of money, you don't have the capital, but you have a vision and an operating plan, and oftentimes they've helped you with your operating plan, they'll reach out and they'll propose terms that work for you. And that's how I bought my third, fourth, fifth, sixth, 8th, 10th, and then several after seller finance deals. They came up where the seller called me and said, hey, I only need 10% down. I know you're a little strapped on cash, but if you can find 10%, we're going to write this deal where it cash flows for you day one. And we did this again and again and again. And ultimately that strategy is how I retired my wife from teaching, eventually retired myself from the 9 to 5, and allowed us to move from a tiny little house in Seattle, Washington to a gigantic house here in Texas and start a family. All of that came from these 4 little techniques of getting a yes to creative finance to bridge that gap between the money that I did not yet have, but that was available for the right deal. If the seller has the equity, the seller can be your lender. You just have to know how to frame it. 9 out of 10 times, it's going to either be you're pitting the bank financing or bank qualifications against them for your reason of, hey, for me to give you what you want, the bank won't do it. But you and me can work this out, or it'll come directly from a long-term relationship with owners in the market. The only thing that you cannot do is come in with reasons that you need creative finance. I never come in with, I need this for the deal to make it work for me. It's either to make it worth a bank, we need to bridge between A and B. Let's get you what you want. Or they come to me with a proposal and I say yes. But that subtle difference between making it their idea or making it a concession on your end to get them what they want is so much different than I see most people do this, where they call, hey, are you open to seller finance? Hey, I can only do this because I have a little bit of a credit problem. Don't make it a you thing. Make it a deal thing. Solve the deal, get the deal closed. You'll do this again and again and again on repeat. Hope this helped. Like, subscribe, follow the channel for more real estate tips. And if you want to join a free community where we're talking about this every single day of the week with thousands of investors all over the country, free calculators, the whole nine yards, go to the link below, join our free school community, S-K-O-O-L. Just type Multifamily Strategy Community into school, join us there completely free. If you're watching a free video, might as well join us there. Thanks for watching. We'll see you on the next episode.