4 Simple Tips to Always Get Seller Financed Offers Accepted

Hello YouTube, we are back. Brandon is here. I know he's been out for a couple weeks. We replaced him with Cody. Terrible decision. I'm kidding, Cody did a great job filling in last week. However, we have Brandon back. I'm excited to have you back on the channel.

Thank you very much.

Uh, if you haven't followed his channel already, do it right now. It's Multifamily Momentum. I show up on there occasionally, so if you like our content here, we do even more over there. Um, Brandon is one of the best brokers in the Pacific Northwest. That is a fact. You can look it up, it's online. But seriously, Brandon is an amazing resource. How long have you actually been a broker in this market?

Almost 13 years.

Okay, so over a decade of experience. You've done single-family, multifamily, all sorts of investment.

That's my niche, multifamily.

Multifamily and heavy on the investment side. The reason this is important is because today is talking about how you put together a seller finance offer. I brought in the master of writing offers. He actually wrote the offer for the last deal that Cody and I purchased.

Yeah, appreciate that.

Yes, absolutely. And guess what? It went without a hitch and we didn't really have to renegotiate anything except for, I think, like a mild— didn't we do a few-day extension on that?

Yeah.

And that's the only thing that we changed at all is we kicked the timeline out like a week.

Yes.

So very, very simple. Easy to work with. A lot of people don't know how you actually offer seller financing. So I wanted to get Brandon's opinion. I know Cody and I have thoughts on this. So I'm just gonna open up to you.

What does it look like? It's interesting. The last few months, because the market's kind of shifted and not everything's going for over asking and crazy stuff like that, all cash, sellers still want their price. So they're— some of them know about seller financing, but a lot of them don't. So we see deals listed, it still say cash out or conventional, but I'll call that listing agent or the broker or the seller if it's for sale by owner and say, hey, have you considered seller financing? They're like, I don't even know what that is. What do you mean? So it's my opportunity, our opportunity to educate them and say, hey, let me, let me run this by you because I think this may work depending on your situation, right? Yeah.

Well, this is somewhere where Cody and I differ from a lot of people, so I'm actually interested to see your thoughts and experience on this. What I have found is that educating on the basics is very important and it's usually pretty easy to put through, but the more complicated you make that explanation, the less likely you are to get—

Exactly.

Seller financing. And My thought— I'm gonna see if you agree. I don't know, you're allowed to disagree here, by the way. We'll get more views if you disagree. I'm just kidding. But what I have found is that if you try to sell it on features and benefits, they're usually out. If I try to go, hey, this is what it's gonna mean for you tax-wise, this is the advantage of— if I try to add in all the advantages, I almost always get a no, right?

So I agree, because— and I have to be careful as a licensed broker, I can't give financial advice, right, or legal advice. So I always disclose that and say, hey, I don't know anything about your financial situation, but what is— try to interrogate, not interrogating, but asking questions about what's important to you. Do you need a big buyout down the road in 2 years or 5 years? Do you have health concerns now that you need a bigger down payment, or do you just want a nice set fixed pay? Like, it's not always about the interest rate, right, and stuff like that.

So I think more than anything, from the 10 plus deals that we've done seller financed, about half of them, the main thing they're worried about is getting their price above all other things. That is the most common thing. The next thing, and I think a lot of people miss this, is not interest rate. It is that monthly payment. A lot of people have an idea of, if I can get a note for X amount, this pays for my lifestyle and I am now good to go. And that is fairly common, especially multifamily, where you're talking investment properties. It's usually not their only property, right? And that's where you get— it's a lot easier to get seller financing with people who don't need the money right now.

And again, the seller, they don't know what they don't know. And so they may think, but I still have a note, I still have a mortgage on my property, I can't do seller financing, right? So that's another thing they get concerned about. You got to dig a little deeper. Well, do you only owe $100,000 on this million-dollar property? I think we could still make it work. Yeah, right. But if you owe $900,000 on a million, it's Probably.

Yeah, if your down payment's over $100,000, you can pay off that first note and away you go. And there's a lot of different ways to blend it too. We have him on the channel, I think he comes on this Friday or next Friday, but Matt Hawkins, Lumberjack Landlord, he's worked on a bank product that he gets approved all the time. He just did a deal like this. 50% bank, 40% seller financed, 10% down.

Nice.

And he can knock those out all day. The 10% hits the bank's requirements for how much skin they want to see in the game. And they love coming in first position for 50%, their risk on that loan is super, super low. The seller typically loves it because they don't have to finance the whole thing. They get a blend of— they can have their cake and eat it too. They get a big lump sum for 60% of what they wanted, and then they hold a little bit back. And that's another great option. But it all comes down to the first step, which is exactly what you hit, which is you identify their goals because Everyone has a different goal. Seller financing is a relationship game, just like bank debt. A lot of that is your relationship with the bank. It's more so with a lender. It's a personal thing. They're part of the deal while they're tied to it. Like, your lender is like a partner on your deals. They have to be respected. They have to know what's going on. Sellers, you start that relationship by identifying the goals.

I started to learn that too. The more I thought, presuming in my head I'm going to pitch this to the seller and it sounds in my head like a great deal for them. And then they come back to me and say, well, no, no, I have a year to live. I'm dying of cancer. I need all of this now. So I need a bigger chunk. I can't take— it's nice you're offering this big payment every month, but I'm not going to even be around in a year to have that big payment. So yeah.

So it's good to know the benefits of seller financing. However, don't pitch off of the tax savings. If someone's sophisticated enough to be thinking about their tax savings and their interest rate on their money, I guarantee you they already understand what seller financing is. Like, if you're with a sophisticated investor, which is what Cody and I usually do, is we talk to people who've mastered the game. But at any level, if you have to explain the little details of why it's going to benefit them, you're probably not looking at a great candidate to do seller financing. 9 times out of 10. So be able to educate them. There are some tax benefits. They get interest on their money over time. One thing that I see happen a lot is people who are doing estate planning go, I want to cash out because I'm about to die. And it's come up on multiple deals now where we get into the conversation and they actually find that, hey, I actually don't want to pass a lump sum of money to my children. If we can convert these into notes over time, I pass cash flow. My children don't want my real estate, and I don't want to give my irresponsible children a lump sum of money. And I've seen that happen with two different sellers on multiple transactions. That is the estate planning method, is let's turn these into long-term notes, talking 5, 10, 15 years with options to extend, so that their family gets money in chunks over time. They're in their 70s. So all good things to know. However, you're going to pitch this on what makes the deal work for you. So step 1, you've already put it out there, find their goals.

Their needs. Yep.

Creative finance is fun. You get to adjust stuff. So you go, okay, price up and down, what works? Interest rate up and down, what works? Monthly payment. The nice thing with monthly payment is you can actually do low interest with a high principal payment. We've done that before. So you figure out what works for you that makes the deal cash flow day one and figure out how long that balloon is so you know that you can keep it forever. So if you need 5 years to know that you can refinance it comfortably and get it into another form of debt, and that's what you need to do, Make sure that's in the terms. But you pretty much pitch that, at least in my experience, would you be willing to carry a note? If they understand that's usually a yes or no. If they have some questions around it, be able to answer a basic question. And then you present to them, once you know what inputs you can and can't move, well, this is what makes the deal work for me. If they need a higher than market price, lower the interest rate.

Right.

I mean, it's that simple.

Be patient with them, right? Yeah. Not everybody knows what a balloon payment is, and so you have to explain that and stuff like— so yeah.

And don't bring up balloons. I have learned this from, uh, Michael Zuber. When you met with him, he has multiple seller finance notes, 30-year fully amortized.

Nice.

And I was like, how are you proposing that? He's like, well, I don't say the word balloon. He's like, if they want a balloon, my minimum is 5 years. And I like to see 15. But he's like, I ask for seller financing. And if someone's used to bank debt that's amortized over 30 years, half the time they'll just go like, okay, well let's do this on a 30-year AM.

And if you're new to following seller financing, that, that's a really good term or terms for that note. Yeah.

It's insane. Traditionally, and there's no such thing as average in creative finance because it's creative. But if there was something in the realm of average, I'm going to say it's going to be a 5 to 10 year note. It'll either be interest only or have some blend of principal in there. About half of them are interest only that I've seen. And you're usually looking at 10 to 20% down. I've seen it go as high as 80% down. I've seen them go as low as 0% down. But you have options. I think Michael Zuber's was actually a 0% down, fully amateur. Amortized 1% interest.

Nice.

Freak of nature.

It happens.

Yeah, I don't actually propose that. That's something a lot of our mentees actually get better terms than us because they'll get aggressive. I like to propose things that I would accept myself.

Some of the best advice I was ever given by a guru once was you should always start with something that makes you almost cringe or uncomfortable to even speak those words. So that's what I think is a great tactic, is throw out something that you're like, oh, there's no way they're gonna take that, but You'd be surprised. You would be very surprised what people will consider.

And it's a great model. I think most people do that very successfully. I have had some level of luck by writing great deals for both parties where I don't push it all the way. I just go, okay, I would accept this. This gets me to where I can hold it forever. I can buy it, I can cash flow it, I can hold it, we can move forward. If we push that margin to where I know they're getting a great return, they're going to be happy with. Those people, 10 to 1, they sell to us again. And I work with mostly people who have multiple properties. So we get multiple transactions, they love the way we operate, and those people have ended up being lenders for me in the future when they're like, you know what, I love the terms of our note, I actually have too much capital. I had one person call us and say, hey, I'm 70, for the first time in my life I can't spend all my cash flow.

So you mean the relationship paid benefits?

Yeah. I don't know that that person, if you negotiated the zero interest 30-year note with them, I don't know if that person is going to call you and say, can I place capital with you? So two schools of thoughts on it. It depends on who you're working with. I suppose it's what you want out of the relationship. If it's, you know, one person who owns the one property and wants to sell it, that's probably the best strategy is just asking for something absolutely ridiculous because if you get it, You just have a stellar deal. I would weigh how many transactions does this person want to do, what is the size of their portfolio. If you do an aggressive deal where they really benefit, you want to become the most obvious buyer for the rest of their stuff. So weigh the entire thing before you do that guru strategy. However, Cody and I don't have any insane loans. They're all medium interest rate, medium term, Like, they work. Yeah, and they cash flow fantastically. But I try to adjust the inputs in a way where it's like, yeah, I feel like this is right in the middle. Multiple ways to negotiate and multiple ways to do it. So if we're breaking this down into simple steps, and I'll put a little— I'll put a little tag here in our video so you guys can just skip right here and get through all the commentary. Step 1: identify their goals.

Yes.

Step 2: Educate where needed. Is that a fair step 2? Okay, absolutely. Step 3, make an ask that allows you to cash flow day 1. And then step 4 is just shut up and let them say yes. Yes, I hear people over-explain this all the time.

It's a great strategy.

Yeah, just ask. And if it doesn't work, figure out why without saying the words why, because why is a dumb question. Ask intelligent open-ended questions. Learn more about what their objectives are, because if you propose something and they don't accept it, it means you did not do something correct in step 1, identifying their goals. If you do that step correctly and you know, hey, I hit their goals and I have a cash-flowing deal— I think we've been turned down on a proposal for seller financing 2 times in our investing career. When you do this correctly, you don't get turned down. You will get these every single— I'm gonna say 99% of the time. Yeah. So follow those steps. I'm doing this at the end of the video, probably gonna set at the beginning. You can skip to the end if you want the shortcut, but those are the 4 steps to buy a seller finance deal. We will see you guys next week for another episode of Multifamily 101. Thanks for sticking with us. Like, subscribe. If you have questions, post below or hit me up on Instagram @ChristianOsgood.