Presentation about seller financing as given on 5-15-12 at Cal Poly State University in San Luis Obispo, Calif.

2. Know anyone who has
completed a seller-finance
transaction?
In SLO County, as reported to our Multiple
Listing Service, over past 6 years, only 6.5% of
sales involved likely seller financing.
Copyright © 2012 Davies Company Real Estate

3. Seller Financing
Definition
When the seller of a property accepts a
note and trust deed as part of the
purchase price. The buyer owes the
seller the amount specified in the note.

4. Seller Financing Players
Buyer
Seller
Escrow
Real Estate Broker

5. The Deal Example
Seller has no loan on the property (free & clear title).
Buyer wants property
Buyer’s loan options are limited or undesireable
Buyer has resources to pay payments (income)
Seller prefers or will accept payments instead of the full
purchase price
Buyer makes promise to pay, seller accepts
Sale closes escrow
Buyer makes payments

6. Seller Financing Math
Example
The Variables:
$500,000 Property Value
$100,000 Buyer’s downpayment
$400,000 Seller Carries Back Financing
$40,000 Estimated Closing costs paid by seller (8%)
$60,000 Net cash to seller at closing + Buyer’s
promise to pay the balance of $400,000.

7. The Seller

8. The Seller
From property …to payment
owner… collector!

9. Benefits to Seller
 Income Taxes
 Return on Investment
 More Buyers
 Faster Transaction Closing with Less
Decision-Makers
 Note and Trust deed are Marketable
 Structure Customized to Their Situation

10. Seller Considerations
Include:
• Do we want to risk owning this property again?
• Do we have confidence that our loan is well-secured?
• What kind of interest rate can we get on our cash in the bank?
• Credibility of the Buyer?
• What would we do with the cash proceeds from the sale,
anyway?
• Could we use a monthly payment?
• How long are we willing to wait for the proceeds?
• What are credit, legal, and tax implications of our decision?

11. Should Some Sellers Avoid
Seller Financing? Yes
If you have no equity or are
pursuing a short sale If you need the cash immediately
from the sale

12. The Buyer

13. The Buyer
From renters…
…to homeowners!

14. Benefits to Buyer?
All Terms Are Negotiable
Credit Score is Less Important
Down Payment Flexible
Can Use Other Collateral
No Cosigner Needed
Terms Can be Renegotiated
Closing Cost Savings
Property Value More Important Than Buyer’s
Qualifications

15. The Escrow
Company

16. The Escrow Players
Private Escrow
Companies, too.

17. What documents are
required?
Note (Detailed terms of repayment)
Trustdeed (recorded in public domain at
County Clerk Recorder’s Office)
Reconveyance (when loan is paid off)
Purchase Contract & Escrow Instructions
Amortization Schedule for Payments

18. The Note

19. The Trust Deed

20. The Reconveyance

21. The Real Estate
Broker

22. Real Estate Broker Reality
Listing broker must be director with the strategy,
and monitor information to parties.
Manage buyer expectations- if buyer’s agent
Manage seller expectations- if seller’s agent
Become educated in seller financing matters and
benefits to the parties
Expect transactions with inexperienced agents
Have professional resources to refer to, like
CPAs and attorneys, and trust deed buyers

23. Real Estate Brokers
(Insider Secret)
In my experience, over 85% of active
agents have never participated in a seller
financing transaction.

24. The Real Estate Broker
as seen by Buyer & Seller at Successful
Close of Escrow in a Seller Finance
Transaction

25. Davies Top 5 Tips
for Seller Financing
Or how to be a smart investor, with any
kind of transaction, including seller
financing.
Copyright © 2012 Davies Company Real Estate

26. Tip #1
Anticipate the fears of all
parties

27. Tip #2
Know the math
What does the seller need to make the
transaction be acceptable & lowest-risk
to them?

28. Tip #3
Be responsive to the other
party, keep calm

29. Tip #4
The Terms of the Seller Financing
Can Increase the Benefits in
Transaction to Both Parties
You can create more
opportunity and
more value in your
property by offering
seller financing.

30. Tip #5
Buy real estate.
And use what you have to get what you
want.

31. DaviesCo.com
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