Considering a ‘Seller Carryback loan’, or ‘Seller Financing’?

We have helped set up dozens of commercial ‘Seller Carryback’ loans in the past few years.
This is my approach to the question of how to present a proposal and get it done. Commercial real estate is different and a commercial loan can have balloon payments and all kinds of unique terms and conditions.

Sample Case Study
A commercial property is listed for $400k. Seller wants to sell for cash, but is having a hard time to attract a cash Buyer. So, Buyer A comes along and makes an offer. Both Buyer and Seller agree on a Sales Price of $400k. Seller wants 25% down as security, and Buyer A agrees to $100k downpayment (25%), a 30 year amortized loan at 6% with a balloon payment due at the end of 5 years. No prepayment penalty for early payoff is also part of the terms. We have used Security Title Agency as the escrow and title company, and then used their loan financing department to service the payments.

My Approach
We would set up an Excel spreadsheet with financial function fornulas that include all the terms. Also, very important, the spreadsheet should show a line for EVERY payment, just like a bank shows on an amortized loan. This will clearly show exact payments, amount of payment going towards the loan and interest, and monthly loan balance. Clarity on how it is layed out will overcome most questions.

We have found the Excel spreadsheet to be as accurate as the printout any Bank would produce (it is all formula driven anyway). We recommend to be as clear up front as possible and review with Buyer and Seller these terms and how it will look in the future.

I create and attached a spreadsheet below that shows how it might look. This is exactly how I lay it all out. But, I just don’t have room to show all the amortization lines.¬†Notice the loan balance in YELLOW at the 60th month in the amount of $279,163.07. This shows both Buyer and Seller what they can expect if all the terms are carried out as agreed.

About:  Bryan Watkins is a Broker with LRA Real Estate Group in the Phoenix Metro area. The firm is a full service real estate company and works with clients to maximize their strategy and goals. You can reach him @ 480.734.7878 or