Selling a family property- advice on structure &amp; terms
Selling a property for $1MM.

I know the buyer and am willing to give generous terms to a certain extent. He knows the building well and will close quick.

Current terms are $250K check $250K cash and a $500K note at 4% amortizing for 30 year term. I also offered no payments on the note for 6 months until the buyer gets the building operating (he will have to deal with the city to get c of o and repair a few things). 

The buyer is adamant on paying $250K in cash. Not sure if or how this can be advantageous. Seems strange and don’t know what to do with this. I also think 4% is too generous of a rate for seller financing in this market. I have an appraisal ordered by a previous possible buyer for $1.4MM, but since the current buyer is familiar with the building and business I want to make a deal with him and am willing to take his $1MM offer. Is this too generous? 

Any thoughts on structure here?
[{"id": "itwhjaj", "text": "You\u2019re kidding, right? This is money laundering 101. You have to be a troll.", "replies": [{"id": "itwijgz", "text": "There\u2019s nothing illegal about paying for real estate in actual cash as long as it\u2019s recorded and taxed properly. It\u2019s certainly not common and I\u2019m not keen on accepting the cash but, no it\u2019s not \u201cmoney laundering 101\u201d", "replies": [], "depth": 2}], "depth": 1}, {"id": "itwovap", "text": "Make sure the attorney/title company is filling out a form 8300. If buyers bristle about you filling out an IRS form 8300 then run because it\u2019s money laundering.", "replies": [{"id": "itwtan4", "text": "I\u2019ve already been in contact with our attorney and the buyer regarding form 8300 they have no issues with it. I don\u2019t have any knowledge of the buyers tax situation, it should not matter. My question is about the structure of the deal", "replies": [], "depth": 2}], "depth": 1}, {"id": "itxagtb", "text": "If your doing seller financing maybe due a higher interest rate I would sue a minimum of 6% and possibly no payment for 6 months but the interest get put on the back side of the loan", "replies": [], "depth": 1}, {"id": "itxjcac", "text": "As an investor and broker, I would suggest that you give yourself some more options. Usually a seller will accept a discounted price for a quick cash sale that will allow them to \u201cmove on\u201d speedily to whatever\u2019s next. If you are offering generous terms - like seller financing (especially in this lending environment) - and it\u2019s a slow \u201cwait to pay\u201d process, then why discount the price? If you need to wait for the money, then get all of it. Even if you want to hold the 400k as a 2nd mortgage that you won\u2019t seek payment on for x months or years, if they execute on their business plan successfully and refinance/sell at a higher valuation, then they can pay off your 2nd mortgage with the proceeds. Otherwise, right now, it looks like you\u2019re leaving a lot of money and opportunity behind that likely isn\u2019t needed to get this deal done, even with a friend.", "replies": [], "depth": 1}, {"id": "itz9ss7", "text": "Random thoughts:\n\n1. If you have any fiduciary responsibility (trustee, corp, etc) I'd consider getting at least a BOV or an appraisal to justify the selling price. \n2. An experienced attorney and title company should be able to inspect and adhere to the requirements for the cash contribution. Your bank may also be helpful. (see number 3 below if a problem with the source of funds becomes a problem at a later point)\n3. The terms of the note, protections including 1st lien restrictions, default provisions, fees, guarantees, etc. are as important as the rate. Are you amortizing the payment for 30 years or actually offering a 30-year term and plan to potentially hold the note for that long? A 10-year term with 30 amortization might be worth considering. You probably mean that you are deferring payments for the first six months not waiving and not making anything contingent on a CO or operation. They key is you probably want many of the terms and protections of a commercial real estate loan - especially if you are providing such a low fixed rate. The idea is to protect your interest in the collateral. \n4. Your interest rate may not be keeping with the rate of inflation or alternative returns if you had $500k to invest. That said, and depending on how the property is held there may be some tax advantages to seller financing.", "replies": [], "depth": 1}, {"id": "itzcedj", "text": "Horrible deal for you. Totally depends not only on how well you know the buyer, but how much you want to \u2018gift\u2019 him. To my best friend, I would sell @ $1.3MM @ \u201c.25-.5% &lt; what a bank would  charge. But first off, have a decent real estate lawyer draw up the papers.", "replies": [{"id": "itzljyn", "text": "A bank won\u2019t lend on this property. It\u2019s a rooming house without a certificate of occupancy.", "replies": [{"id": "iu1nuio", "text": "Then you can charge even more than your local bank\u2019s avg interest rate (~6.5%?). However, charging slightly less is very generous.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "itze0x4", "text": "You must get an attorney NOW - for you and not just for closing.  Pay them as they are worth it.\n\nWhy are you seller financing?\n\nCash still has to be reported unless the cash is under the table and the sale is for $750,000 (illegal).\n\nGenerous would be $1.4 million at 4% or $1 million at 10%.  Seller financing usually comes with a higher rate.  At least ask the seller to shop for a loan and match the approved loans terms (it will likely be a 5-7 year loan amortized over 15-30 years).  If the buyer cannot get approved then it is a high risk loan and deserves high risk consideration.\n\nAlso make sure that you can repo the property. For non-payment and make sure that the $500k down payment is yours no matter what.  (This is what you need an attorney for).\n\nFriends screw each other over all the time!", "replies": [{"id": "itzlazk", "text": "I\u2019ve been working with my attorney from day 1 one.\nThe reason I\u2019m doing this deal is because the building is a rooming house which essentially is an apartment building with month to month leases for tenants typically below the poverty line.\n\nRooming houses have a unique license issued from the state that is currently inactive. Additionally the building does not have a certificate of occupancy due to an incident a few months ago.\n\nThe buyer owns several rooming houses in the area and has been aware of the building for some time and has approached me for a sale several years ago. He will take it in as is condition (without c of o), knows the business well (as he owns a few already), and will keep on my super when it is operational again. I\u2019m doing this as a courtesy to him because he\u2019s wanted the building for some time and the different between $1MM-$1.3MM is arbitrary.", "replies": [{"id": "iu5u0k8", "text": "If he has several then do a One year loan at 3% renewable for one year at 6% for $1,300,000.\n\nThat gives him time to get it fixed and get a proper loan.\n\nYou cash out in 2 years.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]