I have at least two serious buyers for a property, one all cash and one on owner-finance terms, and as the subject says I'm wondering which of the two buyers others would prioritize.
Cash Buyer has agreed to $6,500 cash plus he'll cover closing costs on that transaction. Terms Buyer has agreed to $1,500 down and $188/mo for 48 months ($10,524 total over 4 years), and no discussion yet with him of who pays what closing costs. I believe the Terms Buyer would probably agree to just structure the sale as $10,524 total purchase price with 0% interest on the financing, so let's assume that's the case and if he pays off the note early (probably unlikely) I'd still get the full amount. Let's also assume that I'd incur an additional $500 in closing costs with the Terms Buyer, that I wouldn't with the Cash Buyer, so it's essentially $10,024 over 4 years vs. $6,500 today.
Couple more relevant factors: my all-in direct cost for acquiring the property is about $2,000, and the property has some attributes that could potentially be a liability for whomever owns it, which are discussed, in part, in this previous thread.
I've had several other offers on the property, but all were either not as good as these, or were essentially the same as one of these but the prospective buyer doesn't seem as serious. I would ultimately be fine with either of these, but would like to give one of them priority, like 24 hours to sign a PSA and pay a deposit, before opening it up to the other. If it were you, which one would you give priority to?
I have been focusing on building a terms sale portfolio... BUT never turn down a cash sale.
A bird in hand is better than two in the bush. You might have to take it back for non payment on the terms sale... with cash its clean and you are buying more land.
I agree with Jason! You have to consider several factors with the terms sale like the ability of the borrower to repay the loan and legal fees associated with reclaiming the property if the borrower defaults. Additionally, you have to think about loan servicing and if that is going to be done in house or using a vendor and what cost that will add. Also, you have a pretty high opportunity cost if you could yield $4,500 from a cash deal. You could use those funds to buy two more properties and increase you investment capital!
Thanks @jawollbrink and @Dan-McDermott. I appreciate the feedback. I went with the cash sale, as well. They were the most eager-to-close of the prospective buyers, too, which combined with the factors that you guys mentioned just made the quick cash return too hard to pass up. If I'm understanding things correctly regarding how simple it can be to take a property back in this state, on a land contract / contract for deed owner-financing structure, on paper it would probably work out better in the long run to have a terms buyer default, and get to sell a property again, but having easy, no-drama returns has value, too.
Also @jawollbrink, you commented in my other thread about this same property, which has an unlivable house on it, how there's always some buyer out there who will be willing to fix up a house, no matter how bad, and you were absolutely right in this case, too. 80 year old house that's been vacant for 28 years and never had indoor plumbing; broken windows and roof caving in. I mentioned to the buyer that the local fire department was willing to help burn it to the ground safely, free of cost, and he said, "No! I'm going to fix it up." This is the same guy that went on a rant about what a horrible liability the house was when he was negotiating price, but I could not care less. He still came through with the best cash offer.