Posted by Jim Kennedy - Houston, TX on June 19, 2000 at 13:17:37:
Jim,
First, some minor clarification. The seller of a property does not give the buyer an all-inclusive trust deed (AITD), the seller gives the buyer a deed of conveyance (typically a warranty deed). The buyer gives the seller a promissory note. The all-inclusive trust deed is the security instrument that vests title in the name of the Trustee to secure repayment of the debt.
Now to the heart of your question. A property owner can sell the property (using an AITD/wrap) at any price and terms that are mutually agreed upon by the parties. The amount of the down payment (if any) is a negotiable point between the seller and buyer. The seller’s decision concerning the minimum amount of down payment required should be influenced by several factors, not the least of which are the buyer’s credit and income. Just like any prudent lender, the seller should weigh the risk of carrying the financing against the buyer’s ability to pay. The greater the risk (i.e. the worse the buyer’s credit), the more security (larger down payment) the seller may require. For a buyer with a solid income to debt ratio and a good FICO score, a seller might accept at little as 5% down. For a buyer with worse ratios and a lower FICO score, a seller might require as much as 20% (or more) down. Basically, it’s negotiable.
Hope this helps,
Jim Kennedy,
Houston, TX