Seller Financing in Flatbush, Brooklyn: Rowhouses and Victorians

Today's bank rate vs. a typical seller-finance rate

When a Flatbush owner sells with financing, the owner becomes the lender. Most owners price that loan off what banks charge: homeowners typically ask about 2 percentage points more than the national average 30-year rate, with a 5-year balloon payment, or an extension if both sides agree to one in the contract. The numbers below update every week.

About Flatbush

Flatbush began as one of Brooklyn's original Dutch towns, and the Flatbush Reformed Dutch Church and the old Erasmus Hall academy building near Church and Flatbush avenues both date to the late 1700s. The area stayed largely rural for another century. After the Brighton line opened, developers around 1900 laid out Prospect Park South, Ditmas Park and nearby enclaves as planned suburbs of large freestanding houses. Later decades added brick rowhouses, two-family homes and many art deco and prewar apartment buildings along Ocean Avenue and Flatbush Avenue, giving the neighborhood its unusually wide mix of housing.

Flatbush Avenue, Church Avenue, Cortelyou Road and Newkirk Avenue are the main commercial streets, and the restored Kings Theatre on Flatbush Avenue reopened in 2015 as a concert venue. Prospect Park and the Parade Ground sit at the northern edge. The housing range is wide: the Victorian blocks sell at prices closer to brownstone Brooklyn, while brick two-family houses and apartments east of Ocean Avenue toward Nostrand Avenue are more within reach for a first-time buyer. That spread means a buyer can often find something here at several different budgets.

Getting around: Q on the Brighton line (Parkside Av, Church Av, Beverly Rd, Cortelyou Rd, Newkirk Plaza), weekday B express stops, and the 2 and 5 along Nostrand Avenue

What you will find for sale

• Freestanding wood-frame Victorian, Colonial Revival and Queen Anne houses from around 1900 to the 1910s in Prospect Park South, Ditmas Park and nearby blocks, often with porches and driveways.
• Attached and semi-detached brick two-family houses from the 1910s to the 1930s east of Ocean Avenue, many with a full basement and rear yard.
• Art deco and prewar elevator apartment buildings along Ocean Avenue, Flatbush Avenue and nearby side streets, a mix of rentals and co-ops.
• Mixed-use buildings with stores below and apartments above along Flatbush Avenue, Church Avenue, Cortelyou Road and Newkirk Avenue.

Why seller financing fits Flatbush

Flatbush buyers run into different bank problems depending on the house. A century-old frame Victorian can need roof, porch, foundation and heating work that drags an appraisal down, and some insurers charge more for large frame houses, which affects how a bank views the loan. A brick two-family east of Ocean Avenue may have an illegal basement unit or open violations. Many buyers here are contractors, tutors, salon owners and others who run small businesses, and their income rarely fits neatly into a bank's forms even when the money is steady.

Owners at both ends of the market have reasons to hold the note. Long-time owners of large Victorian houses may want income in retirement and a way to spread out a sizable gain, rather than one taxable sale. Owners of two-family houses and small mixed-use buildings on Church Avenue or Flatbush Avenue may find that the buyers who most want their building are exactly the ones a bank turns down. Estates are also common, and heirs who do not live in New York often prefer collecting a monthly payment through a loan servicer to handling tenants and repairs from a distance.

The 5 terms you will negotiate

Every owner-financed deal comes down to five numbers. Here is what each one means, what is typical in New York City right now, and how they work on an illustrative 2-family brick rowhouse in Flatbush.

How to buy owner-to-owner in Flatbush

1. Find owners open to financing. Start with Flatbush properties on the SellerFinanceNYC live map, where every listing is checked against ACRIS deed and mortgage records. Owners who have held a building for decades with no open mortgage are the most likely to carry a note.
2. Offer on all five terms at once. Price, down payment, rate, amortization and balloon trade off against each other. Put them in a short written term sheet so nothing gets lost.
3. Hire a New York real estate attorney. Your attorney drafts or reviews the contract of sale, the promissory note and the mortgage, and confirms the seller has no existing loan with a due-on-sale clause. See our guide to finding an attorney.
4. Do local due diligence. In Flatbush, check:
   • Prospect Park South and Ditmas Park are designated historic districts, along with smaller ones nearby; porches, siding, windows, roofs and additions there need Landmarks Preservation Commission approval.
   • Large frame houses cost more to insure and heat; get insurance quotes and the last two years of utility bills before you agree on a price.
   • Many apartments along Ocean Avenue are co-ops; the board must approve the buyer and may not allow seller financing of shares, so read the bylaws and house rules first.
   • Prewar walk-ups and elevator rentals in Flatbush usually include rent-stabilized units; budget using the legal registered rents and ask about any pending rent cases.
5. Close like a normal sale. The deed transfers to you, you sign the note, and the seller's mortgage is recorded with the City Register. Buy title insurance, and consider a loan servicing company to collect payments and escrow taxes and insurance.
6. Plan the balloon from day one. Use the five years to build a payment record, fix up the building and document income so you can refinance well before the balloon is due.

Questions buyers ask about Flatbush