Official Carleton H. Sheets^® Website

I have an 8-unit townhouse that I'm looking at purchasing.
His asking price is $440,000. With the cap rate in the area, it's worth about $360,000.
The problem is that he took a 25 year mortgage, with a 10 year term. There is currently 7 years left before renewal. To break the mortgage would cost him about $40,000, which he obviously doesn't want to do. He's looking for cash for the difference between asking price and the mortgage left (about $250k left to pay). I'm not willing to assume mortgage because of a high interest rate.
I have a credit line available of about 75k. I'm not looking to invest much cash because I know it can be done without it. I've heard someone talk quickly once about a deal he did. I don't have all the info, but I do have the basics:
Seller could have sold a property for $150,000, but buyer said that he would only purchase it for $125,000. However, it would need to be partly seller financed. The buyer offered to pay about $2200 per month for 2 years to the seller (with property in guarantee). This is an amount at 5% interest (above current bank fixed rate). The buyer would somehow have $25k in cash from the deal (from equity possibly?), he mentioned something about $100k (which would make sense with a purchase price of $125k, and pocketing $25k).
I'm looking for someone to fill the holes for the scenario above and how it didn't cost him a peny above closing cost, pocketing $25k and having $500 in positive cashflow (cashflow I understand).
And also, if someone could help me structure a deal with my situation using the scenario, it would be appreciated. The seller is motivated to sell because of a divorce. He's in his 50's, so he may go for a higher fixed interest rate (as opposed to mutual funds etc...)

HI! Maritimer,
I'm new to this and I would just like to say that: Find common interests that can precede the negotiation. Don't just jump into talk about price and trems. Use some chitchat to warm up the relationship before you get down to business. Don't provoke a competive spirit or a win-the-game attitude about the negotiation. You win the game when you buy a property at a good price, not when you drive off a potential seller because you failed to yeild a relatively minor point.
Control the reference points of the negotiation. All sellers _base_ their asking price and trems on certain reference points. The seller may believe that comparable properities have sold with a monthly gross rent multiplier of 175, or maybe a rate of 6.5 percent, and will therefore apply those norms to figure a fair price for his or her property.
To negotiate effectively with this seller, learn the reference points the seller is using, and why. Once you gain this information, attempt to explain why those norms aren't appliale and why the reference points you've selected are fairer or more appropraite. You might point out the comp properties with cap rate of 6.5 precent are newer (better location, more stable tenants, better condition, etc.) than the seller's property. in fact, true comps to the seller's property have typically sold with cap rates in the range of 7 to 7.5 precent.
The seler may know the house down the street just sold for $380,000, but dosen't realize that its owners carried back financing at 5.0 precent and included in the transaction $35,000 worth of personal property. You can try a curt approach ("I'll give you $335,000. That my to offer. take it or leave it"). But you win more negotiations when you first persuade the seller to accept a reference point that's favorable to your offer. Then edge the seller toward the agreement you want.
Like I said I'm new to this,
Mr. Sheet wrote: "When evaluting whether or not a property is an attractive investment, you should take into consideration two things (1) the property itself, and (2)the willingness of the seller to be flexible when it come to financing and/or price. Not all sellers are flexible."