6% Drives $160 Billion Dollars Of A Market

Over $160 billion dollars of business is done by a very small portion of the real estate market

. It may vary a bit, but approximately 6% of real estate is held in the private mortgage sector. An industry term, "Note" can be known by several names depending on what part of the country your in, such as Promissory note or trust deed, but to name a few. It is still a private seller that is having a problem selling there property and they need a buyer. With traditional lending tightening the qualification guide lines, or as several experts have said, following the rules they themselves set has made loans difficult.

Along came the age old answer of the "promissory note". The idea of seller financing is not new to the industry at all, but more popular than ever and growing. Just like a bank financed loan a seller will usually get a down payment of 10% or more and in many cases be able to add some money on to the selling price. How you ask in this generally down market, well as a private seller they do not have the capital a lending institution has and assumes a bit more risk. Should a seller not add to the sale price of the home they still get a higher interest rate, in the normal seller financed contract. Depending on the credit score of the individual buying the property this can vary from 7% and up to 10.5%. Each trust deed is different in how the seller has the option to set the terms. Now this can be done on commercial property, single family home, mobile home attached to land or a land contract, developed or not, condominiums anything secured by property. Just like a normal bank financed loan the buyer and seller will use an attorney or title company to write the deed and file it in the county with the clerk to protect both parties as to validity.

Now should a seller want to sell the note they created at some point in the future, they have some options as well. The reason for selling can be as simple as wanting to reinvest in other property and needing capital. Other reasons such as early retirement, medical debt, college tuition, or a second honey moon; good to keep the wife happy! Seriously any number of reason or even the concern of the payor not being able to make payments due to loss of job or a second income that was in the property. Foreclosure can get expense for the private seller.

Solution, is take a lump sum of cash paid on the remaining balance of the note. This is done in several ways, but in general a note finder such as myself will get you a quote on the balance of the note. These are at a discount, thus the term "discounted note", but depending on the situation can be close to the balance. Now as we talked about earlier, if the seller added some money into the sale price and had a fair interest rate on the loan, they can walk away quite happy with the down the monthly payments received and a lump sum of cash.

Like any other investment there is benefit and risk, before you make any decision get in contact with your tax professional and attorney, gather information from articles and web sites like mine and weigh the risks before you act.

6% Drives $160 Billion Dollars Of A Market

By: Ron Riffel Sr

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