subject: Sell Your House Faster! Smart Selling Financing Solutions [print this page] When you offer seller financing, it doesn't mean you will carry that note forever. An experienced Note Buyer can give you direction on creating the note before you creat it in order for your Real Estate Attorney can use that information to make that note even worth more.
Misconceptions from the Seller
Many sellers avoid seller financing because they don't believe it's a viable solution for selling their home. If they can't walk away with enough money to provide the down payment on another property, they'll be powerless to replace the property they're selling. But in reality, many notes created through seller financing are quickly sold for cash. Actually, if the note is created with the buyers' purchasing criteria in mind, the seller could walk away from the closing table with cash in hand! This means that the net result is almost exactly the same as with a normal real estate sale. In the cases where Note Holders do encounter difficulty in selling their monthly payments, it's typically because the note was not created with the Note Buyer in mind. This is why you should involve a professional Note Finder even before the note is created.
Plan ahead to make a note "a great deal": Create your note with the Note Buyer's needs in mind
If the note holder of a private note needs a large amount of cash quickly, they will want to sell the note as soon as it has been created. And in order to quickly find a buyer, the note must meet general buying parameters:
*Enough Money Down
* An excellent credit score (to minimize risk of default)
* Interest 8% or more
* A term that comes due in ten to fifteen years
If there is no down payment collected and the interest rate is low, the note would be great for the new property owner, but not to a potential Note Buyer. In a "no money down" real estate sale, lenders worry that the buyer could walk away and lose almost nothing financially. So to offset this risk, lenders generally set higher interest rates so they get more money per payment. Unfortunately, Note Buyers do not have the ability to change the terms on the note. So when there is little or no equity in the property, all offers to purchase the secured note must be discounted substantially in order to compensate for the buyer's chances of default. The downside is that a heavily discounted buyout offer often means the seller can't get the money she needs from her note.
Creating notes that can be sold
Usually in the current market, the home buyer's down payment should be a minimum of 10% of the sale price. This payment immediately creates equity in the property to serve as the buyer's safety net in the event of a default. A competitive interest rate is important because it will make it easy for the buyer to purchase the note and yield the desired profit without big discount to the Note Holder. Finally, keep in mind that people typically prefer notes that follow a traditional term (amortized over 120 months, 180 months, etc). A two-year, interest-only balloon term is a perfect example of a note that many buyers would avoid. But remember, all notes are good notes at the right price. Of course, there are no absolute guarantees of a quick sale. But it is always easier to obtain an attractive offer for the Note Holder when the note is written with the buyers' needs in mind. The points described here are only a rudimentary starting point for note creation; buyers often examine many other factors. Please contact me directly with specific note information so that I may suggest a private finance solution that will be optimal for your needs.
