Selling Your Owner Financed Loan – Faq
Selling Your Owner Financed Loan – Faq
Selling Your Owner Financed Loan – FAQ
If you\’ve ever taken out a mortgage with a bank then maybe you\’ve experienced this: about 6-8 weeks after closing you receive a letter from a totally different lender who now has control of your loan and you are to send the monthly payments to them.
Well the original bank sold your mortgage or real estate note for cash to another financial institution that wanted a long-term cash flow investment. If you have \”owner financed\” the sale of your house with the buyer you can do the same thing. Sell your deed of trust or real estate note for cash to an investor who is looking for a long-term cash flow. There are lots of different names for a note: Deed of Trust, Contract For Deed, Mortgage, Loan, IOU, Promissory Note and others. For simplicity sake I\’m going to use the term note.
Let\’s say you have in one hand and 0 in the other and I said you could keep only one. Well you\’d keep the 0 of course but what if I told you you could have that 0 but it will be paid out at a month over the next 8 years but you can have the right now. Well that changes everything.
If you looking to purchase something really special for your family or to pay off some high-interest, nagging debts; maybe you have another promising investment opportunity, or you simply prefer not having the responsibilities and risks of carrying a Note. I can help you sell that note for cash to a buyer looking for a long-term cash flow investment.
Due to the current economic crisis, the price an investor is willing to pay for your owner financed loan has never been higher! If you are interested in finding out how much an investor is willing to pay for your real estate note call or email me today for a free quote.
For a more detailed description of the different kinds of notes please see the faq section of my website or a more in depth overview please download my free ebook \”How To Owner Finance Your Home\”
Here are some faq:
1. WHO BUYS NOTES?
There are various people and companies who like to invest in real estate notes instead of the stock market, commodities or apartment buildings. They could be a one-person operation, or an office of 4 or 5 people, or 20 people, or a big investment house of 100 people. I don\’t put your note on a web site forum and hope somebody sees it or market to people right out of a \”How To Get Rich Investing In Real Estate Notes Seminar\”. I work with only reputable, long-term investors.
2. WHAT KIND OF NOTES ARE YOU LOOKING FOR?
I can help you find an investor for various kinds of Real Estate Notes:
• Single or in portfolios.
• Single Family Residential
• Duplex, Triplex, Fourplex
• Income Property
• Improved Land Contracts
• Recreational & Resorts
• Commercial Land Contracts
• Farm & Ranches
• Vacant Land
• Bulk REO (Real Estate Owned) and real estate property portfolios
• Bulk mortgage note portfolios
3. WHAT IF THE HOME BUYER IS BEHIND IN PAYMENTS?
If you have a delinquent mortgage note I can help you. There are investors who will purchase notes that are behind in payments. If you are frustrated and not getting your monthly payments and just want to be done with the whole thing, I can help you find an investor who will purchase that delinquent note. This includes semi-performing (buyers are over 30 days late with payment) and non-performing (buyers are over 3 months behind in payments) mortgage notes. Get rid of that headache note and let someone else deal with it.
4. HOW MUCH IS THIS GOING TO COST ME?
There is no charge to you, the note holder ever. Getting a quote from an investor is free with no obligation to sell your note and the entire process is completely confidential. The borrower until the transaction is complete. The investor pays all broker fees.
5. HOW MUCH WILL I GET FOR MY NOTE?
This unfortunately I can\’t answer, as there are too many variables involved. Each transaction is unique so an investor looks at several key factors for pricing. These include the type of property and location, down payment, equity, the buyer\’s credit, how long the buyer has been paying you, and the terms of your note like interest and monthly payment amount. All that goes into their risk assessment and they make their offer based on that. Having said that though an average note will demand anywhere from 80 to 93 cents on the dollar depending on those factors.
6. HOW LONG WILL IT TAKE BEFORE I GET MY MONEY?
All deals vary, but normal closing time is 2 to 4 weeks once the investor starts their due-diligence process (inspection, appraisal, credit check, etc).
7. I JUST NEED SOME CASH NOW BUT I LIKE HAVING THE MONTHLY CASH FLOW.
There are a couple of ways to get creative:
A great option for note sellers because of it\’s extreme flexibility and because in many cases it is possible to receive MORE MONEY than the original selling price. If you need cash right now but want to keep your note for the cash flow investment you can structure a deal so that you sell just a portion of your monthly payments for a certain amount of cash.
Let\’s say that you sold your house for 0,000, the buyer gave you ,000 as a down payment, and you now have a 5,000 note at 7% interest for the next 15 years. You want the monthly income but are in need of ,000 cash right away. An investor could give you that ,000 in exchange for buying \”x\” number of monthly payments, after which the note reverts back to you for the remainder of the term.
Split Partial Balloon
If your note has a certain amount of payments then a balloon payment at a certain date you can sell the payments leading up to the balloon and a portion of the balloon when it comes due. You get a lump sum of cash at closing and then receive a portion of the balloon payment when it gets paid off.
8. I HEARD I SHOULD HOLD ONTO MY NOTE FOR A NUMBER OF YEARS TO GET A BETTER PRICE.
This is called \”seasoning\” the note. The reason for waiting is that you are hoping to increase the equity in the house, which will help the note command a higher price. While this could happen other variables might decrease the price of the note the longer you wait.
It\’s possible that maybe the property might devalue in price. What if the homeowners rack up a lot of credit card debt buying appliances, furniture, landscaping or remodeling and their credit score goes down? What if the homeowner loses their job and they stop making payments?
An investor looks at many things when assessing risk on a note and how old the note is is just one of them. A 3-year-old note with a bad credit score might be priced less than a 3-month-old note with a great credit score all other things being equal. Every note is different. Brand new notes and 20-year-old notes are sold everyday.
9. CAN I GET CASH AS SOON AS I CREATE THE NOTE?
Yes this is called a simultaneous closing, where a few days after the close of the house with the buyer you receive a check for the note. If you\’re going to owner finance your home and you know you want to sell the note this is a great way of doing it because the investor is there for the initial process and you don\’t have to start over again 6 months later with another appraisal, inspection, credit check, etc.
10. HOW MUCH DOES THE NOTE HAVE TO BE FOR?
The minimum is around 0,000 if it\’s under that then it\’s really not worth it for the investor. So a note could be for 0,000, 0,000, 0,000, 0,000, million and everything in between. There are all different kinds of investors looking for all different kinds of note amounts.
11. CAN I SELL MY 2ND LIEN NOTE?
If you have a 2nd lien, where there is a bank or another investor with a more senior lien
against the property, you may be able to sell the note, but the price that you receive won\’t be nearly as high. You generally won\’t be able to sell those types of notes at any sort of decent price unless the buyer has put in at least 30% of his own money as a down payment or in built-up equity and has fantastic credit. Unfortunately investors just aren\’t interested in 2nd lien notes or mortgages right now.
12. IF I OWNER FINANCE WON\’T I ACTIVATE THE DUE-ON-SALE CLAUSE IN MY MORTGAGE. AND IF I\’M ONLY GETTING A SMALL DOWN PAYMENT HOW WILL I PAY THE BANK LOAN BACK?
The Due-on-Sale Clause is a provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home. It is probably the most talked about, feared and misunderstood topic in real estate.
The link below is to a great article by real estate lawyer William Bronchick and will dispel any misunderstandings you may have about the due-on-sale and suggest a simple, yet effective strategy to get around it.
If you\’re thinking about owner financing your home you can also do a simultaneous closing, where a few days after the close of the house with the buyer you receive a check for the note. If you\’re going to owner finance your home and you know you want to sell the note this is a great way of doing it because the investor is there for the process and you don\’t have to start over again 6 months later with another appraisal, inspection, credit check, etc.
13. WILL THE HOME OWNERS HAVE TO REFINANCE?
When an investor purchases your note, all terms remain the same. The only thing that changes is where they send the payment. If fact the borrowers are not contacted until the transaction is complete.
14. HOW DOES THE NOTE SELLING PROCESS WORK?
You\’re interested in finding out about to selling your note. Give me a call or email and I\’ll get some information about the property and note from you. We can do it over the phone or I can email or fax you the form. It\’s an easy 2-page worksheet you can fill out in about 10 minutes. It asks for the loan balance, interest rate, length of loan, and basic information about the property. Then with the information you gave me I look for an investor who is interested in buying your note.
If I find an investor who is interested they take 2 or 3 days to crunch the numbers, assess their risk and see if it\’s a good investment for them. If they are interested they make what is called a soft quote, which is their best offer before having reviewed any supporting documentation, such as the payee\’s credit report and property appraisal. The quote will state something to the effect: \”subject to review of credit – assumes good credit\” but pricing should not change that much unless the property value comes in low or the homeowner has a low credit score or subsequent documentation does not support the information provided on the worksheet.
If you accept their offer you\’ll draw up an option of purchase and sales agreement with the investor. The investor then starts their due-diligence on the property and the homeowners. Just like selling a house — home inspection, appraisal, credit checks, copies of legal documents, payment history and verification of current balance. This enables the note investor to verify the information provided, analyze the risk, and confirm their pricing of the note.
Once all the T\’s are crossed and I\’s dotted and contracts signed the investor takes control of the note and the title company sends you a check.