You should also be prepared to hold a second mortgage for at least 5% of the total sale. This is very similar to a regular loan program called a 90/5/5 or 90% first mortgage, 5% down payment, 5% seller second. This is the least you should go, more preferable is an 80/10/10 in which the first mortgage is for 80%, buyer down payment of 10% and seller second of 10%.
Do not create a note or mortgage with the intent of quickly selling it for full price. The more seasoned the note is, the more you are likely to receive if you do sell at a later date. Also note that flips are not generally a good idea either, check into this before you use owner financed notes as a means to flipping houses.
No reasonable person enters into a seller financed deal with the intention of getting the property back or not getting a lump sum of cash in the future. You must structure your seller financed note or mortgage in a fashion that protects you, you assets and your ability to sell your note at a reasonable price in the future, if needed. A couple of tips: have the note balloon in 5 or 10 years, tell your buyers not to buy anything on credit until their deal has closed, if the buyer cannot afford 10% down, let them make the down payment over time.
Sunday, January 18, 2009
Owner Finance and Sell the Note
How to Structure Seller Financed Notes
With today's ongoing struggles within the mortgage industry, you will see more seller financed deals than ever. This post will attempt to provide some details on how to structure a seller financed note.
Notes are merely a promise to pay a certain price, for a period of time, and other certain conditions surrounding the sale of an REO asset, whether a home, car, boat etc. Notes are also called purchase money mortgages, owner financed notes, or just notes.
Before entering into a contract, make sure that you consult an attorney for the proper language, because there are several different types on the Internet. Certain land contracts or deeds of trust slant either in the favor of the seller or buyer. If you are the seller, you certainly want one that slant in your favor. Most attorneys know eactly what you are talking about if you call them and tell them you want to owner finance a piece of property. Let the attorney draw up the note, the mortgage, and the deed.
Do not sell your home or sign any contracts or deeds of trusts until you properly checkout your buyers credit. When selling an REO on land contract of deed of trust, you must think like a banker for resale (selling your note) purpose or to protect your own interest in the sale. Subscribers to our REO Black Hole list will receive a simple "Credit Check" form that will allow you to check your buyers credit BEFORE you agree to sell to them.
With today's ongoing struggles within the mortgage industry, you will see more seller financed deals than ever. This post will attempt to provide some details on how to structure a seller financed note.
Notes are merely a promise to pay a certain price, for a period of time, and other certain conditions surrounding the sale of an REO asset, whether a home, car, boat etc. Notes are also called purchase money mortgages, owner financed notes, or just notes.
Before entering into a contract, make sure that you consult an attorney for the proper language, because there are several different types on the Internet. Certain land contracts or deeds of trust slant either in the favor of the seller or buyer. If you are the seller, you certainly want one that slant in your favor. Most attorneys know eactly what you are talking about if you call them and tell them you want to owner finance a piece of property. Let the attorney draw up the note, the mortgage, and the deed.
Do not sell your home or sign any contracts or deeds of trusts until you properly checkout your buyers credit. When selling an REO on land contract of deed of trust, you must think like a banker for resale (selling your note) purpose or to protect your own interest in the sale. Subscribers to our REO Black Hole list will receive a simple "Credit Check" form that will allow you to check your buyers credit BEFORE you agree to sell to them.
Subscribe to:
Posts (Atom)
