| Summary of Seller-Financing |
The Nefer Note Network
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Summary of Seller Financing
The benefit of seller financing
Many home owners dread being involved in a situation where a property they've listed for sale has been
sitting unsold for too long. The basic reason is usually the same - the asking price is too high for the
market conditions.
In these situations, the seller is forced to lower their price in hopes of making the property more
attractive to buyers. Unfortunately, this technique doesn't always work to sell the real estate, especially if
the seller is unwilling to "discount" their house by much, or if the market is weak.
A great solution for the seller is to open up to an entirely different segment of buyers by offering seller
financing. This way, the property owner can often sell their house for their desired asking price (or even
more), and find a buyer more quickly than with conventional real estate methods.
Some homeowners are hesitant to offer seller financing services because of a lack of understanding
about how private financing works.
Like other things that seem complicated on the surface, it's simply a matter of grasping the fundamental
issues specific to seller finance. By following the proper procedures to locate a prospective buyer,
create a note, and resell the note to a note purchaser (if necessary), a real estate seller that is willing to
"think outside of the box" can sell their home for more money and close the deal faster as well.
Finding a prime buyer for seller financing
The majority of home buyers looking for seller financing look through the "For Sale By Owner" ad listings
in the local paper. Even in today's Internet-dominated world, newspaper advertising continues to be an
effective means to reach those looking for seller financed deals. A simple sale ad including the line
"seller financing available" or "credit issues OK" should help to generate interest from the right potential
candidates.
Doing the deal
Once a serious buyer is "on board" to buy, the seller works with that party to set the terms of the note. It
is especially important to draw up the contract to favor the note holder when the property owner will need
to immediately resell the note in order to receive a large lump sum of cash for their future payments.
Larger down payments are better than smaller amounts, and shorter terms (5-10 years) and higher
interest rates (12%-20%) are usually preferred by buyers. It is the property seller's option to determine
what is acceptable and what terms to which the buyer will agree.
Once the details of the initial payment, payment term, interest rate, and any necessary clauses are
established, the buyer and seller can create a new seller-financed note. Creating the note can be
handled with standardized boilerplate or the assistance of an attorney, although some note sellers
manage the private sale of their home without any paid legal counsel at all.
Once the newly-created note has been reassigned to a buyer, the property seller will have "cashed in"
their future monthly payments for an immediate lump sum payment from the note buyer - an amount
similar to what they would have received from a conventional sale.
Locating the right note buyer
The best method to find note buyers is using the Internet. Using a popular search engine website with
keywords such as "buy monthly payments" or "buy mortgage payments" could lead to many interested
buyers.
Enlisting the assistance of a note finder
In the secondary finance industry, a unique group of individuals exists who specialize in locating buyers.
These cash flow specialists - often known simply as "finders" - have a unique understanding of what
most buyers are looking for. These finders are happy to work with property sellers (or their real estate
agents).
While note finders can't offer any legal advice or assist with the creation of a note, they are qualified to
give general recommendations about note buyers' buying criteria. Most importantly, note finders will be
able to help locate a buyer for a newly-created cash flow.
Creating an attractive note for resale
Note payers and note buyers are usually looking for very different things. Most payers would love a "no
money down" purchase over 30 years at a low interest rate, but buyers wouldn't want anything to do with
this sort of note because it is a bad deal for them.
An initial down payment of at least 10% of the sale price, a fully amortized term between 60 and 120
months, and an interest rate of 12 to 20% is typically what a note buyer is seeking. These conditions are
necessary in order to minimize the discount to the note seller. Note buyers will always reduce the payout
amount somewhat in order to counterbalance the risks - limited equity, a payer with low or no credit
score, possible foreclosure, or having to foot the bill for legal actions and selling the property via auction.
When property sellers are willing to offer an unconventional, private financed note to sell their house, the
end result is often much better than the alternative of lowering the price until a "traditional buyer" finds
the deal attractive. Smart sellers who can apply owner-finance techniques will have a huge advantage in
closing difficult deals in tough markets
The benefit of seller financing
Many home owners dread being involved in a situation where a property they've listed for sale has been
sitting unsold for too long. The basic reason is usually the same - the asking price is too high for the
market conditions.
In these situations, the seller is forced to lower their price in hopes of making the property more
attractive to buyers. Unfortunately, this technique doesn't always work to sell the real estate, especially if
the seller is unwilling to "discount" their house by much, or if the market is weak.
A great solution for the seller is to open up to an entirely different segment of buyers by offering seller
financing. This way, the property owner can often sell their house for their desired asking price (or even
more), and find a buyer more quickly than with conventional real estate methods.
Some homeowners are hesitant to offer seller financing services because of a lack of understanding
about how private financing works.
Like other things that seem complicated on the surface, it's simply a matter of grasping the fundamental
issues specific to seller finance. By following the proper procedures to locate a prospective buyer,
create a note, and resell the note to a note purchaser (if necessary), a real estate seller that is willing to
"think outside of the box" can sell their home for more money and close the deal faster as well.
Finding a prime buyer for seller financing
The majority of home buyers looking for seller financing look through the "For Sale By Owner" ad listings
in the local paper. Even in today's Internet-dominated world, newspaper advertising continues to be an
effective means to reach those looking for seller financed deals. A simple sale ad including the line
"seller financing available" or "credit issues OK" should help to generate interest from the right potential
candidates.
Doing the deal
Once a serious buyer is "on board" to buy, the seller works with that party to set the terms of the note. It
is especially important to draw up the contract to favor the note holder when the property owner will need
to immediately resell the note in order to receive a large lump sum of cash for their future payments.
Larger down payments are better than smaller amounts, and shorter terms (5-10 years) and higher
interest rates (12%-20%) are usually preferred by buyers. It is the property seller's option to determine
what is acceptable and what terms to which the buyer will agree.
Once the details of the initial payment, payment term, interest rate, and any necessary clauses are
established, the buyer and seller can create a new seller-financed note. Creating the note can be
handled with standardized boilerplate or the assistance of an attorney, although some note sellers
manage the private sale of their home without any paid legal counsel at all.
Once the newly-created note has been reassigned to a buyer, the property seller will have "cashed in"
their future monthly payments for an immediate lump sum payment from the note buyer - an amount
similar to what they would have received from a conventional sale.
Locating the right note buyer
The best method to find note buyers is using the Internet. Using a popular search engine website with
keywords such as "buy monthly payments" or "buy mortgage payments" could lead to many interested
buyers.
Enlisting the assistance of a note finder
In the secondary finance industry, a unique group of individuals exists who specialize in locating buyers.
These cash flow specialists - often known simply as "finders" - have a unique understanding of what
most buyers are looking for. These finders are happy to work with property sellers (or their real estate
agents).
While note finders can't offer any legal advice or assist with the creation of a note, they are qualified to
give general recommendations about note buyers' buying criteria. Most importantly, note finders will be
able to help locate a buyer for a newly-created cash flow.
Creating an attractive note for resale
Note payers and note buyers are usually looking for very different things. Most payers would love a "no
money down" purchase over 30 years at a low interest rate, but buyers wouldn't want anything to do with
this sort of note because it is a bad deal for them.
An initial down payment of at least 10% of the sale price, a fully amortized term between 60 and 120
months, and an interest rate of 12 to 20% is typically what a note buyer is seeking. These conditions are
necessary in order to minimize the discount to the note seller. Note buyers will always reduce the payout
amount somewhat in order to counterbalance the risks - limited equity, a payer with low or no credit
score, possible foreclosure, or having to foot the bill for legal actions and selling the property via auction.
When property sellers are willing to offer an unconventional, private financed note to sell their house, the
end result is often much better than the alternative of lowering the price until a "traditional buyer" finds
the deal attractive. Smart sellers who can apply owner-finance techniques will have a huge advantage in
closing difficult deals in tough markets