Seller Financed Notes and Interest Rates
The interest rate a seller agrees to accept when providing owner financing to the buyer has a large impact on the note’s value. Unfortunately, many sellers overlook this important decision.
Seller Financing – How Much Can The Buyer Afford?
Many sellers accept owner financing without any idea of how much the buyer can actually afford to pay.
The last thing a seller wants is to stress over receiving monthly payments or worse, getting the property back through foreclosure.
Three Seller Financing Mistakes To Avoid
Would you rather have $97,000 to sell your $100,000 note or only $80,000? The difference in usually comes down to the big three. Here’s the three biggest mistakes note sellers make and how to avoid flushing money down the drain.
Safekeeping the Original Mortgage Note
Can you easily locate the original mortgage note?
This important legal document should be kept in a safe place, and here is why!
5 Reasons Owners Offer Seller Financing
Why would a seller allow a buyer to make payments over time for the purchase of property? Wouldn’t the seller rather get paid now and require the buyer to obtain a bank loan?
How to Sell Your Mortgage Note
If you sold property with seller financing chances are you’ve wondered about selling the real estate note. Here’s how to sell a mortgage note, trust deed, or contract in 7 easy steps.
Protect Your Mortgage Note With Current Taxes and Insurance
A buyer failing to make payments on the mortgage note isn’t your only worry.
Understandably, a buyer that stops making payments is a major concern when using owner financing. After all, a seller-financed note is a very valuable asset.
Unfortunately many sellers fail to protect their asset when it comes to another area…verifying current property insurance and taxes.
Next to delinquent payments, the most common default by buyers is failure to keep the property insured and the real estate taxes current.
In fact many buyers will make their monthly note payments but fail to pay the insurance premium or real estate tax installment.
Sadly, a lapse in insurance can be devastating to both the buyer and the seller. If the property burns down and is not insured, the seller will probably never see another payment from the buyer.
If a buyer fails to pay the real estate taxes for long enough the county can actually foreclose on the property. In most states, the lien for county taxes even takes priority over mortgage note holders, leaving an unsuspecting seller high and dry.
A buyer failing to make payments on the mortgage note isn’t your only worry.
For insurance, require a copy of the declaration page showing the buyer as the insured owner and the seller as the insured mortgagee. Next call the insurance company to verify the policy is current and the annual premium has been paid. As the mortgagee listed on the policy you should receive notice of cancellation but it is safer to verify on or before the date premiums are due from the buyer.
To verify taxes are current simply check the county records using the property address or tax parcel identification number. This can be done with a phone call, a visit to the county tax assessor, or online.
Most documents require the buyer to keep taxes and insurance current and failure to do so qualifies as default under the note. Sellers can demand the default is immediately cured or start foreclosure.
Sellers as lien holders may also elect to pay the delinquent amount to protect their interest and add back to the amount due, depending on the terms of the actual note, mortgage, deed of trust, or contract.
Some sellers prefer to avoid the headache by setting up reserves through a third party servicing agent. This way the buyer pays an amount equal to 1/12th the annual amount for taxes and insurance establishing an escrow reserve account from which the bills can be paid.
A note buyer will also verify the taxes and insurance are current should the note holder ever decide to sell the mortgage note, trust deed, or contract.
Whatever the method, smart sellers know to protect their valuable asset by verifying the real estate taxes and hazard insurance are being kept current on the property!
Learn the Value of Your Mortgage Note
Wondering just how much your mortgage note is worth?
Why Sell My Mortgage Note?
Accepting payments on the sale of real estate might have made sense at the time, but circumstances change.
Many sellers discover they would now prefer cash today rather than the small amount that trickles in each month.
Here are just a few reasons people have sold all or part of their seller financed mortgage notes for cash:
- Retirement
- Taxes
- Investment Opportunity
- Expensive Medical Care
- Vacation
- College Tuition
- Unexpected Financial Changes
- Peace of Mind – no more worrying if the buyer is going to make late payments or having to foreclose
- Accounting headaches, IRS regulations, paperwork hassles and the list goes on…
Discover Your Options – Request a Free Note Analysis
The only way to decide what is best for your situation is to know the options available.
When you request a free note analysis it reveals the current market value of your payments – similar to what a real estate appraisal provides for real property. Sometimes referred to as a “note appraisal” or “request for quote,” it lets you know how much your future payments are worth in cash dollars today!
We recommend having your note reviewed once a year as note values change based on market conditions.
Use Outside Closings To Sell Mortgage Notes!
Ready to sell mortgage notes?
Protect yourself with outside closings!
When an investor has performed their research and is ready to purchase a private mortgage note they will ask the seller to deliver original documents (note, recorded mortgage, etc.) and sign the transfer package.
The Note Buyer
The note buyer will want these original documents before the funds are released to the seller.
The Mortgage Note Seller
A note seller may understandably wonder,
“How do I know I will ever receive my money once I turn over the documents establishing ownership?”
The Note Buying Challenge
So the note buyer wants the documents before the money is released and the seller wants the money before the documents are released.
The Solution
Using an outside closing through a title company, attorney, or escrow company easily solves this impasse. The outside closer will act as an independent third party (or fiduciary) protecting the interests of both parties.
An outside closing is basically an exchange of money for documents. The outside closer will receive the proceeds from the investor into their trust account and also receive the documents from the seller. It is not necessary for either the investor or the seller to physically be present for the note closing with the use of overnight delivery and wire transfers.
The fee for outside closings average $200 – $400 and can be paid by either party or split equally. Any legitimate note buyer should be willing to participate in an outside closing through a licensed and bonded closing agent.
Outside closings offer protection and peace of mind to both sellers and investors when selling mortgage notes.