KNOWLEDGE BASE

Mortgage Notes Learning Center

When you sell your home, you can be ‘the bank’ — the buyer will make the mortgage payments to you. Below are articles on this subject known as seller financing. We will be happy to chat with you to explain further by calling us at (817) 800-8980.

When a seller sells a property and allows the buyer to pay over time, it is known as owner financing or seller financing. The seller is the ‘bank’ and has all the rights and privileges of a lender. The buyer is obligated to make the monthly payments to the seller as per the terms of the promissory note negotiated at the time of the sale of the property. Because the buyer is making payments to the seller rather than a bank, the arrangement is called a private mortgage, seller-carry-back, installment sale, or owner financing.

More Prospective Buyers

When buyers apply for a loan, they may not qualify, or the bank may not lend on this type of a property. Moreover, a bank’s approval process is more stringent. With seller financing, you are overcoming all obstacles because you are making the decision to lend to the buyer.

Reduce Marketing Times

Instead of waiting for 30 or 60 days before needing to reduce the price, by offering seller financing you do not need to reduce the price—the buyers would be happier with the tradeoff of the seller financing against the higher price.

Quicker Closings.

A third-party conventional lender will require six to eight weeks to close on a loan. A seller financed transaction through a reputable title company can take as little as two to three weeks.

Buyer Saves Fees

The buyer will save on the expensive loans fees if he were to go to a bank.

Earn Interest.

When you are financing a buyer borrower, you are earning interest on the credit you have extended to the borrower. The total money you collect over time is much greater than the price of the house you sold.

Sell Your Note Immediately.

If you desire to receive a monthly stream of cash, you can collect on the note for the term of the note. You can also sell your note at any time in between if you wish to cash out and collect all the cash up front.

Help With Creating The Seller Financed Documents

When you are ready to sell your house with seller financing, we can help you create the paperwork free of charge. We only ask that if you decide to sell the note in the future that you offer it to us first.
Sellers do not want to trade a house that will not sell for a buyer who will not pay. Here are a few tips when considering seller financing:

Buyer’s Credit

When you seller finance your property to the buyer, it helps to know if the buyer is creditworthy—does he or she pay their bills on time? Always run a credit check to approve the borrower.

Down Payment

This will determine the risk you have in extending credit to the buyer. The larger the down payment the more ‘skin’ in the deal the buyer will have at stake should he default on the loan.

Buyer Affordability

Is the buyer able to afford and do they have the means to make a payment of that size? Verify monthly paychecks and tax returns.

Valuable Terms of The Note

A seller financed borrower is always willing to pay a higher interest rate than a conventional lender would charge. Make sure to have favorable interest rate, term and monthly payment established in the note.

Collect Payments Like A Pro

Collecting the monthly payments, tracking the balance, and calculating how much goes to principal and interest is referred to as ‘servicing’ the note. A third-party can usually handle this process, automatically deposit payments, track taxes and insurance, and provide the annual tax reporting forms. Keep good records.

Safekeeping the Original Mortgage Note

The mortgage note is an important legal document, the financial instrument. It is an IOU from the property buyer with his original signature. It is like a check where the original must be presented to collect or prove ownership. Store the documents in a safe deposit box or a fire and waterproof safe.

Seek Professional Help

The process of doing a seller financing transaction is a very specialized process. We will be happy to assist you. Just give us a call!
You may be collecting monthly payments on a note and have the comfort of the cash flow. At times, circumstances for the note holder (seller) changes and the seller may need to have cash today for medical expenses, taxes, college tuition, unexpected financial changes, a vacation, peace of mind about the borrower defaulting on the payments, or other circumstances. On the other hand, the borrower may simply have stopped paying! Either way, selling your note provides you the cash that you need.
You can sell a part of your note for some of the money or sell the whole note for all the money. When you sell a part of the note, you are temporarily assigning the rights to the buyer of the partial note who will collect on the note for a certain period of time, after which, the rights will revert back to you and you can continue collecting for the remaining life of the note.
Sellers do not want to trade a house that will not sell for a buyer who will not pay. Here are a few tips when considering seller financing:

Seasoning

How aged is the loan? How many payments have been made?

Payment History

Are all the borrower’s payments logged accurately by a third-party servicer? It increases the value of the note.

Loan Documents

Are the originals available?

Collateral Property

What is the value of the property? Is it well maintained?

Wondering how much your mortgage note is worth? The value of a note is affected by all the factors covered above. Each note is unique, and we can offer a free analysis based on your situation. It is easy to obtain an evaluation in three easy steps:

Gather copies of the documents

      • settlement statement
      • mortgage (Deed of Trust or Contract for Deed)
      • promissory note
      • payment history and
      • current balance
      • title insurance
      • hazard insurance

Payment History

Are all the borrower’s payments logged accurately by a third-party servicer? It increases the value of the note.

Complete the Quote Request Worksheet

It summarizes the information we require to provide you a quote.

Submit for Review

We will look at the information and provide you with a quote within 48-72 hours. It will be subject to due diligence, which includes review of title, appraisal, insurance, buyer’s credit, and other underwriting, and will be valid for 30 days.

Once the due diligence on the note is completed and the price of the note is agreed upon, we will prepare an agreement for us all to sign.

The transaction can close through either a title company or a loan servicer, either acting as an independent third-party (or fiduciary) protecting the interests of both parties. We will arrange the closing without much involvement on your part. You simply send the documents in and you do not have to appear at the closing. At the closing, the original loan documents will be exchanged for the funds which will be wired to you the same day. It is that simple!

You could potentially sell your note and have cash in your hand within 15 days from start to finish.