Sell your property FAST – with an owner-financed mortgage
Owner Financing is very well known to sell properties quickly, especially where the properties or prospective buyers do not meet traditional lending/mortgage requirements. The Seller offers to hold the mortgage (owner financed mortgage) and receive the monthly payments from the Buyer as a bank would.
The problem with this approach is that sellers sometimes don’t want to collect small monthly payments, but instead want to withdraw shortly after closing to buy another property or for many other reasons. The benefits of owner financing are many, but sometimes they aren’t enough to help close a deal.
Basically, here’s how an owner-financed mortgage note works:
1. Seller sets sales price exactly at appraised value and advertises “Owner Will Finance… No Bank Qualified!”
Interested buyers go through a pre-qualification process to determine the best potential customer.
2. Seller and Buyer agree on the structure and terms of the note to be created (the note buyer may make some suggestions) and sign a Real Estate Purchase Agreement.
3. At closing, the Seller creates the 1st mortgage and shortly thereafter sells/assigns the mortgage note to the buyer of the note.
4. The seller receives the buyer’s down payment plus the proceeds from the sale of the note. When purchasing a seller-financed bond, the bond buyer typically covers all closing costs and the cost of their own appraisal of the property.
Let’s say the Seller owns a property that’s appraised at $100,000, but because it’s not a suitable lot, he’s having trouble finding qualified buyers. Buyers don’t seem to commit to the purchase, and those who do don’t get their mortgage approved by the bank.
The seller has listed the house at $90,000, expecting to get $80,000-$85,000 after incentives and expenses are paid. But even this price does not attract real buyers.
This is where the buyer of the note can step in. The seller will be advised to create a $90,000 note, the remainder ($10,000) will be the down payment. Interest can be 8%, term 360 months, payment of $660.39 per month (principal + interest).
The note buyer would purchase that note for approximately $80,000 in cash shortly after the closing of the real estate. Add to that the down payment and the seller gets a total of $91,000 (minus the real estate closing costs).
Shortly after the closing of the real estate and after the new note is recorded, the buyer of the note makes the purchase of the note and the Seller receives his money. A perfect example of how an owner financed mortgage makes selling real estate possible. And there are no hidden fees or costs other than the usual real estate closing costs that must be paid anyway. The buyer of the notes generally bears all costs of closing the purchase of a note.
This approach attracts a large number of buyers and after a few days the Seller can have cash.
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