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Loan Servicing - Who Needs It?
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Loan Servicing - Who Needs It?
Find out more now!
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Free PDF E-Booklet
Free PDF E-Booklet
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Seller Financing - Back to the FutureRoberta StandenFor many years now – thirty five to be exact, I have noticed that a few homeowners, real estate brokers, investors and buyers have been almost secretly, but certainly quietly using this real estate financing technique that saves time and money. For sellers it moves property quickly or at least quicker than with any other method. Additionally, wise brokers have been emptying drawers of expired listings and turning them into closed transaction while earning commissions using the plan and investors have been cashing in on purchasing private notes as a result of this methodology. For buyers, it works perfectly. It’s cheaper with savings of a variety of fees typically charged by banks and mortgage companies such as application fees, points, lender fees and appraisal costs. Fast Forward We were introduced to Owner Finance decades ago as a survival mechanism while owner/brokering a real estate company in California. Interest rates exceeded 20% in those days; anxious and often relocating buyers couldn’t qualify, disappointed frustrated sellers were left with no sale and one by one our office escrows were cancelled. We were desperate and started looking into and attending classes and workshops on seller financing. Boy, what a lean two or three years accompanied by a long and steep learning curve. It wasn’t only sellers needing to move there property and agreeing to a seller financing proposition; but also real estate investors needing to move their commercial properties were in a bind also. Motivated to survive we also learned the art of real estate exchanging, not primarily for the Section 1031 tax benefits, but simply as a solution for our investor clients. Inasmuch as these exchange transactions almost always involved the principals to execute a private note….we were in our glory with our new found ability to put together transactions using private financing. Though the years, we, along with thousands of others have quietly, consistently and without pomp and circumstance regardless of interest rates, credit crunches, liquidity challenges and/or changes in the economy, been using seller financing often as the method of choice. Win/Win for all Seasons Seller financing, the win/win situation for all seasons whether it is the best of times or the worst of times….but whoa, let’s back up here and answer the question many may be asking: What is seller financing – exactly? Seller financing is sometimes called “owner financing” or “owner carry back”. It is a type of transaction where the seller acts as the bank and agrees to receive regular payments from the buyer instead of one lump sum. The seller transfer the deed to the property to the buyer and in return receives a mortgage or note and trust deed (depending upon the state) which places a lien on the property and obligates the buyer to make regular payments. Although this kind of deal offers high flexibility with the arrangement negotiated privately, it is important the seller and buyer seek professional help in setting it up to ensure the validity. For sellers, carry back notes are negotiated at greater than market interest rates and therefore receive top value if and when the seller decides to sell the note to a note investor. Recognizing the benefit of the transactional and closing savings as well as other benefits, buyers typically have no problem with paying a little more in interest over the life of the loan. However, a word to the wise here to sellers is appropriate. Hedge your bets and minimize risk by requiring a respectable down payment. If the buyer has nothing or little to loose, what’s to stop them from simply walking away. Insist on a credit report and references and by all means have the documents professionally prepared and professionally serviced. Hmmmmmm, “Professional Service”, well that’s where we enter - “stage left” with our two cents worth. The Servicer – Enter Stage Left The Note Servicing Center has been servicing seller carry back notes since 1984. We set up an impound trust account to make sure the taxes and insurance are paid in a timely manner by the buyer and also provide the buyer with payment coupons, collect the monthly payments and disburse to the sellers bank account or wherever directed. We take care of the statutory year end reporting as well as the 1098 and 1099 required by the IRS and offer other benefits – many absolutely free, such as, On-Line password protected viewing of client accounts are available 24/7. Check us out at www.sellerloans.com . Whether you’re a buyer, seller, broker or just plain curious about Seller Financing, contact us to find out how we can help you successfully put together your seller financing transaction. COPYRIGHT© 2008 by Roberta M. Standen - ALL RIGHTS RESERVED This article cannot be reprinted without the express permission of the Author - 6-08 |
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Note Servicing Center, Inc.
PO Box 77 - Midpines, Ca. - 95345
Phone: (209) 742-5732 - Fax: (209) 742-7153
Copyright © 2004-2009, All rights reserved.
This site is A J.Parr Production
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"If you are not 100% satisfied with your present loan servicing company,
why not check out some very good reasons to change your note-servicing
provider to Note Servicing Center."