Wraparounds with Underlying Liens

 

When people go to sell their home, the majority will still owe money on a loan from when they bought the property.  Since few sellers own a property free and clear, what to do with this underlying lien is an important consideration with owner financing.

Read more

Real Deal #148 – Seller Financing for IRA Investments!

Welcome to Real Deals!  It’s always easier to learn from real life so here we share information from actual owner financed transactions. It can be challenging to obtain non-recourse loans necessary to finance the purchase of real estate in an IRA, 401(k), or other type of self-directed retirement account.  Seller financing can be a viable alternative financing solution.

Read more

Real Deal #147 – Estate Note in Arizona

Welcome to Real Deals!  It’s always easier to learn from real life so here we share information from actual owner financed transactions. A seller-financed note is an asset. The seller can elect to hold the asset collecting payments, sell the note, or leave to heirs as part of their estate.  Many heirs would prefer cash now rather than payments over time.  A large number of notes are purchased through estate distribution similar to this Arizona note. Read more

What is a Payer Estoppel?

Prior to purchasing a seller financed note, the investor might ask for a payer estoppel.  This simple one page letter or document is sent to the person making payments on the note, mortgage, deed of trust, or real estate contract.

The estoppel explains the investor is contemplating the purchase of the note, reassuring the payer that all terms and conditions will remain the same.  It then summarizes the information on the note including current balance, interest rate, terms of repayment, and contact information for the payer.

In addition to confirming information, it also provides the payer an opportunity to validate or dispute the details provided by the seller.  This can be particularly important when there is no third party outside servicing company collecting payments and keeping track of the balance.

The estoppel, also known as the vendee verification, is usually sent to the payer by certified mail or some other method of delivery confirmation.  Most investors mail once the title and property value have been reviewed and the transaction is near closing.  It might also be performed with a payer interview or verbal debt verification.

Temporary Seller Financing

Who wants to wait for the monthly note payments to trickle in over the next 5, 15, or 30 years? It makes sense that more sellers would be willing to carry back owner financing for the buyer if they knew how to sell all or part of their note for cash shortly after closing. Read more

What’s Your Discount?

How do you answer a note seller when they ask, “How much will you pay for my note?” The simplest answer to “What’s Your Discount?” would be “It depends!”  But what you say next is very important.

Here’s how we like to answer the seller’s first pricing question.

“How much we pay really depends on your note. Each transaction is unique so we look to 5 key factors for pricing.  These include the type of property, down payment or equity, the buyer’s credit, how long the buyer has been paying you, and the terms of your note like interest and payment amount.

An average note will demand 80 to 95 cents on the dollar depending on these factors. If you have a few minutes we can go over the details of your deal.  This way we can provide the accurate fair market value of your note rather than just a ballpark estimate.”

We then take the time to ask them questions about their transaction to gather enough information to complete the intake form or quote request worksheet.  If possible, we also obtain a copy of the note, mortgage, and settlement statement.  We can then provide an accurate quote subject to standard due diligence.

However you decide to answer the discount question, be sure you address the seller’s real underlying question, which is “Will you treat me fairly?”