How to Sell Your Mortgage Note

Tired of receiving monthly payments?

Wishing for a lump sum of cash today?

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.

Step #1 – Request Quote

Just complete a short informational worksheet to receive a free no obligation quote. This can be submitted online, by fax, or over the phone.

Click Here for a List of Note Buyers

Click Here to Download a Worksheet (PDF)

Step #2 – Provide Document Copies

To get started note buyers like to see copies of these three documents:

• Settlement Statement
• Promissory Note
• Mortgage, Trust Deed, or Contract

It is also a good time to be sure you know where the originals are located, especially the Promissory Note, as they will be requested at closing.

Step #3 – Accept Offer & Agreement

Once an offer is accepted it will be outlined in a written agreement. In addition to stating the price, the agreement will specify conditions of closing and who pays costs.

Step #4 – Note Buyer Review

The mortgage note buyer will perform a detailed review of the transaction, known as due diligence. This includes a review of the buyer’s credit, current tax and insurance status, payer interview, and other important items. They may also request copies of additional documents including a payment history, insurance policy, and existing title report.

Step #5 – Appraisal

The note investor will order an evaluation of the current property value. This usually takes the form of a BPO or drive-by appraisal. The investor wants to be sure the property value is still equal to or greater than the sales price. If the value comes in low, the note investor may present a revised offer for consideration.

Step #6 – Title Search

The title search verifies ownership of the property and the mortgage note. It saves time and money to work with any title report that might exist from the original sale date. If the title search shows money is still owed on a prior mortgage it will usually be paid from proceeds.

Step #7 – Closing

When all steps are complete the note buyer will send the final closing documents for signature. The title company is often used to handle the exchange of money for the original note and transfer documents. Funds are typically paid in the form of a wire transfer or cashier’s check. You are also encouraged to have your attorney review and advise with the closing process.

Selling your mortgage note can be a simple process when you work with an experienced note buyer. Just take a few minutes upfront to gather your information and documents and they will handle the rest for you!

Sometimes it is not only what you know, but who you know.

Knowing the right people can not only make things easier, in the case of the 2010 Directory of Owner Financed Note Buyers, it could also make you more money!

Gain access to our personal Rolodex of experienced note professionals that took years to develop.  Work direct with knowledgeable investors, educators, and master note brokers.

Owner Financing vs. Seller Financing – What’s In a Name?

As cash flow note brokers we know that owner financing happens when the seller of property accepts payments over time from the buyer.

This creative financing helps buyers purchase homes without traditional bank loans. Read more

Fighting to Preserve Owner Financing with the National Association to Protect Private Property Rights

What is Your Livelihood Worth?

It’s not a ridiculous question. As you read this, governmental agencies are actively working to eliminate all but the most basic form of owner financing without being a licensed mortgage originator.

Now industry leaders have joined efforts in the creation of an association to protect property owners, home buyers, and professionals in the seller-financed industry. Read more

Land Contract Buyer Sells Without Owner’s Consent – Real Deal #157

Our readers are the best source of real deals!

Here is one seller’s request for answers when dealing with a sneaky delinquent buyer that sold without consent. Read more

How to Calculate Interest Only Owner Finance Payments

Calculating the payment needed to cover just the interest on an owner-financed contract or promissory note is simple. Just follow three easy steps and avoid two common pitfalls.

Follow 3 Easy Steps

Step 1: Obtain the current principal balance and interest rate from the land contract or promissory note

Step 2: Times the balance by the interest rate

Step 3: Divide by 12

In fact it is so simple you don’t need the best financial calculator, any standard calculator will suffice.

Here are the steps in action:

Step 1: A seller-financed note has a balance of 100,000 at 8% interest

Step 2: $100,000 x 8% (or .08) = $8,000 (interest for the year)

Step 3: $8,000 divided by 12 = $666.67 (monthly interest only payment)

What It All Means

If the buyer pays just the interest every month then the balance stays the same and does not decrease.

If the buyer makes a payment that is more than the interest only portion then there is a principal reduction and the balance goes down.

Unfortunately there are two common mistakes people unknowingly make with interest only payments. Read more

What is a Land Contract?

A Land Contract is a type of owner financing that allows the buyer to make payments to the seller for a home or land purchase. The buyer gets to use the property but the seller hangs onto official title until paid in full.

The contract comes under several names including Real Estate Contract, Contract for Deed, Installment Sale, and Land Contract. It is an alternative way to document the seller financing arrangement from the more common Note and Mortgage or Note and Deed of Trust.

One big consideration with a Land Contract is that the buyer will not receive the Warranty Deed to the property until the purchase price is paid in full. That means the seller stays in control as official title holder while the buyer makes payments. Think of the contract like a layaway program for the Deed.

So what’s the big difference? Well with a Deed of Trust or Mortgage the seller provides a Deed to the buyer at closing, transferring title to the buyer. Then the buyer simultaneously gives back a Purchase Money Mortgage (or Deed of Trust in some states) to the seller for the portion financed. When the amount financed is paid in full the Lien is simply satisfied.

When the seller holds fee simple title using a Real Estate Contract the buyer is holding equitable title. Since the buyer does not yet have the Deed it is almost impossible for the buyer to obtain any type of secondary financing unless the Contract is paid off.

The buyer also risks the seller encumbering or clouding title before the Contract is paid and the Deed released. To provide greater protection, the Fulfillment Warranty Deed can be held in trust by a third party escrow servicing agent

If the buyer quits paying and the seller needs to take back the property, a Real Estate Contract has the advantage of being faster and less expensive than a drawn out foreclosure process on a Mortgage or Deed of Trust.

The accepted use of a Real Estate Contract varies by state. They are common in many Western states like Washington, Oregon, Idaho, and New Mexico along with some Mid-Western states such as Michigan and Wisconsin. However a few states, like Texas, have passed regulations to prohibit use of Contracts for Deed.

A Real Estate Contract can be unrecorded or recorded at the county level depending on local practices. A seller can also sell contract payments for cash now. Just know that some investors may require conversion to a note and mortgage or a note and deed of trust.

A knowledgeable title company or real estate attorney can assist in selecting the best method of documenting the seller-financed transaction.

For more information on buying or selling with contracts read Personal Profit Series: Notes – The Complete Money Making System to Buying, Referring, Creating and Holding Real Estate Notes!

5 Owner Financing Tips for Sellers

It’s a tough time to sell a house.

In an effort to sell fast and stand out from the crowd, sellers are turning to the owner financed installment sale. By accepting payments over time from the buyer, the seller provides an alternative to bank financing. This attracts more buyers and helps the owner get attention in a market flooded by oversupply from foreclosures.

Of course sellers don’t want to jump from the frying pan into the fire by trading a house that won’t sell for a buyer that won’t pay.

Here are 5 safety tips for sellers considering an owner carry contract:

Tip #1 – Review the Buyer’s Credit

How buyers have paid bills in the past is a good indicator of how timely they will make future payments. Always review the buyer’s credit prior to accepting a promise to pay. Sellers can obtain a signed authorization from the buyer to pull credit through a reporting agency, or the seller could simply ask the buyer to obtain a copy of his or her report for the seller’s review.

Tip #2 – Get a Down Payment

The more money a buyer puts down, the more “skin” they have in the deal. The greater this equity, the lower the likelihood the buyer will stop paying.

When people have little to no equity, they are more likely to default or just walk away from the home. Few sellers want the hassle of taking back a property through foreclosure, so increase the odds in your favor by requiring a down payment.

Tip #3 – Set the Terms

The terms include interest rate, payment amount, frequency, and the due date for payment in full. There are also late fees, default clauses, requirements for insurance, and other standard provisions.

While the terms can be whatever the buyer and seller agree upon, it makes sense to set terms that are affordable to the buyer AND favorable to a note investor. This way a seller is more likely to own a note that is valuable to an investor in case they ever want to sell future payments for cash.

Tip #4 – Get Help with the Documents

In addition to putting the terms in writing, the documents evidence the lien. The obligation to pay (or IOU) usually takes the form of a promissory note, which is secured by an owner mortgage or trust deed recorded in the county records. A land contract or real estate contract are also used in some states. A qualified attorney or title company familiar with local laws should prepare the closing documents.

Tip #5 – Collect Payments Like a Pro

Tracking the payments, interest, and balance is often referred to as servicing the note. In addition to collecting payments, a servicer should verify the real estate taxes and insurance are kept current. The seller can perform servicing but it is a whole lot easier to hire a third party company to handle this process.

If you are looking for the complete system for safe owner financing be sure to read our how-to manual. It includes documents, examples, terms, credit reading tips, note investor criteria, and lessons learned from 20 years of real life experience.

Here is what one satisfied reader said:

“Your product is one of my go-to programs. I am glad you took the time to put it together. I think I paid more than 10x when it first came out and I think it was worth every penny!”  Greg G – Canyon Capital

Available today in our bookstore as an instant download for just $99.97

Article written and copyrighted by Tracy Z. Rewey at www.NoteInvestor.com.

Learn Owner Financing For Profit!

Every day people contact us asking about seller financing.

Often they are interested in making money as a broker with cash flow notes.

Increasingly we find it is sellers looking to sell a property fast or buyers wanting to purchase a home without a bank loan.

But where do you turn for real answers that won’t break the bank? Read more

Top 5 Articles on Seller Financing

Owner financing was a hot topic in real estate last year and all indicators point to increased demand in 2010.

In search of alternative financing methods, Read more

Secrets of Paper Training

NoteInvestor is excited to share information on the “Secrets of Paper” live training offered by Jeff Armstrong September 18-20, 2009, in Atlanta, Georgia.  Jeff has been operating his successful one-man note brokering business for over 18 years.  We asked Jeff to provide his insights on the current market and how the live training will help note brokers and real estate investors to not only survive, but also thrive in the upcoming year.

Be sure to read his comments and statistics on the increase of seller financing. Are you ready for your share of the note business? Register Now for the Secrets of Paper 201 Training.

Secrets of Paper 201 from Jeff Armstrong

I had a note broker call me up the other day and ask me in desperation, “When is the note market going to change?” With no hesitation, I answered. “The bad news is, Read more

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