Mortgage Note Buyers and Sellers, Loan Servicing, and Hard Money Lenders

Sell My Note – What is Seller Financing?

When I attend various networking events around Texas and I get up and give my 60 second spiel and almost always I will get someone that comes up to me and say. “Robert What is Seller Financing? I have heard of it, but just not really sure what it is or how it works.”

Seller Financing is the oldest form of lending there is. Seller Financing also referred to as “Owner Will Carry” or “Owner Financing” has been around long before banks or mortgage companies ever existed. Because it is the oldest form of lending that exist, it is also the method of lending that sellers and buyers know least about.

Seller Financing occurs when real estate is sold and the seller provides financing to the buyer for all or part of the sale price. The seller becomes the lender, or the bank, by offering financing to the buyer in the sale of their property. This process is used in a variety of ways to meet the needs of sellers.

In traditional lending the buyer will provide a down payment and get a loan from the bank for the remaining amount of the sales price. Bank fees and points are also included in the amount of the loan to the buyer. With Seller Financing, where there are no bank fees and points to pay, the buyer provides the seller with a down payment and then monthly payments according to the terms of the contract.

The buyer will make payments to the seller according to terms agreed upon in the promissory note which is secured by the Deed of Trust against the seller’s property.

Here is an example of Seller Financing: John and Trudy have owned outright a condominium investment property with 5 tenants for 10 years. They know the property well and what the market will offer for it. They are tired of managing the property and want to use the proceeds for their retirement and a vacation. They elect to use Seller Financing to sell the property. John and Trudy sell the property with the following terms:

Sale Price:

$ 625,000.00

15% Down Payment:

$ 93,750.00

Amount Financed:

$ 531,250.00

Interest Rate:

8.5%

Term (20 Yrs):

240 Months

Monthly Payment:

$ 4,610.31

What John and Trudy have successfully done is create an Seller Financed Note to give them the benefits they wanted. They were able to sell their property, create a monthly cash flow of $4,610.31 (not bad), then take some of the money(The down payment) and pay off credit cards and go on a European vacation. Additionally, by using Seller Financing they were able to defer the capital gains tax they would have incurred had they gone with traditional methods.

This is just one example of the many reasons to use Seller Financing and how it can work for you as well.

Need to sell you note contact a note professional at the Texas Note Company help.

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