Ok so you’re thinking about selling a home with some owner financing and want to create a quality mortgage note. Before you do however, wouldn’t it be nice to know what terms you should create for the mortgage note to maximize it’s value. Well, if that interests you, this blog post should set you in the right direction to create a good quality real estate note.
How To Create A Quality Mortgage Note!
As such, this could be the most important blog post of the sell my mortgage note for cash series.
So here we go!
Here are some simple steps of creating a good quality mortgage note.
Here Is A Typical Owner Financing Mortgage Note Example:
A seller has a free and clear property (meaning there are no mortgage liens against it) that he/she was trying to sell. Unfortunately, the price the seller is trying to get is $90,000 which is exactly what the home is worth per a recent market value appraisal done on the property.
The seller is having trouble finding buyers though and they are too stubborn to drop the price. Since the home appraised for $90,000, the seller refuses to sell for less than full market value. In fact, the seller might even consider renting the property out if they don’t get full value for the home.
Then one night the seller has a thought.
Hey… why don’t I make the sale of this home more attractive by offering some type of owner financing. This way, the house will appeal to a lot more buyers.
As such, the seller comes up with the following owner financing structure.
Since they know the home is worth $90,000 from a recent market value appraisal, they feel they can sell the home for maybe $10,000 more since they are now willing to offer very attractive owner financing. As such, here’s how they structure the owner financing.
Seller agrees to sell the home for $100,000.
Buyer gives seller a $10,000 cash down payment and seller carries back a purchase money Note and Deed of Trust for $90,000.
Why did the seller do this?
Because… seller was getting no action on the property when trying to sell it for $90,000 cash (the appraised value). Potential buyers would have had to pay all cash or qualify for a loan which made it un-appealing for most buyers.
So instead, seller offered to sell the property for $100,000 with 10% cash down payment to attract more buyers.
Now the seller was able to cash a quick $10,000 cash in the form of a down payment while at the same time creating a mortgage note of value with a face value of $90,000. Assuming the buyer has decent credit and the buyer continues to make payments on time on this newly created mortgage note, the seller just created something of great value.
If ever the seller gets tired of receiving monthly payments on this mortgage note, they can always consider selling this owner finance note for a lump sum of cash. These are the types of mortgage notes that get bought up constantly.
That’s it for now till next time. I hope you enjoyed this quick lesson from sell my mortgage note for cash.