Seller Financing

Archive for the 'Seller Financing' Category

Note Queen to Speak at Real Estate Investors Club of L.A. August 23, 2008

August 20th, 2008 categories: Real Estate News, Seller Financing

Yeah, sounds kind of fancy, doesn’t it? The reason I’m so excited is that I really love talking to people about investing in (or divesting themselves of) property in this market. My whole joy in life is putting real estate transactions together completely outside of and apart from the institutional lending community.

When cash or cash-to-new-loan isn’t working, that’s when I get the chance to shine. (But seller financing isn’t just a desperation tool, it can be a great estate planning tool for retirement, as well).

No qualifying for financing, no asking for a short sale . . . I don’t know, I just think closing escrow is a whole lot more fun when I get to say when it closes, not some catatonic organization desperately in need of a liver cleanse. I feel more powerful that way, plus my blood pressure is more stable.

So, here is the link to the REICLA so you can attend if you want. According to the “flyer:”

Dawn Rickabaugh, Broker/Owner of Rickabaugh Realty, is known as “The Note Queen” because of her passion for real estate notes and the installment sale. She loves the dance between property and paper, and thrives on putting real estate transactions together without so much as a nod from the institutional lending community. For the last 5 years she has been buying real estate notes, buying and selling her own seller-financed properties, and helping others close real estate transactions through a variety of creative strategies as an investor and as a broker.

Dawn wants you to be able to be successful so she can buy your notes. When you learn how to do this, it is a win-win situation for all parties. Dawn is not selling any package-just her service.

You will learn how to:

Do less and get more by becoming the bank on properties you already own

Have twice as many buyers looking at your property

Get top dollar by offering terms

Close escrow quickly

Get out from under heavy mortgage payments without short sale or foreclosure

Sell, carry the financing, and still walk away with cash at closing

Buy property without qualifying for bank financing

Structure the sale of your real estate note to meet your financial objectives

I look forward to meeting you there, or on cyberspace, when you’re interested in having a conversation about ways that seller financing techniques can help you get what you want regardless of what’s going on in the market at large.

I had a really nice email recently that I’ll share with you. It’s always gratifying when someone appreciates the work you’ve put into something, like this Note Queen blog:

Hi Dawn,

A quick note (no pun intended) to tell you what a helpful and informative web site you have put together! I just spend an hour reading every word and I am fascinated. I am preparing offers for several properties with a business partner this week. A seller carry back will be presented as part of our offer so my finding your web site is very timely. Perhaps we can ask you assist in some capacity and do some business.

Thanks again for a great site. The secondary market of note buying and selling opens up all kinds of possibilities. My world just expanded…

Thank You,

Mike Hardy - President, Paradigm Mortgage Group

Phone (800) 587-4096

Thanks, Mike. It’ll be great to get together with you and your partners to discuss the possibilities.

Can a Seller Without Any Equity Offer Seller Financing, and Can They Sell Their Note?

August 11th, 2008 categories: Seller Financing

“Hello Dawn, You really are the note queen! I am a buyer and I am interested in finding owner financed properties. The only way a seller can sell their note is if they have an assumable loan or own their property free and clear. Is this correct? Or are there other ways to do this, and if so, how does it benefit the seller? I find your website and advice very helpful!

Best Regards,

H.”

Hello Howard,

Thank you for your feedback on my website. I’m glad that you find it helpful.

To answer your question, the seller carry back scenario is simplest when the seller owns the property free and clear and has a lot of equity, but a seller can “carry paper” even if all they are doing is leaving their existing financing in place for you. That means that seller financing can work even when the seller doesn’t have any equity.

Free and Clear example:

Purchase Price: $300,000
10% Down Payment: $30,000
Loan Amount (face value of note): $270,000
Amortized Over: 360 (30 years)
Interest Rate: 7%
Monthly Payment (principal and interest): $1,796.32

You would give the down payment and each monthly payment to the seller (who is now the bank). This seller (now note holder), who is now holding a good first position note, can sell all or part of it if they want to. People who own their properties free and clear have a lot of options. They can sell for top dollar and close quickly by offering seller financing, and then turn around and sell all or part of their note to raise the cash that they need.

No Equity example:

Property Value: $300,000
Underlying Loan: $300,000 (with 6% fixed interest rate)
Monthly Loan Payment (principal & interest): $1,798.65
5% Down Payment (Contribution): $15,000
Trust Transfer System used with maturity date: 7 years

With a low down payment of $15,000 (and no bank financing = no hassle or fees), you simply take over the existing financing and get all the benefits of home ownership, including mortgage interest write-offs. You pay the Trustee, and the Trustee pays the lender. You will refinance the property in your own name or sell the property to a third party in 7 years, when, hopefully, the property value is $400,000, and both seller and buyer can split the equity in some fashion.

The seller should be happy to get out from under the payments, avoid short sale or foreclosure, and have a chance at regaining “lost” equity at a future point in time. Obviously, there is no note created in this scenario that the seller could sell. There is already a large note against the property.

Because there are very few, if any, assumable loans out there, we need to structure the transaction in a way that does not violate the “due-on-sale” clause. We do not want the bank to be able to “call” the loan. Most lenders have the contractual right to accelerate the loan (make you pay everything you owe them right now) if you transfer title to another party. The way around this, which still protects the rights of all parties and is 100% legal, is the Equity Holding Trust Transfer System.

You can read more about land trusts if you like.

If you have a particular house you are interested in making an offer on, and/or someone who would like to sell their note, please let me know and I will help you structure your offer and the transaction itself. And, if you want to find an agent in your area familiar with seller financing that will work well with me on helping you close a successful seller financed transaction, just let me know and I’ll help you arrange something.

Best wishes,

Dawn

Buyer Wonders How to Structure an Owner Financing Offer - If the Owner Will Carry, What Should You Do?

July 18th, 2008 categories: Land Trusts, Seller Financing

If you’re a buyer right now, it really behooves you to know how to structure a seller financing offer. In the live deal that I’m sharing with you below, the buyers specifically looked for properties that were owned free and clear (there was no mortgage on the property) and zeroed in. Here’s the conversation in a nutshell:

Hi Dawn,

I saw your website while searching for a way to put together a deal to purchase a home. My husband and I are the buyers and have found a lake home in north Georgia that we would like to buy and we have a great realtor. The seller is willing to owner finance the home for 10 years @ 6% with a 30 yr amortization but wants more of a down payment than we have at this time. We have a great income but a few years ago through a failed business we damaged our credit. We have spoken to a mortgage broker and we qualify for the new FHA loans with our income and even with our credit but last september my husband became self employed and they need 2 years on the tax return before the underwriters will do the loan.

So, we are searching for a creative way to raise the cash for the down payment he is wanting. Is it likely that we might structure a note for the cash needed in the form of a second and then sell it at closing to raise the funds? You might have some other ideas that we could try ? Like I said before we have the income to support this home but we just do not have the cash.

Thanks in advance for your help.

We chatted on the phone and by email so I could get a very clear picture of the needs and objectives of all parties, and then I responded below with what I would have the listing agent (who will double end this deal) submit to the seller:

Hi Laura,

Great talking to you again. So here’s the recap:

Purchase Price: $675,000
Down Payment: $20,000
Face Value of Note: $655,000
Interest Rate: 6%
Amortized Over: 360
Due In: 120
Monthly Payment: $3,927.06

In light of the low down payment, property to be placed in a 2 party trust to give the seller the ability to regain possession of the property through eviction (as if buyers were tenants) instead of foreclosure upon any buyer default. The buyers will be able to take all the usual mortgage interest write-offs.

Property to be purchased “As Is” (no requests for repairs or warranties)

Escrow to close in 21 days (likely sooner)

Just after close of the first escrow, I will buy a portion of the note.
I will bring $75,000 to the closing table in exchange for either:

the first 24 payments of $3,927.06 OR

half of each payment ($1,963.53) for the first 67 payments

If the seller accepts the first option, he will get:

Buyer’s down payment: $20,000

My note purchase: $75,000

TOTAL: $95,000

Estimated closing costs (if agents will take 4% total commission): $50,000 (trust, title, escrow/atty)

At closing: $45,000

Two years from now the note will still have a balance of $638,416.82, he will start receiving the payments:

$3,927.06 for 96 payments: $376,997.76

When the balloon pays off in 10 years, he will get $548,140.82

Grand total to seller: $970,138.58

OK, so there’s my pitch. Please feel free to have the agent and/or seller call me regarding any questions they may have.

Best of luck!

MEET THE TEAM

Archive for the 'Seller Financing' Category

Note Queen to Speak at Real Estate Investors Club of L.A. August 23, 2008

Related Reading:

Can a Seller Without Any Equity Offer Seller Financing, and Can They Sell Their Note?

Free and Clear example:

No Equity example:

Buyer Wonders How to Structure an Owner Financing Offer - If the Owner Will Carry, What Should You Do?

CATEGORIES

ARCHIVED ARTICLES