Frequently Asked Questions
What is Seller Financing?
Seller financing is when the seller becomes the bank on property they already own. See this quick video.
Sign up for ‘Seller Financing on Steroids.‘ It will answer many of your questions before you contact me. It’s a great way to get some of my expertise without paying for my time!
I’m interested in selling my property and carrying paper. How can I find out if it will work in my particular situation?
You can download ‘Seller Financing on Steroids’ [above]. When you’re ready for more, you can hire me to take a detailed look at your personal situation and give you a variety of options based on your individual needs and circumstances.
I have a lot of equity, and I really need to walk away with most of it at closing. Can I still use seller financing? (And how about the infamous Simultaneous Close?)
Absolutely! Carrying paper DOES NOT mean you can’t walk away with cash if you have sufficient equity. Offering terms to a qualified buyer is a great way to close your deal at an attractive price.
Once you have a great real estate note, you can turn around and sell all or part of it for cash. This is sometimes called Simultaneous Closing (a ’simo’). It used to be that ’simos’ closed within a couple of days, but be prepared to collect 1-3 payments before trying to sell your note.
If you bring me in to help you underwrite the buyer before you close, I can sometimes pay more for your note and close much sooner than the typical 1-3 months.
The discounts on unseasoned notes is higher now than it used to be. Be prepared to be offered .70 to .80 cents on the dollar. That’s why the partial is such a great tool right now. The discount you take will be smaller. You’ll get some cash up front, and then still be in line to collect note payments down the road.
But be warned . . .
The way you structure your transaction and put the paperwork together is absolutely critical!
You’ll want to talk to me before you close escrow. Please read Putting Your Deal Together
[The simo technique rarely works with rehab/flipper paper any more . . . you’ll want to get the new road map to dispel the myths and discover the possibilities: Flip With Owner Financing. Please read the chapter on ‘the simo’ in ‘Seller Financing on Steroids.’]
I would like to be a private money lender and/or buy notes secured by property in Southern California. How can I find out about local opportunities?
Sign up to be on my ‘note buyers’ list and you’ll get notified when I have local opportunities.
I know you buy notes, but I also see that you’re a real estate broker, can you list my property?
I could, and once in a while I will, but I will usually hook you up with a real estate professional in your area that does an excellent job with traditional listings and sales. I like to stick with what I do best, which is to come in as an Owner Financing Expert to help your deal close in a way that meets the needs and objectives of all concerned.
What will my capital gains be if I sell and take a 20% down payment?
While I understand the generalities of how things work, I’m not a CPA and can’t give you specific tax advice on your particular situation. It’s very important that your accountant and I work together to make sure there are no unpleasant surprises when you decide to sell with or without an installment sale (IRC 453). For a little information on how capital gains work in California, read: Calculating Capital Gains
Note: If you have an investment property, you can defer capital gains without a 1031 exchange when you use the Title Holding Trust System. Even sellers of high-end principal residences can have a huge capital gains liability, as the IRC 121 home owner’s exemption only goes up to $500,000. These home sellers can defer virtually all of the capital gains due by converting their home into an investment before ’selling’ it.
The safest way to do this, to protect the asset and all parties involved, is to use the Title Holding Trust System. After 18 months, the seller can exchange their beneficial interest in the trust for another ‘like kind’ property according to section 1031 of the IRC.
You may also want to explore the Deferred Sales Trust, which helps high net worth individuals defer capital gains without a 1031 exchange, or some of the risks of a traditional installment sale, such as foreclosure.
I’m a BUYER. How does SELLER financing help me?
If you’re a buyer with a down payment and decent credit (or not), then the world is at your fingertips! As a buyer, you should be working with a Realtor who knows how to negotiate a possible seller financing deal for you!
Here are a few of the benefits of seller financing for buyers: avoid the hassles of qualifying for bank financing (this is worth its weight in gold!), low or no points or origination fees, interest rates often as good or better than what you could get at a bank, quick closing, and the ability to customize the loan to your liking . . . it’s whatever you and the seller agree to. Hire me to help you get your seller financing offer accepted!
I’m selling my property FSBO. Is there a way we can work together?
Of course! Offering terms (providing the financing, carrying paper, taking back a note) is a great tool for FSBOs who want the competitive edge. Seller financing will help you out-perform your competition. This report is a must-read for you: The BOFS for the FSBO: Owner Will Carry
There’s a lot I may be able to do to help you. Click here for some ideas (consultations, putting your transaction together).
I don’t have a lot of equity, but I do have good underlying financing. Can I still use Seller Financing techniques to sell my property and get out from under my payments?
The answer is ‘yes.’ We just need to structure the transaction in a way that protects both buyer and seller. You will want to become familiar with the Title Holding (Land Trust). Listen to an interesting audio from a past client here:
I’ve read everything on your site, and I’d like to know if there are any books you can recommend so I can learn more.
Sure! Here are a few products I can recommend. There’s also a video clip you can watch: How Do I Get Started in the Note Business Without All the ‘Bull?’
What happens if I carry paper and then the buyer quits making the payments?
I wrote a blog post about this very topic. Click here to read it.
