Options for Seller Financed Notes

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August

10

Sellers and buyers of both residential and commercial property have used seller financing for years, which essentially means that the seller of the property is holding the new loan for the buyer of the property. In the past, this kind of financing was largely used when a buyer needed financing to purchase a property but time was an issue, as seller financed notes don’t have to go through the typical loan approval process that banks provide. However, in more recent years, with the economy going downhill in a fast way, properties in many parts of the country losing value, and many property owners finding their adjustable rate mortgage payments skyrocketing and putting them at risk of foreclosure, a perfect storm was created that resulted in seller financed notes becoming a necessity for many buyers and sellers to reach a deal.

If you find yourself holding such a note, you are likely not in the position you want to be in. Rather than accepting monthly payments for the property you’ve sold, you would much rather have (or perhaps even need) a lump sum of cash. The fact is that you can continue to hold your note and continue collecting monthly payments, slowly recouping your cash. Or you can try to find someone who buys seller financed notes. When you sell the note you are holding, you should expect to receive an offer for less than 100% of the face value. The actual amount that a note buyer will offer you will vary depending on the structure of the financing terms, such as the interest rate, the amortization, the term, and the amount of the loan. However, when you accept the offer that the note buyer provides to you, you will get that lump sum of cash you needed when you sold your property initially.

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