What Are Seller Financed Notes?

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August

18

Seller financed notes are a loan that is provided by the seller of a property where no money has been loaned to the buyer. Also called vendor/owner finance or owner carry back, this is a good way for both the owner of the property to sell and also for a buyer to get into the property market or secure property if they found it difficult to secure a loan amount.

For example, if I had a home and was wanting to sell it but was approached by a buyer who could only get finance for part of my asking price, I could offer seller financed notes for the remaining amount of the asking price. This would secure me a sale of the property, as well as ongoing agreed payments on the balance of the property.

Or, to look at it from the other angle; if I was wishing to buy a property and did not have the approval for finance by a bank due to any number of credit history and/or income reasons, then I could approach a seller and ask if they would be interested in seller finance notes and come to an agreement on repayments and terms.

There are often balloon payments that are factored into these agreements. Often times the balloon payment will come at theĀ  end of the agreed term of seller finance and will be the remaining amount of what is owed. It is a good idea for the buyer to seek finance on the balloon repayment and use the history of regular repayments on the seller financed notes as a reference for their credit history.

There are many companies that will buy seller financed notes. This can be attractive to the sellers as they may need the remaining amount that is owed on the property they have provided finance on in a lump sum now. These companies don’t necessarily pay you 100% of the note value and shopping around for the best price on your note is highly recommended.

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