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| Cash Now For Your Real Estate Contract |
BACKGROUND AND FUNDAMENTALS
The private mortgage industry is a relatively young business
with roots that can be traced
directly to the emergence of seller-backed, or owner, financing.
Prior to the very high
interest rates of the late 70s and 80s, seller-backed financing
was not a common financing
option. The only loan option for most real estate buyers was
through a bank or savings and
loan institution. But with interest rates topping out at 22
percent, financing for real
estate was either unavailable or too unattractive for most
buyers. Real estate sales
plummeted.
Desperate, those with real estate on the market turned to
innovative, unusual ways to
attract buyers. One of the quickest to catch on was
seller-backed financing. The seller
would "hold paper" on the property, allowing the buyer to pay a
mortgage directly to the
seller. Simple and straightforward, the financing option
appealed to both the seller and the
buyer because it beat the high interest rates and circumvented
the unavailability of
traditional financing. Often |
this was the only way to sell real
estate in the high interest
rate market.
As more and more individuals held private mortgages (called
private because they are not
held by banks), a need developed for the holder to be able to
sell these mortgages. Thus,
the private mortgage industry was born. Seller-backed financing
has developed into an
accepted and standard way to finance real estate. As a result,
the private mortgage industry
has flourished, earning a place of respect in the financial
community.
The amount of private real estate paper has risen dramatically.
It is conservatively
estimated that over $226 billion in real estate purchases is
financed through private
(non-institutional) notes.
Seller financing provides many advantages to buyers and seller,
but one area of concern to
many sellers is liquidity. How do they get cash from the note if
they need it or want it?
Will they be saddled with a 15-year note or longer rather then
having the cash that is
needed?
In response to this need, funding sources buy paper |
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from note
holders for cash, usually at a
discount off the principal balance of the note. This provides a
means for the holder to
receive cash now instead of having to wait out the term of the
note.
The evolution of this secondary market for privately-held paper
has increased the
attractiveness of seller-backed financing, giving the seller a
"fall-back" position. Some
sellers turn their notes over directly after the sale; others
hold the notes until the cash
is actually needed. Selling property, holding a note and then
selling the note for cash is
the yield equivalent of selling property for cash.
TRANSACTION DETAILS
In order to obtain an accurate quote, it is necessary to have up
to date information about
the note. All quotes will be subject to due diligence by the
note purchaser.
The first critical item of due diligence will be verifying the
credit worthiness of the
payer (mortgagor). The lower the credit score, likely the lower
the offer.
The second critical item is a drive-by appraisal or valuation
with comparisons of similar |
houses and neighborhoods. The note purchaser wants to be sure
there is adequate value.
One of the key things many people do not realize is they do not
have to sell the whole note.
The note holder will always receive more money over time if they
only sell part of the note.
We recommend that a note holder determine the amount of cash
needed. A quote can be obtained
telling how many payments will be required in order for the note
holder to receive the
necessary cash.
There are many options available when you have a contract or
note and are trying to raise a
lump sum of cash: 1) sell the entire balance of the contract; 2)
sell a specified number of
payments; 3) sell part of each payment, while continuing to
receive the balance.
About the author:
Would you like to turn your real estate note into cash? Save
time and money... Work with a
professional. With over a decade of experience, Louise Pointer
can help you avoid common
mistakes. Click -> http://www.NationalFundingResources.com
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