Creative home sellers who offer seller financing to potential buyers can
often sell their houses more quickly (and at a higher price) in a slow market.
While applying seller financing techniques isn't more difficult than
traditional real estate sales, it is important to recognize that the buyers
looking for seller financing represent a different target market than typical
bank-financed customers.
Similarly, the process for obtaining a large cash payment for the seller
after a note is created varies from the conventional real estate closing
technique as well.
Fulfilling a Seller's Need for Cash
In some seller-financed real estate situations, the property owner may have
an immediate need for more cash than is available from the scheduled principal
and interest payments. This situation often comes about when the seller needs to
have enough money to use as a down payment for their next real estate purchase.
In order to quickly obtain a large proportion of the money due from the loan
they just created, the seller could sell the monthly note payments to a buyer
for a lump sum of cash. By locating someone willing to buy the note payments,
the seller will have ready cash for a down payment or any other pressing
financial need.
In order to streamline the seller finance sale situation, it is advisable
to have potential buyers for the newly-created cash flow at the ready. A
seller can start looking for buyers before the note is created, or even before a
seller-financed buyer is "lined up". This way, the property seller could have a
buyer for the payment stream ready to make the purchase as soon as the new
private mortgage is created.
Locating the Right Note Buyer
But what is the best method to find these note buyers? In stark contrast to
locating seller-finance buyers for the real estate itself, a classified ad in
the paper is not the best option. Most people looking to purchase a stream of
monthly payments do not look in the newspaper for potential cash flows to add to
their portfolios. An alternate marketing strategy is required for finding note
buyers.
In recent years, the Internet has become the best place to find cash flow
purchasers. Using keywords such as "buy monthly payments" or "buy mortgage
payments" at a popular search engine website should lead to many interested
buyers.
Sometimes there are so many potential buyers, it can be difficult to figure
out where to start. Also, cash flow buyers tend to have distinctly different
financial parameters; an opportunity that meets the needs of one person
perfectly may not be attractive at all to another. Therefore, it is often best
to work with someone who could give the seller a general idea about how notes
should be structured.
Using Note Finders...
In the secondary finance industry, a unique group of individuals exists who
specialize in locating note buyers. These cash flow specialists - often known
simply as "finders" - have a unique understanding of what most buyers are
looking for. These finders are happy to work with agents and their clients. Many
of them utilize online marketing and have Internet websites to facilitate the
buyer location process.
The best of the bunch also look in the newspaper for property sellers
offering financing, so sometimes a good finder will contact the seller if their
property is advertised as FSBO. Finders specialize in helping property sellers
locate buyers for secured notes.
Once in contact with a finder, the seller should explain the details of the
situation. While note finders won.t be able to offer any legal advice or assist
with the creation of a note, they are qualified to give general recommendations
about what types of terms are attractive to note purchasers. Most
importantly, note finders will be able to help locate a buyer for a
newly-created cash flow.
Remember, these finders are not note brokers, meaning they will not "show"
the seller's note to buyers or act as a representative. They will only pass the
information along to someone who would be interested. Once a commitment to
purchase the cash flow has been established, the buyer will step in and complete
the deal.
When working with a property seller who needs a lump sum of cash immediately
after selling their real estate, contacting a finder early in the process of
creating a real estate note makes sense. By involving a qualified note finder
BEFORE a note is created, the property seller can receive invaluable input about
the payment characteristics that note buyers prefer.
Without this knowledge, the property could sell quickly with the creation of
a new note, but the seller might end up collecting the payments long-term
instead of being able to quickly "trade" the future payments for an upfront cash
settlement. If the property seller will need a large amount of cash quickly, it
makes sense to plan ahead for a buyer to purchase the cash flow and involve the
services of a note finder.
