The discounted note business has been in existence since people began owning real estate. Currently there are over $350,000,000,000 in owner-financed trust deeds and mortgages nationwide.
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 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.
