Private Mortages, Notes, Seller Financing or Seller Carry- Backs

Let's say you have decided to be the bank and offer private money to the buyer when you sell your property. You have officially entered the "paper" business as a creator of a note or loan.

You meet with a real estate attorney in your area, create the note (or loan), the deal closes and your new buyer moves in.

You start receiving payments on a monthly basis and all is well. This is your ideal scenario and frankly this is what more often than not happens. At the end of the day, I believe that most people just want to own their homes, live in them keep them nice and life goes on. Remember, you are not land-lording anymore than any major commercial lender would be. Can you imagine what they would say if called because your plumbing is backed up?

You are officially allowed to give a similar response to your mortgagor.

So far it has seemed like a really good idea. When you get out your handy
amortization calculator you can see right away that with interest accruing over time, you will make a lot more money taking payments then you would if you received a lump sum.

Lumps sums are fine too though. You won't make the same amount of money as you would have if you let interest accrue over time, but your money available straight away.

If I have money and bad credit; Can I still buy a home? If I can't find a qualified buyer, can I still sell my home?

Yes, but now it is up to the home more than you.

In today's lending market where people can have good income and horrible credit. Providing "funding" for someone might just be a great way to make a deal happen and it may not be as risky as you think.

Usually when all else fails for people financially, they still want to keep a roof over their heads. Although most of the stigma has been lifted surrounding a home foreclosure, people still want to have a home for their families and are less likely to default on a house payment despite the current trend then a credit card or a medical bill.

The current economic climate of foreclosures has been very often linked more to bad loans and predatory lending, than people deciding they should have free housing and not make their mortgage payments.

They may have a low credit score because of a bad loan, but they may still make a good salary and would, in any other economy, be a safe bet for a loan.

If the crunch is on YOU, and you need to sell your home or income property, creating a note could be a great way to set yourself apart from all of the other homes for sale in your neighborhood that have been foreclosed on and the bank only reluctantly lends for.

If you could skip the bank and offer financing to the buyer, your phone would surely ring more for that sale!

Okay, life happens and now you need one big payment instead of monthly income.

So everything is going great, you have found someone to buy your home, they have a good job but bad credit so the bank wasn't an option for them. You have called your local lawyer and created a loan and every month you get a check in the mail for the note you crated on the house you sold. Since you know the property and have set the sale price, you know you are getting a good deal and you are in first position on the carry back loan that you have created.

And then Surprise, life happens and you need your money now! You want to get a lump sum and not have to worry about getting monthly payments which won't address your new financial demands.

Well, good news, you can sell your loan and get paid a lump sum of money.

It doesn't really matter what your circumstances are, perhaps you are faced with medical expenses or a layoff, or maybe you've decided to live a little and take that dream vacation or pay for your child's education or even a wedding.

Whatever the case may be, you do have options. Don't be surprised if a note buyer or broker asks you why you want to sell your stream of payments. It is a fair question. You don't have to give every last detail, but a note broker or buyer will likely ask.

It is the note broker who will help or note buyer who can help you get your lump sum of money or help you to even sell part of it.

This is where note buyer or brokers come in.

There are individuals who are very happy to receive your monthly payments and pay you a lump sum for it. These people are called note buyers. There are middlemen too known as note brokers who may not be able to buy your loan but can put you in contact with someone who can.

Nuts and Bolts...How do you make a note?

1. Always create your loan with the help of a local lawyer. I have created loans myself in Nevada, Georgia and Texas and each time I hired a local lawyer and found that it was money well spent. There are great sites out there for prepackaged legal forms, but this would not be the time to wing it.

2. Each state has its own laws regarding lending that influence the interest rates you can charge, the term of the loan and even whether the property is purchased with a trust deed. If you don't do this part properly, you might find yourself not getting paid at all.

3. You need to take a good look at the collateral involved in the loan. Since you may be lending to someone with bad credit, the asset becomes a lot more important.

4. You must independently seek an appraisal of a property and make sure that if the borrower defaults that it is something that is re-sellable. If you trust someone that the house is worth $100k but don't bother to research and find out that the median home price in the area is $250k, you might end up with the biggest lemon on the block.

5. Make sure you have all of your title work done. If you are not going to be in the first position in the loan, you may want to walk. This seems easy since you are originating the loan, but what if they borrow the down payment from someone else and that party insists on being in the first position. Remember they will get paid before you, and there may not be any money left by the time you make it to the trough.

6. Shop the note broker sites prior to creating the loan. Even the ewwy ones. At least you can pick their brains and find out if your loan is even marketable. Find out what a note broker or note buyer would give you for the loan if they purchased it in 90 days or 1 year or more.

7. Make sure you understand time value of money and why your note will be sold at a fraction of its value.

If you want to find a note buyer or broker, you need only go on the internet to find them. They advertise like most other businesses and they can be easy to work with.

A note buyer will evaluate your note and will give you a bid on how much they want to buy it for. A broker will also give you a bid but they make their money on the difference between how much you are willing to sell it for and how much the buyer wants for it. Some buyers rely only on brokers to create their business so don't feel uncomfortable working with them. There are lots of legitimate ones out there.

Some of the sites can seem intimidating because they want a lot of information and they have a lot of restrictions. If they are legitimate, they have to ask these questions regarding the details of the note.

If you cannot provide this information, they will not feel comfortable with you and may balk a the deal before you even get started. The growing number of restrictions is a reflection on the lending climate of today which has seen more defaults then ever before. Don't let this deter you from working with a company you find. They need to cover themselves to stay in business just as you would.

In order to get the best deal, try to find out as much as you can about the process. As a maker or notes and/or seller financing and a broker, I created a website with all the information I can find about the whole business process.

Well, before you start to worry, there are actually ways to deal with a note that the buyer is no longer paying on. These notes are called delinquent paper. There is a whole market of note buyers who specialize in delinquent paper. I happen to know a really good one in Salt Lake City and he tells me the risk is very high, but the reward is too.

This is where it comes in to really do your homework before you create a note. Now the value of the note is really contingent on the property. When the delinquent note buyers purchase your note, they are often doing it so that they can foreclose and take the property for pennies on the dollar.

Not an ideal scenario for a note holder, but great for the note buyer.

If the home still has value, a delinquent note specialist may be delighted to buy your note. You will have to give it up for pennies on the dollar, but at least you will be out of the equation and your peace of mind may not have a price tag on it.

I thought this might be a good business for me decided to put some time into seeing how I can not only help people understand the world of loans, notes and private lending, but also open up some avenues for them if they ever decide they don't want that note any more and want to just get their money and move on.

So are you thinking phooey! this was all just an ad, well, honestly, it isn't. I just am not a note buyer personally, but know a few and could be the link you need to help you with your situation. More importantly, every time I learn something new, I want to simply put it up here for your perusal in hopes to help

I can explain to you why you got a quote that is lower than the amount of the loan at the end of the specified term. I can let you know if a company is doing you a disservice.

I can tell you if you are being treated fairly in the industry. I can refer you to the experts that I know and you can talk with them. I'm not greedy or trying to make a buck here, like I said, chances are I wouldn't buy your note, but after hours and hours of classes research and creating notes on my own, I know a thing or two about it and would love to help.

I am a golden rule kinda gal and I want people to have a good experience. After all it is YOUR money and I think you should have it. All at once or over time. If I can help I will be paid with good karma.