Plenty of note holders like collecting the payments and profiting from the interest on the loan, but plenty more find holding paper a burden they'd love to shed. A note holder may want to sell the note for any one of a number of reasons. He may need the cash or may just be tired of collecting monthly payments. If the note holder has died, the heirs may prefer to have a lump sum of cash rather than payments made to the estate over a long period. Whatever the reason, you can help.
Once you have identified a potential note seller, you must gather preliminary information about the seller, payer, and property secured by the note, which you submit to a funding source. The funding source reviews the information and tells you what they're willing to pay for the note. From that amount, you deduct what you want to make on the deal and present an offer to the note holder. If the offer is accepted, a formal application is submitted to the funding source.
The funding source researches the note (a process known as due diligence) to determine that the facts are indeed as the note holder has presented them and evaluates the risks associated with the note. If everything checks out, the offer is formalized and arrangements are made for closing. That process is similar to a real estate closing in that the necessary documents are executed and recorded, and the associated payments are distributed. The note holder receives a lump sum payment for the sale of the note, the broker collects his fee, and the funding source now owns the note and may keep it to receive monthly cash flow or resell it at a profit.
When a seller provides all or part of the financing in a real estate deal, he has greater control of the transaction. He can set his own interest rate and often will get a higher price for the property. Another benefit is that because of the easier qualifying and minimal amount of paperwork, owner financing attracts more buyers.
■ What Motivates Note Sellers?
People are motivated to sell their notes for a variety of reasons, including:
■ Education expenses
■ Divorce settlement
■ Medical expenses
■ To reinvest funds
■ A variety of other reasons
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You already recognize that rich individuals think differently than middle class or poor individuals in every aspect of life. But particularly when it comes to money. That's why they're rich. Their selections and decisions just by nature bring about riches.