FOR SALE BY OWNER

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FOR SALE BY OWNER

  Does this scenario sound familiar ?  Your home has been on the market for some time, with little or moderate showing activity and still no offers are being made.  Finally, someone comes along and seems to be in love with your home and make application to some bank and about two weeks later the bank comes back, and after everyone is excited about the pending sale of their property and the unexpected answer from the bank is negative, for some trivial incident that occurred some years prior but still remain on the credit report. So now you have to start the entire process over again, only to running into a duplicate situation …. and time is wasting.

ADVANTAGES for both BUYERS AND SELLERS

  • No red tape

  • No points to pay

  • No conventional loan requirements to meet.

  • No certain down payment to come up with

  • No meeting Federal Guidelines.

  • No closing delays

  • No bank fees or application fees

  • No piles of paper to process before closing

  • No questions regarding stated income – assets –stated reserves

  • No requirements for tax returns

  • No bank statements

  • No W2’s

  • No escrow accounts

  • No termite inspection reports

  • Seller financing helps people get the funding they need to buy your house.

  • Sellers are happy to have sold their house.

  • Quicker closings (days rather than months)

  • Less expensive closings – quicker sale

  • Flexible  down payments

  • Flexible terms

  • Easy qualifying

 

WHO CAN USE SIMULTANEOUS CLOSINGS?

Anyone can use this type of closing, however, this will work best for people who:

  • Can’t qualify for conventional mortgages

  • Have less than perfect credit

  • Where the house’s value is higher than the appraised value

  • When the house has been listed for many months and has not yet been sold

  • Works terrifically for people who have high equity in their homes

  • Works for anyone who no longer have a mortgage on a property

  • Works for anyone who is in a rush to sell his or her home to relocate and need the cash now…

Together both the buyer and the seller get together and agree upon certain terms that both parties can live with and meet without any serious complications.  Before creating a note all parties agree on the terms of sale, purchase price, interest rate, and amortization.  Because there is what is called in the industry (no seasoning) with seller-carry-back notes, the owner of the note (seller) immediately sells the note to an investor (me) at a predetermined and guaranteed price, at the same time that the transaction closes that same day. For the agreed upon price.   If you own property and want to sell, or if you are a developer/builder and don’t want to deal with real estate agents and bank loans, we can help you create a mortgage note and then sell  the note for CASH  at closing, often times this will speed up the SALE process of selling your property. Once a seller decides he wants to use a seller-carry-back note:

A. The following information required. 

What is the motivation of the seller to take a discount?

  • Why does he/she want to sell?
  • Why? Why? Why?

Once it can be established that we would be working with a motivated seller,( not a time waster) we can proceed.

  1. The following information needs to be known:
  • What is the sales price?
  • What is owed by the seller on the existing mortgage?

If the seller has less than 25% equity in the property based on the proposed sale price, the deal is unworkable.

  • When it is known that there is equity, the we need to:
  • Look at the credit and qualifications of the buyers(s).
  • Have the buyer(s) fill out and sign a standard mortgage application. (Like Fannie Mae)
  • We should look at the qualifications of buyer. The monthly payment of principal, interest, taxes and insurance (PITI) should not exceed approximately 28% of the gross monthly income of the payer(s). And once recurring monthly debt (Visa, Sears, school loans etc.) is deducted from the monthly income, not more than approximately 36% of that number should be used for PITI. If the buyer is qualified continue. If the buyer is substantially unqualified to make the purchase, stop now.

If qualified we will also need to:

  • Know how much cash the buyer has available for a down payment.
  • What is their comfort level of a total monthly payment (PITI)
  • Deduct the approximate cost of taxes and insurance because it is only the principal and interest portion we are interested in now.
  • Now is the time to begin working on the potential note.
  • Use the P & I from the buyer.
  • Use an appropriate term, 15 to 30 years.
  • Use an interest rate a point or two above the current hard money lenders (ex. 9.5% to 10.5% for residential and 11.5% to 12.5% for commercial. Insert these numbers into a financial calculator and solve for PV which is the approximate amount of the loan the seller will have to make to the buyer.

Balloons are better than straight amortizing loans. If acceptable to the buyer, a balloon payment is inserted into a place in time where the balloon amount does not exceed 80% of the sale price for residential or 70% for commercial. For instance, if the sale price of the house is $100,000 and the balloon at 60 months is $85,762.21; move the balloon out to 96 or 120 months until it is below $80,000. If the seller does not have a buyer in mind he or she can advertise his house as in the example in the above question as follows: The seller  advertises their property with “SELLER FINANCING” increasing his/her market response by 1/3 by offering :

  1. Easy Qualifications
  2. More Flexibility
  3. Low Down Payments

Residential Simultaneous Closing

Now called TRANSACTIONAL FUNDING

The phrase “Simultaneous Closing”  now called (Transactional Funding) is used to describe transactions that occur when the seller is carrying back a note, as payment for their property, with the specific intention of selling the note for cash.  In other words, “Simultaneous Closing”  (Transactional Funding) just means, during an escrow closing, that there are two (2) separate closing transactions happening within minutes of each other.

The documents are signed and:

  1. The Buyer gets Title of the Property and the Seller receives the mortgage payments

  2. National Note Buyers buys the mortgage payments from the seller for Cash-Assignment

The advantage is the seller gets cash up front for payments that may never materialize.  The buyer then pays us the mortgage payments.   The seller is then out of the transaction altogether.

 

 

Business Note Simultaneous Closing

Definition

Basically, a Simultaneous Closing is very similar to liquidating any other note, except the note has no seasoning (it is brand new). Assuming that we are provided with all of the terms of the proposed note and an accurate bill of sale, we will issue a Letter of Intent that states that we will purchase the note for some given amount after the business closing, provided no changes have been made. This assures the seller that the note can be sold and for how much, even before the business closing. We can provide a check to the seller very soon after the business closing, often right at the business closing table.

Reasons for Simultaneous Closings

  1. The buyer does not qualify for a conventional loan

  2. It is difficult to obtain conventional financing on a business

  3. The business has been difficult to sell

  4. Owner-Financing provides more potential buyers

  5. The Seller needs cash, but his Buyer cannot provide it