It is well known that owner financing sells properties quickly, especially in cases where the properties or prospective buyers do not meet traditional loan / mortgage requirements. The seller offers to retain the mortgage note (homeowner financed mortgage) and receive monthly payments from the buyer as a bank would.

The problem with this approach has been that Sellers sometimes don’t want to collect small monthly payments, instead wanting to withdraw them shortly after closing to buy another property, or for many other reasons. The benefits of owner financing are many, but sometimes they are not enough to help close a deal.

Basically, this is how an owner financed real estate mortgage note works:

1. The seller sets the sale price exactly at the appraised value and announces “The owner will finance … No bank qualifies!”

Interested buyers go through a prequalification process to determine the best prospect.

2. The seller and buyer agree on the structure and terms of the note to be created (the buyer of the note can provide some suggestions) and sign a real estate purchase contract.

3. At closing, the seller creates a first mortgage and shortly thereafter sells / assigns the mortgage note to the buyer of the note.

4. The Seller receives the advance from the Buyer plus the proceeds from the sale of the promissory note. In a seller-financed purchase of notes, the buyer of notes typically covers all closing costs and the cost of evaluating his or her own property.

Example:

Let’s say the seller owns a property that has been appraised at $ 100,000, but because it is not a conforming lot, he is having trouble finding qualified buyers. Buyers do not appear to commit to the purchase and those who do do not get their mortgage approved by the bank.

The seller has the home listed at $ 90,000, hoping to get $ 80,000- $ 85,000 after the incentives and costs have been paid. But even this price is not attracting real buyers.

This is where a ticket buyer can step in. The seller would be encouraged to create a $ 90,000 bill, the remainder ($ 10,000) would be the down payment. The interest can be 8%, term 360 months, paying $ 660.39 per month (Principal + Interest).

The buyer of the promissory note would purchase this promissory note for approximately $ 80,000 in cash shortly after the real estate closes. To this, add the down payment and the seller gets a total of $ 91,000 (minus the closing costs of the real estate transaction).

Shortly after the closing of the real estate and after the new ticket is registered, the buyer of the ticket makes the purchase of the ticket and the seller receives their money. A perfect example of how an owner financed mortgage makes a real estate sale possible. And there are no hidden fees or costs other than regular real estate closing costs that need to be paid anyway. The buyer of the note generally covers all closing costs of the purchase of the note.

This approach attracts a good number of buyers and in a few days, the seller can have his cash in hand.