Three Ways To Improve The Financial Value Of Discounted Notes
The idea of discounted notes is still a relatively new concept for most home sellers. Just look at the classified section of the newspaper. You will see more ads with "Seller Financing", "Owner Financing", "No Banks Needed", "No Credit Check", "No Money Down", and other variations of the same message. These three things will dramatically improve the value of your discounted note, and it will give you the best options to get top dollar for the sale of your note. Each of these is covered in detail in our Buyer-Criteria section. Discounted notes are evaluated using several criteria. One of the most important is the down payment of the buyer. The down payment is one of the first and best indicators of the buyer's ability to buy the property along with their sincerity and commitment to see the purchase through. Let's not forget the traditional banking requirements of between 10% and 20% of the purchase price in the form of a down payment. Competition in the financial marketplace has reduced some of these down payment requirements. Today it's not uncommon to find lenders that will accept as little as 5% down. The more money you have for a down payment, the stronger your position will be as a prospective buyer. Your strength as a buyer will dramatically help the seller create a note that can be used to finance your deal. The down payment also has a lot to do with the ways the purchase can be structured. How much discounted notes are devalued is directly related to the overall risk involved. For example, a note with a loan to value (LTV) of 80% will be discounted much less than a note with a LTV of 95%. Remember a down payment can grow with non-cash contributions like rent or lease credits, sweat equity, and other assets. If your buyer isn't quite strong enough at the moment you might want to consider an alternate form of seller financing like a lease with a purchase option or rent to own. More details are avaiable at our Home-Buying-System. Whenever I see an ad for a seller financed property that says, "No Credit Check", I can't help but wonder what the property seller is thinking! Discounted notes are seriously impacted by the credit of the buyer. Failure to conduct a credit check may disqualify your note as a candidate for purchase! Your house is one of the most valuable assets most people ever own. Remember as the "bank", you must protect your investment. It just doesn't make sense to turn over such a valuable asset to someone you don't even know in most cases, without proper justification. You need to know as a home seller what your prospective buyer's credit profile looks like. Credit scores can be improved with proper assistance and strategic planning. People do change all the time. Sometimes good things happen to people, other times bad things happen to good people. It is extremely important to have the credit report pulled for all applicants for your property. Another very simple reason is its importance as a tracking tool when it's time to refinance the property. A documented history of on-time payments over an extended period of time can easily be rewarded by lower interest rates and better terms when the buyer refinances the property. Remember, when you seller finance your property for a buyer, you become not only the "bank", but a major creditor as well. Your feed back will become invaluable to the buyer of your property and their arrangements for future financing. Good payment performance is a great way to soften the impact on discounted notes. The interest rate on your note is another major factor for discounted notes. Most home sellers don't have the experience of professional investors or real estate agents. That is probably why the tendency is to ask for rates that are too low, rather than too high. When your rates are too low, you don't adequately cover your risk. Conventional lenders have the advantage of a large number of properties in their portfolios. Large numbers of properties make it easy to spread their risk. As a single home owner, you don't have that luxury. To compensate for the risk you have it is important that your interest rate is a little higher than conventional lenders. How much higher depends on the credit score and down payment of your buyer. Since every situation is unique, it may be just as easy to check with us. Part of our professional service is the buyer evaluation and deal structuring. There are no up front fees for this service, so if it can help get you unstuck on a deal, just complete and submit our Buyer-Profile. If you are more experienced with risky potential buyers, rather than create notes that have very high rates like 14% to 15% for riskier deals, you may be better off to not do the deal if your plan includes the sale of the note. Rates that high typically fail to attract the attention of note investors because of the perceived risk. Discounted notes are strengthened by good buyers. These three elements can give you the fuel you need to get your seller financed home sale the value you need to cash in for minimum discount and maximum profit. NO BANKS NEEDED WHEN YOU SELL OR BUY!!
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