| Home | Free Articles for Your Site | Submit an Article | Advertise | Link to Us | Search | Contact Us | |
Custom Search
|
Article Surfing ArchiveTIPS ON CREATING A REAL ESTATE NOTE - Articles SurfingOver the past few years of low interest rates in real estate, there was not a lot of news about owner financing. Banks and credit unions had scrambled to find more customers by lowering their lending criteria and competing on rates, so that nearly anyone could find a loan for their house or business somewhere. That is certainly not the case today, and times will remain tough as the credit market remains tight and foreclosures climb. One excellent option that many sellers of properties and businesses use is offering owner financing. The reasons for offering owner financing vary, but include: Owner financed notes can vary, but always include an agreed upon term, interest rate, payment amount, and payment date on which the buyer of the property must pay the seller. The conditions are formally and legally written in a note, also called a promissory note or installment note. Sometimes, the seller of the property would have preferred to have received all of the cash upfront. Even if that wasn't the case at the beginning, circumstances may have changed or new investment opportunities may have appeared that cause the seller to need cash quickly. The note holder has the option of selling all or part of your note. The value that would be placed on the note varies among many factors, with the most important being the amount of equity in the property (cash down payment plus principal payments received) and the credit of the buyer. The more equity and the better the buyer credit, the more that the note is worth. So, if you or your client is creating a note, here are some tips to maximize the amount that you would receive if you later need to sell it, as well as help protect yourself if you don't: Obtain a good down payment. This means at least 10% for a standard house, and 20-30% for commercial properties, land, and mobile homes. These numbers cannot always be reached, so try to get as much as you can without putting the buyer into a financially precarious position. If you can, sell to a buyer with decent credit. A FICO (credit score) of at least 680 is preferable, though 625 or slightly lower is often adequate. You can sometimes still sell the note even if the buyer's credit is below 600, but be prepared to take a larger discount, and recognize that everything else about the note will need to be solid. Ensure that the interest rate being charged is at least as high as comparable bank rates. Other items that we consider to be positive when deciding whether to buy a note and how much to pay include: A note on a property that was previously a gas station or anything that could have adverse environmental consequences will be harder (though not impossible) to sell due to the potential liability If you have questions about structuring your note or potentially selling it, feel free to contact us anytime. Alan Noblitt is the owner of Seascape Capital Inc., which buys and brokers real estate notes and business notes. He may be reached at (858) 672-4678 or toll-free at 1-800-634-4697.
RELATED SITES
Copyright © 1995 - Photius Coutsoukis (All Rights Reserved). |
ARTICLE CATEGORIES
Aging Arts and Crafts Auto and Trucks Automotive Business Business and Finance Cancer Survival Career Classifieds Computers and Internet Computers and Technology Cooking Culture Education Education #2 Entertainment Etiquette Family Finances Food and Drink Food and Drink B Gadgets and Gizmos Gardening Health Hobbies Home Improvement Home Management Humor Internet Jobs Kids and Teens Learning Languages Leadership Legal Legal B Marketing Marketing B Medical Business Medicines and Remedies Music and Movies Online Business Opinions Parenting Parenting B Pets Pets and Animals Poetry Politics Politics and Government Real Estate Recreation Recreation and Sports Science Self Help Self Improvement Short Stories Site Promotion Society Sports Travel and Leisure Travel Part B Web Development Wellness, Fitness and Diet World Affairs Writing Writing B |