The fact is the seller is partially right. It’s not that they won’t buy it, it’s the fact that it would not be that attractive to them at a low rate. The result of a Note buyer Purchasing a Low rate Note would be a very heavy discount to the seller of the Note. The fact is a rate of 9.5% is not going to give the seller a top dollar buy rate on that note. Depending on the credit and down payment I would suspect a discount of 10 to 20 percent. You have to consider many note buyers are borrowing money to buy the notes and if there is not a spread in the interest rate the only way to make money is on a heavy discount.
Situation #2.
You can have the seller sell a brand new unseasoned Note at close, it does not have to be seasoned at all. This would cash your deal out. If you did it this way, when the Note was funded at close it would pay off any existing liens and cash her out.
If you need more info on this contact me via email.
I have a seller who does not mind holding a mortgage. He said he would sell the note in 3-6months. At first I did not mention an interest rate for my seller financing offer.He was fine with the terms but added this 9.5% interest rate. I was like NO WAY! The seller keeps saying no bank would buy a note that has an interest rate less than the average interest rate of a conventional loan (8.75%-9%).
Is that true? I thought, any note buyer would buy a note regardless if it has an interest rate.
Situation #2
I have a seller that needs to be cashed out at closing. She is listed with a Realtor w/ her listing ending soon & she is tired of getting low ball offers.
She said she would hold out on offers & wait until her listing is over to work out a cash deal with me (a little higher than those low ball offers).
Would asking her to seller finance for 3-6 months be a good idea. Then maybe she could sell the note & get her cash then?
Seller has about 100K in equity
needs money to move & has to pay some kind of transfer tax.
Could she do a seller financing transaction even though she has a non assumable mortgage.
Remember she needs to cash out BUT I think if presented right…she would be willing to wait 3-6months
OJ,
You are free to negotiate what ever terms, interest rates, repayment options, etc. that are agreeable to both you and the seller who is considering owner financing. However clearly a note with a ZERO interest rate or a low rate will be affected more significantly than a note that has an interest rate that is more in line with sub-prime lending rates (10.5% -12% +/-).
There are ways to also placate the seller as well by offering him a PARTIAL sale of the note, or a SHARED PAYMENT purchase, a BALLOON SPLIT PARITAL, etc. - these creative note purchase “permutations” can many times allow you to STILL obtain competitive owner financng while getting the seller the cash they really NEED in a format acceptable to them.
As for your question # 2-
Newly created paper that is sold at the same time the property sale takes place can be easily arranged. This is sometimes called a “simultaneous closing” where in essence there are (2) two closings; the first one involves the sale of the real estate and the creation of owner financed note, and then the second closing involves the sale of the note itself where it is convertred into CASH.
Learning to use “paper” to buy and sell properties is a boon to the real estate entrepeneur.
Feel free to contact me if you have more issues, concerns, etc.