Posted by Dario on May 08, 2007 at 20:48:03:
Although very few, there are a couple of companies I kow of (Again not many) that will actually buy this type of paper provided the buyer’s employment can be verified and has been employed a minimum, I think, of 2 years.
The buyer should be in a postion of being able to make the monthly payments calculated at about 2% more of the target interest rate (i.e., if 8%, calculate at 10%). Also, he may need to put down at least 5% down (as always the more the merrier) and the terms of the note should be tweeked to make it more saleable.
If, say the buyer can put $4,000 down and the seller carries a $76,000 note it may look like this: N=240 I=9.50% PV= 76,000 PMT=708.42 with a balloon payment in 5 years of $67,841.69. This situation sometimes applies to people that don’t have a social security number or have very bad credit, but again, I know of a couple of companies that actually buy this type of note. If you don’t like ballon payments you can add a step payment, increase the monthly payments, etc.
I actually had almost the exact same transaction not 2 months ago happen that is why I’m chiming in.
Of course I would rather see the opinions of John Behle, Michael Morrongiello or David Butler for a more accurate take on this scenario.