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Frequently Asked Questions About Seller-Financed Real Estate NotesBelow is a list of commonly asked questions regarding cash flow notes and our business to help you make informed decisions about selling your note.Q: What exactly is a Cash Flow Note and how do I know if I own one?A: A cash flow note gets created when the seller of property helps the buyer purchase that property by agreeing to receive installment payments over a period of time or deferring payments to a later date. The property is usually used as the security for the mortgage note and a legal contract is drafted between the seller and buyer in the form of a mortgage, trust deed or some other agreement that outlines the amount, the interest rate and the length of term. If you sold property to someone and are now receiving payments from the buyer, you most likely own a cash flow note. These can also be called Seller Finance Real Estate Notes or Mortgage Notes.Q: How are these Real Estate Notes created?A: These happen a lot more than one would imagine. Here is your basic scenario: Mr. Jones is selling his house for $100,000. He still has a loan out on the property for $60,000. This means Mr. Jones has $40,000 in equity in the house. Mr. Smith wants to buy the house for $100,000 and pays it all in cash or gets a no-money down loan from his bank. That's great! The bank that owns the first loan of $60,000 gets paid off and Mr. Jones gets his $40,000 based on equity. This doesn't always happen, though. Let's say Mr. Smith agrees to buy the house for $100,000, but only has $20,000 to put towards a down payment. He does not get a loan to cover the rest of the amount from his bank, put does qualify to assume (take over) Mr. Jones' first loan of $60,000 from the bank. Mr. Smith still needs $20,000 to purchase the house, so Mr. Jones and Mr. Smith created a second, seller financed, loan on the house for the $20,000. This loan (seller created note) is a legal document which outlines the amount of the loan, the interest, payment terms, etc. that Mr. Smith is obligated to pay Mr. Jones. I think we can all agree that Mr. Jones would have preferred the $20,000 up front as cash, but he wanted the property sold and created a note - even though he didn't really want to.Q: Why would I want to Sell a Note in the first place?A: There are a lot of reasons why you may want to consider selling your real estate note, and here are some of them:1) You never wanted it in the first place! You wanted cash in your pocket when you sold the property, but you agreed to create a seller-financed note so you could even sell the property. 2) You really don't know the person making the payments to you and are afraid that they may stop paying in the future. 3) Note sure what your financial situation will be like in the future. 4) You don't want monthly payments, you want cash now! 5) You didn't even know you could sell your note to an investor - but you can. 6) You have outstanding bills or upcoming expenses like college tuition, medical expenses, outstanding debt, vacations, retirement, business venture, etc. 7) Money today has more buying power than money you would receive years down the road, even in the short term. Example: I remember gasoline prices dipped down in mid-1999 to $0.89/gallon. Now, 7-8 years later, how much gasoline can you buy with that same $0.89? Not even a third of a gallon! This shows that the longer a person waits to collect on money, the less value that money has. Q: How will my information be used?A: We take your privacy seriously. We use your information to determine the quality of your note in order to decide to make you an offer or not. We may offer to buy your note from you or try to get an offer from one of our network investors. Your information will not be used in any other way, and we do not rent or sell any information we collect. Your information is also safe by utilizing SSL Secure Servers during the application process. For more information, please read our Terms of Use and Privacy Policy pages.Q: There are other notes (loans) on the property besides mine. Can I still sell my note?A: Of course you can - you own the note! We can only make an offer on the real estate note you own and not any other loan on the property.Q: I need money now, but I don't want to sell the entire note - I like the idea of a consistent monthly payment coming in. Can I sell several years worth of payments, and then when that time frame is up, collect on the rest again?A: Certainly. We can offer to purchase a set of your payments from you (i.e., 60 months worth). If you still had 10 years to collect on your note and agree to sell us partial payments, we would collect on those 5 years, and then you would re-assume collection for the last five years. This can be helpful if you need immediate cash but like the idea of having future income.Q: How will I be protected in the sale of my note to you?A: Your note will be placed into escrow when closing occurs, so you as the note seller are protected and we as the note buyers are also protected. This is just like a typical real estate closing and you are protected to receive the amount for your note that we agree upon. The money will be deposited into an escrow account with a company you choose (or we can help you appoint one). The escrow/title company will help throughout the closing process and make sure you get the correct amount of money owed to you.Q: What are the benefits to you buying the note and me selling the note?A: This becomes a Win-Win situation. You, as the real estate note seller, receive a lump sum cash payment for a note you possibly didn't want in the first place. For us, the real estate note buyer, we get the most pleasure out of helping someone like you by filling a need - getting you the cash you want. We are also investors, so we also like the long-term investment.Q: How is my note valued?A: All notes are different each with their own unique characteristics. We have to look at many different factors to determine the price we offer. Some of these factors include: Type of note, terms of note, interest rate, payment history from payor, value of property, down payment, and position of note on title report, balloon payment and payor's credit. This is why it is very important to fill out the Quote Application as complete as possible.Q: What are the basic steps to Selling my Note?A: First, you enter the information requested on the Quote Application page. Next, we will review the information to determine if we are interested in the note or if there are too many risk factors. If the property looks good, we will calculate a reasonable price to take over your note based on the current property value, any risk factors, etc. This can take usually between 5-7 days. After an offer is made by us or one of our network investors, it is your choice to accept or decline the offer. Once you accept the offer, we will send you a list of the required documents needed to process the buying of your note. Once all documents are received and all paperwork is signed, your check will be secured in escrow by a company of your choice, and then a check will be mailed directly to you. It is a very simple process that can take 4-6 weeks total.Q: What if my note is in the form of a trust deed or a mortgage?A: Whether it is a mortgage contract or a trust deed, both are security instruments outlining a promise to pay. One of the major differences between the two is the process used if foreclosure occurs on the property.Q: Who buys the note from me and who are you?A: Your cash flow note can either be bought directly from us or from one of our network investors. We are private investors only, looking to help customers like you by buying your unwanted cash flow note for lump sum cash. We are not licensed brokers or real estate agents, we do not list or represent customers, and we do not work on the note holder's or the buyers behalf. We are a referral service only, connecting owners of real estate cash flow notes with prospective buyers. |
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