Selling Notes At Closing ... Need More Info Please ..
Hi,
My father and I buy, fix up, and sell houses in Newnan, GA outside of Atlanta. Along with finding houses for us to buy, I do most of our marketing and selling of houses on the retail end.
We are currently selling many of our homes on the retail market to FHA type buyers (we also do lease options). Although this type of selling is attractive because you get cash at closing, the difficulty of qualifying buyers, the long wait to closing, the many seller concessions required to sell a property, and dealing and negotiating with buyers agents makes it difficult and very time consuming.
I have heard that offering owner financing and selling the note at closing is a good way to move properties fast and avoid many of the hassles of the "normal" retail market.
My questions are for anyone experienced in using this method to sell houses:
- What kind of discount must we reasonably expect to give in order to sell the note at closing? (i understand the credit of the buyers and the int. rate affect this number)
- On average, can we expect to qualify more buyers with this method than would normally qualify for an FHA type loan.
- How complex/simple is the qualifying process of buyers for most note buyers (we do a lot of this ourselves, so I'd like to compare)
Thank you for any responses. We are basically in the information gathering stage and would like to explore the possiblities out there.
clemsoninvestor,
be sure to check you Private messages, I will respond to the post for everyone to see as well.
The qualification process is going to be very similar to what you are doing now to get them approved initially. Two things that will help, a down payment (Buyer needs to have some skin in the game) and a good interest rate.
The discount on the note will be determined by the value of the property and credit worthiness of the buyer.
I Broker Private Notes, if you want to walk through a scenerio, private message me and I will be more than happy to help.
This should increase the number of buyers you can attract to buy homes in your market.
Since no one knowledgeable in this subject seems willing or able to answer your question (at least publicly) I'll tell you what I know.
There are a few variables that will make a difference such as downpayment, sell price vs FMV, buyer's credit, length of loan (new), etc.
Generally, however, and especially when selling at the closing table expect a steep cut into the funds. Without going into the rate of return and time value of money and all, you show expect a 20-30% discount on your note. So if you have a $100K note, most bids would be around $70K.
Roger
Building in a 5yr to 7yr baloon payment versus a straight 15yr to 30yr mortgage should see an increase in your offer. I've got sample contracts if you need one. Send private and I'll email you.
Much Success!
Mark
Also when you owner finance you should be financing at the appraisal value or very close. This way when you do sell for the discount it should average out.
Benny
[addsig]
Thanks everyone for your replies. I've been reading them but haven't been able to respond to you personally. I am going to send some of you personal messages with some more questions, but I appreciate your feedback.
Quote:
On 2003-10-02 22:52, rajwarrior wrote:
So if you have a $100K note, most bids would be around $70K.
Roger
Are there any sites or organizations where an investor can find "bidders" for owner financed notes?