RealEstateNoteAuction.com

Sell My Note – Ten Things to Think About when Creating a Note

July 5, 2010 | by Maryland Homes

When you sell property using owner financing the down payment sets the tone for the whole transaction and the value of your note. A common mistake among sellers is to accept a small down payment. It is amazing the price you can get for your property with little or no down payment. Just don’t be amazed when you sell your note the deep discounted offer you will receive.

Here is why it is important. For starters when you sell your property you want to get something out of it right away, like a good down payment so you can go onto you next project. Secondly, and more importantly, you want a 15% – 20% down payment because it puts skin in the game for the buyer. Meaning if times get rough for the buyer he is less likely to walk away with a larger down payment. Statistics prove that the larger the down payment the less likely of default.

Now let’s say that you did receive a 20% down payment on a $200,000 home, $40,000, and the buyer did default. You not only get to keep the $40,000 but you will get the property back, hopefully in good condition and not after a long foreclosure process. The $40,000 protects the seller in this case of default, because if that happens there is a period of time where no payments will be made and legal cost could be added in. You don’t want to be out of pocket for non-payment and legal costs.

Note investors look at the equity a note has in the property. A 20% down payment immediately provides the equity note investors are looking for and will pay top dollar for your note. You have to remember that note investors are looking for the cash flow. They are not looking for a note that has a high risk of default and a large down payment reduces that risk significantly. Note investors don’t want to worry about defaults.

Read more