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Software for Keeping Track of Owner Finance Deals 
10 posts by 5 users
Southeast I. |
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Hey All, I am new to the BP. I am looking for some recommendations on software that can be used to track multiple owner finance deals. I have looked around on the web and not been real impressed with what I have seen. Can somebody please provide a recommendation. Maybe this is not the right forum for this type of question? Thanks! |
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Frank A.Loveland, CO |
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I'm not sure what you mean by "keep track". Do you just mean an amortization schedule? My amortization software came with my Windows Excel from back in the mid '90s. I just create a new "loan" for each property. Mine are all 30 year amortization, 5 or 10 year balloon. It takes about one minute per loan to go through and figure our how much interest and "return of principle" I receive each year. I plug that into the worksheet package my CPA sends each December. I also send a letter to each buyer stating how much interest and taxes he paid (I escrow for everything) during the year, as well as his end of year loan balance. As far as keeping track of the escrow account I just set up an "Excel" file on each property. I list the 12 months down the left side, show the year's beginning balance in one column, each month's addition to the account in the next column, any deductions (tax and insurance) in the next and a running total in the last. It takes a few minutes a year to update and create the next year. This could just as easily be done on a sheet of paper though. Any other questions just post them here. Frank |
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Jay K.Real Estate Coach Los Lunas, New Mexico |
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I spent 25 years in the business of servicing owner financed notes, so naturally, I think you should use a servicing company to have them take care of your notes. :) A professional servicer can collect late fees, calculate correct tax and insurance impound payments, pay the taxes and insurance, and make sure that everything is reported correctly to the IRS. Also, if there is a disinterested third party servicing the note, there are fewer disputes between buyer and seller about balances. The company I used to work for is Weststar Escrow. (www.WestLoan.com) They have offices from New Mexico to Alaska. For handling a few loans on your own, you might want to look at Note Smith (www.NoteSmith.com) It works well if you have fewer than a couple hundred accounts. Not only does it do a good job of calculating principal and interest and handling all of the monthly tasks, but it has the software to print the 1098 and 1099 statements required for the IRS. jay |
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Southeast I. |
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Thanks for the insigt Guys....yes I meant software for tracking deals that I am financing to others. A couple of other questions for you..... I am mostly financing junkers right now...mainly because potential losses due to the occupants can be lessened. These junkers need to be rehabbed and can not be occupied until work has been done anyway.....so having said this, what type of owner finance agreement do you recommend? I would like to be able to take back the house asap and as cheaply as possible if they quit paying. Average sales price will be less than 20k. My attorney has suggested a contract for deed with a quit claim back to me to be signed by them at closing. We would then record the QC if they quit paying and the house will most likely be vacant anyway so we can take immediate possession. If they have occupied it, then that means that some work had to be done on the house and it will be worth going through the eviction process because undoubtedly will have had to make some repairs. Do you recommend escrowing everything? |
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Jay K.Real Estate Coach Los Lunas, New Mexico |
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Dear SI, Here is what we do in New Mexico, and I am sure that something similar can be done elsewhere. (Your attorney will let you know what you can do in your state.) The instrument we use is a Real Estate Contract. It is similar to a Deed of Trust. Title does not change hands until the contract is paid off. The contract servicing agent holds two deeds in escrow. There is a warranty deed that will be released to the buyer when the contract is paid off. The second deed escrowed is a special warranty deed giving ownership back to the seller. This deed is released in event of default by the buyer. The terms of an REC says that if the buyer is even one day late, the seller has the right to put the buyer "on demand." This means that the buyer must catch up on all payments, including attorney fees for the demand letter, within 30 days or the property goes back to the seller. No foreclosure. The escrow agent releases the deed, you record it, and the property is yours. This is another reason to use a servicing agent as a disinterested third party between buyer and seller. The servicer can act as an escrow agent. If you would like a copy of the Real Estate Contract form we use in New Mexico, send me a note. You can find my contact info in my profile. Also, I am creating a school in which I teach owner finance concepts and techniques to people like you. Again, you can find info about the school in my profile. Have fun... jay |
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Frank A.Loveland, CO |
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Jay has good advice, IF it complies with your state law! I used to do CFDs (Texas) but then the state changed the law making it a bit more cumbersome to comply with everything. At that time my attorney recommended that I just do fee simple sales. In TX that is a Warranty Deed, Deed of Trust and Note. I prepare all the documents myself (and charge a doc. fee for it) so I make a bit extra on that. One thing to remember on these deals, there is NO MARKET PRICE. Why limit yourself to $20K? The buyers you're dealing with are not "price" buyers, they are "down and monthly payment" buyers. As long as those two numbers meet their criteria they don't care about the price. A "paid off" price is so far in the future as to have no meaning to them. Good luck. Frank |
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Jay K.Real Estate Coach Los Lunas, New Mexico |
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Hoo, Boy! Texas! Yup, you gotta mind your Ps & Qs in Texas. They have a law that says you must provide a year end statement that has more information than is required by the IRS. The IRS says that if you don't file Form 1098 in a timely manner the fine is $50. Texas law says that the penalty is $50 PER DAY! The company I worked for got into a lawsuit because of this law. A sleazy lawyer found a couple to claim that they did not receive their statements two years in a row. On a house worth $50K, they sued for a quarter million dollars! We eventually won the case because it turns out that the couple doesn't speak English and they had their nine year old daughter going through the mail determining which pieces of mail were important to read. Also, we had proof that we had sent the statements. But it cost nearly $60,000 to defend ourselves. We shut down our El Paso office because it wasn't worth the misery. Sorry. That got a little off topic, but mentioning Texas laws hit my hot button. I echo Frank's advice about price. It's only one aspect of the deal. Have fun... jay |
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Mike M.Real Estate Investor Lubbock, TX |
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My experience is what All Cash mentioned about price and escrowing. I have had buyers who only wanted to talk about the monthly costs, no questions about interest rate or sale price! Of course these are always disclosed as we discuss the note and payment expectations in great detail with a lot of "you are going to pay this on time, aren't you?" thrown in. Most of my mortgagers pay their taxes and insurance but one or two can keep you hopping so I decided that I would escrow and make the payments for taxes and ins. once a year and KNOW that they are paid. |
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Mike M.Real Estate Investor Lubbock, TX |
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One more thing. Does anyone know the legality of having a buyer sign a quitclaim at closing? Anything not kosher about that? Also, Southeast Investor, one of the great selling points for seller finance, besides the buyer not having to go see a scary banker, is that I structure the monthly payments, with tax and insurance, a little less than people in the area are paying for rent. This appeals to a lot of people. |
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Chris T.Real Estate Investor Canyon, Texas |
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Can anyone recommend a good note servicing company in Texas like the one Jay is talking about? Also, what is a good formula to use when buying a property to Owner Finance using a Hard Money Lender. ie...65% of ARV - Purchase Price - Repairs |
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Posted: 01/02/2009 at 10:04AM
