Seller Financing

[Erik Haagenson]

I am the sellers agent for a property that I own and flipped myself. I have the property listed for $515k and it's been on the market for 54 days. I have a buyer interested in making an offer but he is seeking seller financing. I am in the process of drafting a seller financing contract with an attorney so all of the details are not yet in place, but the buyer verbally suggested that they could offer to purchase the property for $575k with 100k down payment.

I am a younger real estate investor who needs cash more than I need guaranteed returns on $575k. Although I assume that there are others who would be excited to get a good return on a seller financing situation. How do I go about finding someone like that? What I'd like to do is sell the house with seller financing and sell that seller financing to a third party.

Thanks in advance for any advice.

[Account Closed]

If I were you I'd do a google search for Colorado note buyers.  Give several of them a call.  I'd do this before I had written or agreed to any terms, because there are alot of technical details that may make your note more valuable.  You don't say whether this is an owner occupant or non owner occupant, but depending on the answer Dodd-Frank may come into play.  I'd be directing that question to the possible note buyers, and to your attorney as well.

Just a few factors here:  1) is there any existing financing that will remain in place? 2) if so that an additional monkey wrench which will definitely influence the value of the note 3) What's the interest rate...higher is better providing it does not exceed the usury rate for Colorado 4) How long is the maturity....shorter is generally preferable within limits, and results in a higher value 5)  Are you wanting to sell some of the note or all of the note?  You can do this as well.  6) I'd want to discuss the details of the note that would be preferable to the note buyer before I agreed to anything with the buyer.

You didn't say anything about why this buyer is seeking owner financing.  Does he have a credit issue?  An income issue?  

And understand this:  the notebuyer is not going to pay you face value for your note.  You're going to take a discount, the size of which is going to be determined by all of the factors of the note.  The notebuyer is defnitely going to look carefully at the credit of the buyer, and the value of the property.

Call several, not just one.  Tell them you're in the process of selling your property with owner finance and ask what criteria they want to see when they buy a note.  BTW, another factor is going to be whether the note is seasoned or not.

It's the old saying.  Begin with the end in sight.  If you know what they want, you may be able to give it to them.  At least you're not blind.