Interesting: Seller financing, and free advice on writing notes

2 Replies

This was new to me:  Some businesses scan Craigslist for "seller financing" keywords.  These businesses are interested in reselling the notes from sellers in seller financing deals.  One of their pitches is to encourage sellers to write conforming notes, and season them, to get the highest value on the resale market.

Their advice, which seemed like great advice to pass on:

  1. Have the buyer fill out a Fannie Mae form 1003.
  2. Check buyer's credit with the buyer's permission.
  3. Require minimum 620 credit score.
  4. Require buyer to undergo credit repair. Yes, you're the lender and you can do this. The higher the credit score, the higher the resale value of the mortgage note.
  5. Hire a servicing company to collect payments and do all IRS paperwork.  This costs $30-40/month.
  6. Season (hold) note for 3, 6, 12 months. A seasoned note is worth more than a green note.

All this is designed to make your note "look like all the other notes", making it easier to analyze and resell, giving the note a higher value.

Offering seller financing on a property, and then selling the note, is another strategy for the toolbox.

@Jeff Garzik

I am a novice @ REI. Thanks for passing along this advice, as I have been looking into seller financing as an exit strategy for future properties. Question though! Wouldn't a buyer under these stipulations choose traditional financing instead, or is this just for people that don't have down payment? I as referenced above am a novice, and trying to soak up any advice, information add to my toolbox.

Regards, Tony

It depends - as a seller you ultimately have more flexibility in choosing to whom you lend.

If you know the buyer, you might be willing to loan up to 90% LTV, whereas most banks want 80% or lower. Or, perhaps the buyer has no credit because they're young, but they have a steady income.