Owner's Financing & Loan Servicing Companies

Creative Real Estate Financing
13yFollow

Owner's Financing & Loan Servicing Companies

Chris Bounds
Investor · Sugar Land, TX · Member since 2012 · 554 posts · 232 votes

I have a property that I am looking to sell by offering owner's financing.
My primary goal is to amortize the loan for 30 years with a 3 year balloon. Reporting to credit agencies will help the buyer refinance out within that time frame.

I understand that using a loan servicing company is a great for efficiency, but it seems that most of them now do not report to credit agencies. The only one that I found that did report to the credit agencies cost $60/mo with a 3% refinancing fee!

What loan servicing companies do you recommend and do you know any that still report to credit agencies? Also, what is a good interest rate to charge for owner's financing? I'm in Houston, TX.

1Reply
357 views

Most Popular Reply

Page Huyette
Real Estate Broker · Bozeman, MT · Member since 2012 · 220 posts · 52 votes
13y

I haven't had a chance to close a deal with seller financing yet, but for what it's worth, here are some loan servicers I've gleaned from past posts on the subject here on BP:

http://www.cashflowservicing.com/real_estate.html
http://www.plmweb.com/LoanServicing.htm
http://www.notecollection.com/
http://www.meracord.com/
https://www.sls.net/about.aspx
http://allservicing.com/

I also contacted the title co. I've used for other deals, and they referred me to a local bank that does loan servicing as well as a real estate attorney that can draw up the contract. I agree with Bill Gulley on this--don't skimp on covering yourself.

7Reply
See this reply in the discussion

29 Replies

Jump to latestLatest
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    To report to the credit agencies cost a bunch of money for a servicer so of course they are not going to do it cheap.

    Many servicers do not handle single property servicing and only accept large pools for volume where they do not have to keep track of a bunch of little clients.

    Note world does individual ones but I do not know if they do credit reporting. Even if they did you can't control the buyers other credit lines from being late on and affecting their scores.

    Podcast Guest on Show #47
    NNN Invest53 Reviews
    WebsiteView Page
    1Reply
  • Chris Bounds
    OP
    Investor · Sugar Land, TX · Member since 2012 · 554 posts · 232 votes
    13y

    Joel Owens, thanks for the info. The loan service company said their 3rd party mortgage verification reports will help my buyers refi. Of course that doesn't help their score, but it seems that is about all I can do.

    The servicer I'm looking at is http://sellerloans.com. They look pretty solid, but if anyone else has a referral I'd be happy to look into it.

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y

    Chris, you need to read the recent thread on the SAFE~ Act, owner occupied? You need to comply to state and federal law, appears we have an APR requirement and no balloons. Better find an attorney or MO to originate it.

    Even if this is a one time deal and you appear exempt, read up on the FCPB.

    Borrows appear to have a three year right of recession in any event, if it is not "affordable" or "prudent" they can still cry foul and get thier money back.

    Are you looking for a servicer that originates?

    1Reply
  • Chris Bounds
    OP
    Investor · Sugar Land, TX · Member since 2012 · 554 posts · 232 votes
    13y

    Bill Gulley, Thanks - I replied on that thread about that issue.

    I will be looking for someone to draft the documents. Probably the title company?

    1Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y

    Title companies usually have pretty simplified notes, they may do that for you, probably an attorney of staff/retainer. You might ask that attorney who gave you that advice!

    Let me pose a situation, you do a note with a balloon in 5 years. The buyers die in a car wreck on I-10. Thier heirs get the house and move in, they usually don't pay on time, but not 30 days late. You and they don't see eye to eye and you'd like them gone.

    The loan pops 2 years later, now you will appease them and redo the loan or would you call it due?

    You call it, they get an attorney, it goes from non-judicial to court. They claim they can make the payments but it was the balloon payment you put in there 5 years ago that is the problem.

    You say you were exempt from following the SAFE Act, the judge agrees with you on that. Thier attorney says you should have originated the note with due diligence, prudently and considered contingencies that could arise. Are you going to disagree with that?
    What do you think the outcome would be?

    Just because someone is not required to follow any particular law and comply to the letter, won't ever mean that they can act with malice or in a manner that is not prudent or common practice. What would common practice be? I suggest acting prudently would be doing what would be required if the law had applied, or at least close to it, that even if you are exempt, you might consider acting in the spirit of the law or with such duties and care that a reasonable person would given that there are established guidlines.

    And, if the original borrowers had not died, but fell on the deal, they could certainly bring up the unfairness and ask for similar protections generally afforded to home buyers.

    My point being, you may be exempt, but I suggest you not throw caution to the wind and just have a note filled out at what ever you may get them agree to. Due dilligence and point that out to your atttorney. :)

    4Reply
  • Chris Bounds
    OP
    Investor · Sugar Land, TX · Member since 2012 · 554 posts · 232 votes
    13y

    Bill Gulley, I certainly appreciate the advice. I'll ensure loan and closing documents are reviewed by my attorney before proceeding. I'm particular to take professional advice when necessary. While cautious I try not to let nightmare scenarios cause inaction.

    3Reply
  • Clifford Watson
    Wholesaler · Houston, TX · Member since 2011 · 9 posts · 1 vote
    13y

    There a company here's in houston, they do owner finance service. They will send payment info to all credit bureaus. To help increase their credit score so they get loan from a bank. When I find the name will update my post

    0Reply
  • Chris Bounds
    OP
    Investor · Sugar Land, TX · Member since 2012 · 554 posts · 232 votes
    13y
    Originally posted by Clifford Watson:
    There a company here's in houston, they do owner finance service. They will send payment info to all credit bureaus. To help increase their credit score so they get loan from a bank. When I find the name will update my post

    Thanks. You may be referring to Prime Loan Services. They do what you said, but their setup fees are pretty steep and I think they charge 3% when the buyers refinance.

    0Reply
  • Lisa Smyser
    Investor · Cedar Park, TX · Member since 2013 · 4 posts · 5 votes
    13y

    Hi Chris,

    I'm an investor in Texas also (Austin) and I've done several seller financed deals. I also have rentals, so I use a rent collection service. I put my mortgages on the same service so their mortgage is automatically deducted from their checking account and put into mine. The collection service is in the process of setting up credit reporting, and when they go online, they will report everyone's history - renters and buyers.

    I manage the escrow accounts myself (my accountant set it up for me) and it takes very little time. The company I use for money collection is www.Rentmatic.com and it's very inexpensive! They have been reliable and responsive. That might be an option for you.

    Good luck,
    Lisa

    3Reply
  • Chris Bounds
    OP
    Investor · Sugar Land, TX · Member since 2012 · 554 posts · 232 votes
    13y

    Lisa Smyser, Thanks. I'll save Rentmatic in case I need them in the future. Right now I use ERentPayment.com and they have been great.

    So you use Rentmatic for your owner's financing payments too?

    0Reply
  • Lisa Smyser
    Investor · Cedar Park, TX · Member since 2013 · 4 posts · 5 votes
    13y

    Yes @Chris Bounds, I use Rentmatic for the mortgage payments too. It was actually their idea and it has worked perfectly! It's so much nicer to have the money just appear :)

    Do you manage escrow accounts? Is that what you need a service for?

    0Reply
  • Chris Bounds
    OP
    Investor · Sugar Land, TX · Member since 2012 · 554 posts · 232 votes
    13y

    I do not have any notes at the moment, but I'm considering it for future exit strategies. Currently I'm just managing rentals.

    0Reply
  • Page Huyette
    Real Estate Broker · Bozeman, MT · Member since 2012 · 220 posts · 52 votes
    13y

    I haven't had a chance to close a deal with seller financing yet, but for what it's worth, here are some loan servicers I've gleaned from past posts on the subject here on BP:

    http://www.cashflowservicing.com/real_estate.html
    http://www.plmweb.com/LoanServicing.htm
    http://www.notecollection.com/
    http://www.meracord.com/
    https://www.sls.net/about.aspx
    http://allservicing.com/

    I also contacted the title co. I've used for other deals, and they referred me to a local bank that does loan servicing as well as a real estate attorney that can draw up the contract. I agree with Bill Gulley on this--don't skimp on covering yourself.

    7Reply
  • Rich Nickel
    Real Estate Investor · Houston, TX · Member since 2014 · 40 posts · 11 votes
    10y

    @Chris Bounds

    Resurrecting this thread! I came to one of the Fort Bend REI meetings you put together. The night you had Sam Craven speak. Great event and great people. Really enjoyed it.

    Have you done some notes since posting this so many moons a go?

    Have you found a note servicing company that you are working with?

    Looking at some notes,  but I need to get a servicer lined up.

    0Reply
  • Gautam Venkatesan
    Investor · Dallas, TX · Member since 2013 · 619 posts · 128 votes
    10y

    @Rich Nickel - try augustrei.com they are based in Dallas, TX

    0Reply
  • Chris Bounds
    OP
    Investor · Sugar Land, TX · Member since 2012 · 554 posts · 232 votes
    10y

    @Rich Nickel,

    I haven't sold any with sellers financing (yet). After talking with some investors they use electronic rent payments as their mortgage collection system. There are some dedicated note servicing companies though. One in Houston is called Prime Loan Services. 

    0Reply
  • Dan Shoemaker
    Rehabber · Keller, TX · Member since 2013 · 137 posts · 20 votes
    10y

    @Chris Bounds, @Rich Nickel

    +1 to @Gautam Venkatesan suggestion for August REI. They are based in Garland and they service all of my OF notes. They are especially helpful with my Sub 2 deals. They only charge $35 per month and report to at least one of the credit bureaus, maybe all of them by now. I pass that $35 per month fee on the buyer, btw.

    My first mentor in this business told me to be careful taking advice from people who had not yet done what I was seeking to do, or from those who had failed.  It's akin to having a personal trainer who is 100 lbs overweight...  Doubtful that person can really help you get where you want to be :)

    3Reply
  • Mike Springer
    Developer · Austin, TX · Member since 2015 · 21 posts · 4 votes
    10y

    SecureNet in San Antonio, TX reports borrower's credit and it is pretty reasonably priced.  I've tried them out on a couple notes for about 8 months.  They seem to be pretty good so far.  I've used prime loan services in Houston for years and they are good, they report credit and more expensive.

    0Reply
  • Page Huyette
    Real Estate Broker · Bozeman, MT · Member since 2012 · 220 posts · 52 votes
    10y

    I ended up doing a seller financed deal last year, and used a local bank to handle it.  They were not great, disorganized and would not collect insurance payments as part of the deal.  I had an attorney draw up the note, and went through Title as though it was a standard transaction.

    Ended up paying it off early, and the sellers were very happy.  Am now about to use them as a reference for another seller financed deal to prove we are good at it.

    There's been some discussion on this forum about how long something like this needs to be help before refinancing.  I spoke with my local bank contact and was told they have no length requirements.  So for the next deal I'm trying to close using seller financing so I can put less than 20% down, and then will turn around and refinance within a couple of months.

    1Reply
  • Jonatan Barbera
    Investor · San Antonio, TX · Member since 2013 · 213 posts · 182 votes
    10y
    Call Angie Francis with Step Stone. They can help you with the servicing. As far as the interest rate you need to determine what your strategy is. There are some investors that want the house back so they do a ridiculous rate of 10%+ others that want the buyers to actually buy the house they'll do 7-8%.
    0Reply
  • Bruce M.
    Canyon Lake, TX · Member since 2008 · 74 posts · 3 votes
    10y

    Can any one confirm that this is the case:

     SAFE~ Act, owner occupied:

    Even if this is a one time deal and you appear exempt, read up on the FCPB.

    Borrows appear to have a three year right of recession in any event, if it is not "affordable" or "prudent" they can still cry foul and get their money back.

    0Reply
  • Page Huyette
    Real Estate Broker · Bozeman, MT · Member since 2012 · 220 posts · 52 votes
    10y

    As a follow-up to my previous post regarding the length of time required to hold a seller-finance before refinancing, I wanted to clarify. In my case, the bank would refinance immediately at a specified LTV of either the purchase price or appraised value, whichever was less.

    0Reply
  • Javier Marchena
    Investor · Winter Springs, FL · Member since 2010 · 165 posts · 68 votes
    9y

    Any idea on costs for this note service?

    0Reply
  • Page Huyette
    Real Estate Broker · Bozeman, MT · Member since 2012 · 220 posts · 52 votes
    9y

    I believe my last one had a $500 setup fee and about $10/monthly servicing fee.  It cost me $250 for an attorney to draw up the docs.

    0Reply
  • Justin Bicket
    Omaha, NE · Member since 2017 · 4 posts · 0 votes
    9y

    So, I am new on this site and I bought a house and flipped it and used the proceeds to buy 2 more houses. I am looking to sell these 2 as 'contract for deed' and finance the deal myself. I own these 2 houses free and clear. I wasn't going to have a balloon payment at the end of the notes. Just finance them over 10-15 years with a 5-10% down payment. I would like to be able to help the buyers establish some credit by reporting to the credit reporting agencies but it seems I can only do that if I use a loan servicing company. My questions are:

    1. What other benefits are there for using a loan servicing company? (Do I need to use one for only 2 houses?)

    2. Do I have to use one in my state (I live in Nebraska)?

    3. Are there any pitfalls that I should be aware of with these deals? 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free