Real Estate IOU
A lot of sellers are using an owner financed real estate IOU to attract buyers willing to pay their asking price. Although the real estate market has experienced a slight upturn, finding qualified buyers remains a challenge.
When property owners secure loans with seller financed real estate IOU they act as the lender. A mortgage or trust deed is drawn up and filed with the County Recorder's office. If buyers default on the terms of the note the seller can initiate foreclosure and repossess the property.
Just as banks are allowed to sell mortgage notes to another bank, property owners can sell seller carry back trust deeds to private investors or investment groups. This is common practice amongst investors and is a good approach for those in need of quick cash.
Owners who want to get out from under real estate notes ought to seek out brokers who specialize in owner financed notes. Certainly, note holders can seek out investors on their own, but those who specialize in this field generally don't do a lot of advertising. The only way to find them is to participate in real estate networking groups or use a broker.
Selling owner financed notes to an investor is very similar to taking out a loan with a bank. Investors perform due diligence to ensure the note is a smart investment and the property is worth the asking price.
Initially, investors offer a soft quote that is subject to change. Next, investors investigate the property and review circumstances surrounding the note. For instance, they will need to know how long the loan has been in effect; number and amount of outstanding payments; terms of the note; and the seller's personal financial information.
If the owner accepts the soft quote, investors commence with obtaining property appraisals and inspection. As long as everything checks out, the deal is closed when the investor purchases the note and the proper documents are recorded.
Overall, the process of selling real estate notes takes about 30 days. Conducting due diligence and filing paperwork is the most time consuming part of the process.
Owners need to realize that they might not get top dollar for their note. Investors rarely pay full value. Therefore, owners will need to determine if accepting lump sum cash is the best option.
There are many reasons owners choose to sell their notes. Sometimes, they want cash to invest in something else, pay off bills, cover emergency expenses, or pay for college tuition. Other times, they just want to cash out so they don't have to deal with monthly payments or non-performing buyers.
Last, but not least, some sellers only want to sell a portion of their real estate IOU. This is referred to as a partial sale and is a common real estate investing tactic. If a property owner needs $50,000 he can sell how ever many payments are required to reach that amount.
Note installments are provided to investors until the sold portion is fulfilled. Afterward, payments revert back to the note holder. This is a good way for property owners to take advantage of other investment opportunities or acquire the cash they need without taking out a bank loan.
These are just a few examples of ways to buy or sell real estate IOU notes. We invite you to browse our blog and learn more about real estate investing practices. With nearly a decade experience, California investor Simon Volkov, shares insider-secrets and money-saving tips that can help investors strengthen their real estate portfolio and minimize investment risks.
Published on October 27, 2012 at 04:14 AM