Selling Promissory Notes – creative financing for the “normal” home buyers
I’m still in the business of helping promissory note owners/sellers get rid of their paper mortgage notes for full cash and since I haven’t really blogged about this hidden investment gem I thought I would!
Well for one thing promissory notes are great for either parties whether you are a seller seeking to sell your property fast or get a higher price or you are a “normal” home buyer as I call it because no person is perfect and the bank rejected you so you are seeking other home financing options and alternatives to conventional loans. I personally have been an owner of a good amount of notes and while also being a normal home owner that has gone after trying to get the home owner to offer me owner/seller financing to create a promissory note.
A promissory note in general is just a legal binding contract between the owner (your new bank) and home buyer (the mortgagee payer). Promissory notes are usually done under legal documents called “land contracts” just as a bank would handle a mortgage. The owner financing the home buyer has the same options as a bank, but quicker the process. While the new buyer owns the home outright and pays taxes just like any conventional loan.
Some Pro’s and Con’s of promissory notes:
– As the mortgagee payer if you stop making promissory note mortgage payments the consequences are the same and you will be forced into foreclosures and lose your home plus anything you funded into it (down payment, renovations, ex.)
This is a worse case scenario where you forfeit to pay and the bank (the owner financing you) has all the right to kick you out as if you were a tenant because you signed a legal document to commit to the mortgage and financing terms to that owner willing to help you get into a great home. Most owners are normal people like yourself, but now instead of being paid cash they are receiving an asset of a monthly cash flow from you and expect it to continue because you own their property backed by a promissory note to pay.
Positives for new or existing “normal” home buyers is that if a home owner is willing to rent-to-own, lease-to-buy, owner fiance, or seller finance you may be in luck to quickly move in. Most promissory notes expect some type of down payment just like a bank, but not as much. Some times owners are willing to accept no-money-down promissory notes if it’s in their favor to do so. Also closing costs are extremely lower. When you do conventional loans banks add on high fees for simple work done by an attorney and easy to use computer software. In my opinion real estate agents and mortgage loan officers/brokers are overpaid, but that’s my opinion! Now, back to pro’s and con’s on promissory notes.
Some Con’s for owners considered to seller/owner finance through a “land contract” or promissory note are that your new buyer may stop paying, wreck the home and stop paying, or A and B plus won’t leave in which you will need to request the services of your local police to remove them from the property (within your legal rights in the promissory note agreement). Is it so bad? Not really if you were offered upfront down payment money towards your agreed purchase price. Plus you can resell the home at a higher price and gain a new down payment from a new buyer. If you want to get rid of the promissory note you can easily list it and find an investor interested in your mortgage promissory note as an asset to his or her portfolio. Yes, there are investors that seek all types of notes from auto, mobile home, residential home, business, and just about anything else that can be backed or done through hard money lending promissory note contracts. So as you can see the con’s can actually turn into bigger positive whichever way you look at it.
Con’s for buyers using creative financing through promissory notes are receiving a higher interest rate then normal (because you aren’t going through a conventional bank and your credit is likely not perfect), you like won’t have 100% costumer service on your loan, and it’s possible the owner (bank) won’t be interested in changing terms or refinancing unless you can obtain it on your own (which you can a lot later).
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This entry was posted on April 30, 2009 by Paul Awol. It was filed under 19797761, buying promissory notes, paul meyer, promissory note listing service, selling promissory notes, what is a promissory note? and was tagged with buying promissory notes, help for bad credit home buyers, help with creative owner financing, home buying options using promissory notes, selling promissory notes, what is a land contract?.