A Note Worthy Transaction
by Jeff AdamsRealEstateWebProfits.com
Tough economic times have lead many investors to the take alternative routes to finance their deals. These methods are less traditional than just getting money through a bank via a loan, but they still get the job done and put the money in place to seal a deal. One of these creative finance methods is a seller carryback note.
Those new to this whole business of real estate and financing may never have even heard this term and wonder what it is exactly. A seller carryback note is held by the seller is a promissory note which represents that portion of a sale that was not paid for in cash where the buyer promises to pay the remaining sale price over an agreed term. These notes can be both bought or traded.
If your do decide to create a seller carryback note, there are several areas that you need to take into consideration. For example, asking the buyer for credit history or obtaining a credit report prior to engaging in the transaction. Although it may not always be necessary, it is always a good idea to stay on the safe side. Since you, as the owner, are providing the financing and the final decision of whether or not you will decide to finance the buyer is ultimately up to you.
Research on a potential borrower should be done without question. Information that you find regarding a buyer can provide useful information that may assist in your overall assessment of the deal. In addition to a credit history report, a seller needs to obtain a list of the buyer's assets. Proof of insurance, current tax records, and the appraisal of the property must also be duly noted.
Consideration to the amount that is to be paid monthly should also be taken. A statement should be made that the monthly payments are to be greater than the interest of the loan and that a late payment fee would be applied if necessary. Time allotted for the duration of the loan should be of adequate length and this is usually determined by an agreement between both parties involved. Any amounts due at the time of closing should be clearly specified. This can be clarified by sending an estoppel letter that lists balance due amounts, any assessments or taxes due, and/or rental amounts that are due on the lease should be send to any homeowners associations (HOA) or condominium owners associations involved, they city or municipality where the property is located and the tenants requesting to payoff their mortgages. The seller's option of the receiving payment in full at the time of sale should also be integrated.
Other stipulations to the loan should include the documentation of either an amortized or balloon payment amount specified should be included. In addition, a request for notice of default CC2924B and a notice of delinquencies CC2924E should be included. To avoid any future dilemmas, a seller carryback disclosure statement and a beneficiary statement should be integrated.
Article submitted Tuesday, July 07, 2009 & read 8 times.
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