Buying Real Estate with Seller Financing
In the early 2000’s, banks granted many loans to so many people who could not afford the houses they were purchasing. Looking back now, one could clearly see that a family of four making $45,000 would not be able to afford a $300,000 house. Yet, lending requirements were loose and cases such as this were common. After the market crash of 2007, banks tightened their requirements and it became harder for people to get a loan.
The purchase of owning your own home as always been the American dream. Saving money from each and every paycheck towards the down payment is possible but to save for the whole payment of a house, it is not realistic for many people. If one does have cash for the outright purchase of a house, sometimes having cash has more benefits than a loan. A lower purchase price might be negotiated with the seller, and many times the sale will close quickly with cash.
Another option in buying a house if one does not have all the cash and one does not want to go to a bank for a loan or has been turned down by a bank for a loan, is to use seller financing. Seller financing is when the seller of the house acts like the bank. That is, the seller is the one who agrees to provide the loan to the buyer. The agreement will still include all the terms that a bank provides such as interest rate, and monthly payment. This agreement that secures the loan is called a promissory note.
Promissory notes are written promises to pay a sum of money to the specified bearer at a certain future time. It may include interest rates with length of time to fulfill the promise. The property is the security of the loan. It is signed by both parties.
The seller benefits in that he/she will receive monthly income with interest. The income is passive with no obligation for the seller to now take care of the property to include repairs, taxes, and insurance. And just as bank can foreclose on a property should the buyer stop making payments, so can the seller.
When the seller no longer wants the burden of holding the note, he/she can sell the note to another party receiving a lump sum for the purchase and responsibility of that property/note.
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Whether you are looking to sell a house without the hassles of going through a traditional bank, a note is very viable option for all parties involved.
How to Protect Your Promissory Note
If you have sold a property with owner financing, then you now own a note. If you purchased a note, now what do you do with it? What do you do other than wait for the monthly payments to come in? How should you care for your note? There are many steps you should take to keep you note safe.
Safeguard you note
Safeguarding of your note is just as important as other important documents you may have: pink slips, social security cards, birth and marriage certificates, or will and so on. If an attorney assisted in the closing of the property, sometimes, the attorney will keep the original note document and give you a copy. You have the option of keeping the actual note yourself. It is a good idea to keep the original note with the original mortgage of deed of trust which will be returned to you after it has been recorded at the county recorder’s office.
Keep a detailed payment history
Record keeping of the payments made on a note is necessary. This is help prevent any questions that may arise about payments made or not made. Even if you have no plans to ever sell your note, it may help the borrower should he/she decide to refinance if you have a balloon payment. Or, if there comes a time when you decide to sell, the accurate payment history will help you get the highest possible price.
When the check arrives, make sure you deposit it into your own bank account. This is an added record that the payment was received. Copies of the check and/or deposit slip is also recommended.
Make sure taxes are paid
Property taxes and income tax need to be paid. If you are collecting escrow for taxes, it is easy to have property taxes paid. If not, make sure you verify that the property taxes have been paid by having the tax parcel number along with due date in order to be able to check if they have been paid.
Another tax that needs to be paid is income tax. If the property you sold is being used as the buyers’ primary residence, you must notify the borrower, the amount of mortgage interest paid during the year as required by the IRS. This must be reported by January 31 of the following year.
Don’t forget about Homeowner’s Insurance
Homeowner’s Insurance is vital to keeping your investment protected. Guaranteeing that a policy exists is not adequate. You must also make sure you are listed as the Mortgagee on the insurance policy and that the policy is covered for the balance of the mortgage note. This ensures that you are covered should anything happen. If there is a lapse in policy, you can purchase the policy yourself or prospect of adding the property to your own homeowner’s policy could be an option. The cost of this insurance would be charged to the buyer either up front or on the balance of the note.
Maintaining a property in good condition
The property is your investment and it is in your best interest that the purchaser continues to care for its upkeep both inside and out. If the borrower should ever default on the property, in order to get the best selling price is to make sure that the value of the property has not been reduced by poor care. Plus, a good property will help keep the borrower making payments on a regular basis. Check on your property yearly or have someone do so for you. By knowing the condition of the property, should the borrower default, or you want to sell the note, there will not be any surprises.
Late Payments and Default
If the check was mailed to you late, keep the envelope it arrived in to prove the date it was mailed/received late. This is especially helpful if you are qualified for a payment penalty. Be sure that you are familiar with the notes’ grace period if it exists. Making detailed records of any attempt to collect on a late payment after the grace period should be noted. This includes time and date of any phone calls, copies and proof of any correspondence through certified and return receipt mail. If these steps do not produce any payments, the next step is to seek professional help from an attorney. Seek an attorney familiar with this type of law. If you try to take matter into your own hands, you could find it difficult to enforce all areas of your contract. If you do nothing, this may be taken as acceptance. Be consistent in your actions. If you allow a late payment one month but send a notice another month, this does not present a clear message to the borrower. Do not delay the foreclosure process if the borrower is more than one month behind.
Good record keeping
It is essential to be organized about all paperwork and when payments are due. Besides the monthly payment, if you know when property taxes are due, insurance is due, and have the knowledge to look up if they have been paid, this will go a long way in keeping your note protected.
You only have so much ability to keep you investment protected. The other responsibility lies with the borrower. But by doing all in your power to keep your records straight, it will go a long way should a late payment occur, a default take place, or should you decide you want to sell the note.
NATIONWIDE SECURED CAPITAL LAUNCHES ITS “WEBCASH™” PARTNER PROGRAM
Nationwide Secured Capital Launches its “WEBCash™” Partner Program — For Cash While You Sleep, Play or Do Other Work
Professionals Earn Easy Referral Income from their Web Site, Emails, and Client Contacts
Houston TX – Nationwide Secured Capital (NSC) today announced the launch of its “WEBCash™” Partner program. The program enables effortless referral fees paid to financial advisors, estate advisors, loan and title professionals, AND, in fact, ANY web site owner, or email newsletter owner who is in contact with the holders of secured loans, annuities, structured settlements, or unwanted life insurance policies. “WEBCash™” Partners receive CASH whenever NSC makes an investment based on their unique WEBCash™ Referral Link – whether purchased now, or in the Future.
“For many years, Nationwide Secured Capital (NSC) has been the leading Internet presence and buyer of note and other cash flow investments. We developed and use sophisticated proprietary technology to track submissions by 1) our active brokers who put considerable effort and expense into the leads they bring us, and 2) referrals from a couple of select partners who simply bring us leads from their web sites,” said Gene Powers, founding principal of the company, ” The WEBCash™ Partner program we are announcing today is based on the formalization of this sophisticated and our already proven referral and lead tracking program. Our “WEBCash™” Partner program is able to permanently track leads that a WEBCash™ Partner brings us – allowing us to pay a referral fee where due from a WEBCash™ Partner Lead – every time we close an investment – even YEARS after the referral lead came in. WEBCash™ Partners AUTOMATICALLY earn “mailbox money” income while they sleep, play, or do other work.”
Powers further stated, “It’s a GREAT opportunity for our partners to provide service to their clients and make additional revenue at NO extra cost to their business. We do all the work! We contact the automated lead and continue making followups indefinitely – just as we would on any lead we generate in our own marketing efforts. “
In response to the announcement of the “WEBCash™ Partner Program”, One of the a referral partnersl partners who has worked with Nationwide Secured Capital for years, commented, “”We chose to work with Nationwide Secured Capital due to the professionalism of the company, and their robust on-line lead handling systems. We automatically receive an email showing the first contact made by every referral from our site to theirs – and periodically we receive comprehensive detailed lead status reports. Our leads are permanently tagged as ours in their database. We receive a check every time a loan is purchased from one of our leads – no effort! no matter how old the lead was!”
The NSC WEBCash™ Partner Program Answers THE Question – “How can I create more income from my business activity with just the resources I have now?”
Using your WEBCash™ Partner affiliate link, you refer clients, readers of your newsletter, or web site to NSC – NSC they does the rest!
The NSC WEBCash™ Partner Program Answers THE Question – “How can I expand and improve the services and information to my clients without spending more on my business?”
The WEBCash™ Partner Program enables you to immediately add the the entire NSC staff, systems, and informational resources on cash flow investments to your client offerings-At virtually no cost!
For more information or to join the NSC WEBCash™ Partner Program: Simply go online to www.NationwideSecuredCapital.
About Nationwide Secured Capital
Nationwide Secured Capital (NSC) is a well established brokerage and investment firm specializing in purchase of real estate notes, annuities, and life insurance policy investments in all 50 States. NSC maintains offices in several locations across the U.S. to best serve its clients in all time zones and locations.
Nationwide Secured Capital enjoys an excellent reputation and track record in paying top of market prices for loans, annuities, and policies it purchases, and for closing a much higher percentage of the offers it has made – exactly as they were made.
NSC also established and runs the SMILE FUND ONE LLC investment fund for investors – registered with the SEC as an exempt offering, and provides acquisition and/or management services to other investment funds and investor portfolios.
What to Do When You Have Lost a Promissory Note
Promissory notes are IOU’s, the physical evidence that a transaction took place a debt is owned. In real estate, these notes state that a specific amount of money is owned to a specific person on a specific date. It also states interest, length of loan, the real estate used as the guarantee or the debt to be paid, the amount due after the interest has been met, and any default terms.
When there is owner financing and the lender is an individual, there may be a situations where the original note has been misplaced and lost. A replacement needs to be made with new documents to ensure that the debt remains in place or to enforce the debt should a foreclosure occur. In some instances, the holder of the note might be the only one able to enforce it. The note is also needed should the note holder decide to sell to another lender/investor cashing out either all or part of the note.
Seek professional advice to help get a replacement note. An Affidavit of Lost Promissory Note needs to be signed, notarized and recorded. This will include a statement that the original note has been lost, stolen, or damaged. The affidavit will also include the circumstances surrounding the loss using as much detail as possible. Details describing the lengths taken to look for the document as well as any other details about its’ disappearance should be included.
The Affidavit of Lost Promissory Note instructions are clear asking for information on the debt, what has been paid, what has not been paid, and that the note is not in default. The affidavit should state that the note has not been sold or transferred to another party. The purpose of the affidavit also is to get the borrower to sign the new note with the agreement that if the original note is found, the replacement note supersedes the original note and it will not be used as a separate debt.
If a copy exists, review it. In some notes, lost, stolen, or damaged notes may be addressed in the contract. This may include provisions that should such an instance occur, the borrower must sign the new promissory note. Include by attaching a copy of the note to the affidavit. This affidavit is to be notarized.
Once completed, it is ideal to place the note in a secure location such as a safe deposit box. A third party servicing company can also take care of safe keeping the note to ensure it does not get lost or damaged again.
