Attention

Realtors, Builders

and Owners

Why the need for Owner Financing?

1.  More people will come to look at the home as a result of offering Owner financing.

2.  It will most probably sell for a higher price because the seller of the home does not have to reduce the price of the home when they agree to take back the note.

3.  The Realtor will make more because the home will sell for more and their commission is based on the selling price.


What is a simultaneous closing?

It is a process by which someone selling their property can carry the note or take back the note on the property and sell the note at the same time they close on the sale of the property.  Thus they sell the property and the note virtually at the same time.

If you ask someone when they are trying to sell their property if they would consider using owner financing to help sell the property they would give you two reasons why they would not want to do owner financing.  The first reason is that they do not want to be a bank and collect payments.  The second objection to using owner financing is that they need more than just the down payment.  Using a simultaneous closing would eliminate both of these objections.

To structure the deal three key elements of information need to be known.  How much the seller needs to walk with from the deal?  Secondly the fair marke t value of the property. And thirdly a good description of the property. A seller is trying to sell their property for $100,000 but cannot sell it for some reason.  The fair market value of the property is $115,000 using a simultaneous closing the deal would be s truc tured as follows: 

Sale Price         $115,000

Down Pmt         $11,500

1^{s t} Mor tgage    $103,500  
30 year term, 9% , mon thly pm t $832.78, 7 yr balloon = $96,918.39

The funding source offers $93,000 for the note.  We can get the broker a fee and also give the seller exactly what they said they needed out of the deal. 

Funding source offer $93,000

+ Down Paymen t     $11,500            

                              $104,500    

The actual purchase of the note would occur two or three days after the sale of the property.  In those two to three days the funding source is verifying all of the specifics of the closing and sale of the property.   Once the closing has been verified the funding source will either wire the money to the seller or send them a check for the note.  The simultaneous closing process can work with either a residential or commercial property.

Advantages

A realtor loses several sales a year because the buyer cannot qualify.  Using owner financing the qualifying parameters are more flexible than conventional financing.  Someone could qualify to buy the property that might not qualify using conventional financing resulting in a sale for the realtor.  It will be easier for someone to sell their property because the qualifying criteria is easier for the buyer to qualify.

The closing costs using owner financing will be considerably less than using conventional financing.  The only true costs are a credit check, appraisal and title work.  There will be some other minor costs such as documentary stamps.  On a percentage basis the closing cost are considerably less.  There are never any points charged whether it is a residential or commercial property.

You canno t talk to both the seller and the buyer to struc ture a simultaneous close unless you have a realtor and or a mortgage lender license.  You can however talk to either the seller or the buyer and show them how a simul taneous closing would work.  The end result will be the same: an easier way for the seller to sell their proper ty and an easier way for a buyer to get into a property.