Many people are currently in a difficult financial position, forcing them to find creative ways to generate cash.
Some people are selling their homes, while others are putting investment properties on the market.
The real estate market is bad, so many of these properties are selling for much less than they were purchased.
Anyone holding one of these mortgage notes has an additional way to make money.
Offering seller financing often makes it easier to find a buyer.
Many prospective homeowners find themselves turned away by banks due to restricted lending practices.
These individuals are not necessarily credit risks but may have simply fallen on difficult times due to a layoff or investment gone bad.
They welcome the financing provided by the property seller.
In a short time, they begin making mortgage payments, providing the former property owner with a steady flow of cash.
The property seller also appreciates the arrangement because it allows him or her to sell the property faster.
Rather than forcing a buyer to submit to the hassle of dealing with a mortgage company, the seller provides financing.
The buyer makes the monthly mortgage payment directly to the seller, who continues to hold the mortgage note.
Though the seller receives small cash payments rather than a lump sum representing the entire property value, this tradeoff is worth it, considering the property would likely be on the market for a year or more in the other arrangement.
There is another way that an individual holding a seller-financed mortgage note can get more money.
Some companies purchase portions of these notes in a transaction called a partial purchase or partial buyout.
The organization evaluates the cash flow of the seller and provides a quote that it deems extremely competitive.
A reputable note buyer will not try to undercut a note holder because it knows its reputation is on the line.
From initial contact to closing, the partial buyout process usually takes no longer than 30 days.
The note buyer pays the typical closing costs, allowing the seller to retain more cash.
An appraisal, credit report, and title work are customary closing processes and costs for these can range into the high hundreds or even thousands of dollars depending on the property type.
One of the best things about a partial buyout is that the seller holding the mortgage note continues to hold the backend of the note for the future.
This allows the individual to remain a lien holder on the property and provides additional cash in later years.
There is no sense in the note holder taking more cash than is currently needed because this will just sit in the bank earning little interest.
Property sellers still holding mortgage notes due to providing seller financing may find this arrangement attractive.
At the same time they are receiving monthly mortgage payments from the property buyer, they can receive a partial buyout of the mortgage note, granting them additional cash.
This can help them stay afloat during these difficult financial times.