What you don't know about Temporary Seller Financing could be costing you time and lost opportunities; especially during this slow property market. Let us explain and help you close those deals sooner.
It is a well known fact that seller-carryback financing, alternatively called owner financing, sells properties faster, as it expands the pool of prospective buyers as it includes those buyers that do not qualify for traditonal lending or mortgages. Until now the big problem with this approach has been that the typical property seller does not want to collect monthly payments for years and years. They want to cash out at closing to pay off the existing motgage, to cover all closing costs, to purchase another property, or for a whole host of other reasons. Sellers need cash now !
At Front Range Funding Solutions we have eliminated that problem.
Temporary Seller Financing (TSF) is a process by which someone selling their property can create and carry the note on the property , close on the property, then straight afterwards sell their note for cash to a funding source. Thus they sell the property and the note at virtually the same time. Hence TSF is also often referred to as Simultaneous Closing.
Consequently, you now have access to our unlimited funds and can use our unique Temporary Seller Financing strategy to sell a property even in a slow market and generate the cash at closing you need: you receive far more than just the down payment.
HOW DOES IT WORK ?
Basically, you, the seller:
- Set the sales price at the fair market / appraised value
- Find a buyer and get a down payment of at least 10%
- Create a 1st Mortgage note ( we can advise on the structuring of the note*)
- Sell the note to our investors, right after closing.
* Our investors will purchase the note for up to 85%-95% of the face value of the note.
What the investors will pay you for the note depends on a number of factors including : - the Loan note amount compared to the Value of the property (i.e. the LTV) ,
- the Investors Investment to Value (ITV) criteria that limits their exposure to risk
- the credit worthiness of the buyer and the amount of his down payment
- the Interest rate of the note and the term, including any final balloon payment.
This is why it's important to get professional advice before you set up the structure of the note. We at Front Range Funding Solutions can help you.
It is also important to note that our investors are NOT lenders and cannot create or originate loans. They only purchase existing mortgage notes and that is why the seller will use Temporary Seller Financing to first create the note and then sell the note to our investor just after closing.
SO WHAT ARE THE BENEFITS OF THIS APPROACH ?
- The Seller gets top price (the appraised value). The small discount on the note that is sold is often much less than the "price reduction and other concessions " that sellers often have to provide to buyers in order to get the deal done, especially during a slow market.
- Once you have a prospective buyer, there is little or no negotiation. You are offering the financing, which the buyer cannot get elswhere, so you are in control.
- Remember, this may be the only way the buyer can purchase a home , so they too appreciate this strategy and are eager to cooperate.
- Seller and buyer sign a Real Estate Purchase contract and everyone agrees on the structure and terms of the note to be created. We provide you with a contract to purchase the note after closing. You choose the local title company or closing agent, and they take over from there. We work with them to create and collect all the required documents and set a closing date.
- We can close much faster than the normal 30,60 even 90 days of the regular process. We can usually close in 10-20 days , or even less !
- The closing costs using TSF will be considerably less compared to conventional financing. The only true costs are a credit check, appraisal and title work plus some minor costs such as documentary stamps. On a percentage basis the closing costs are considerably less. Also there are never any points charged whether it is a residential or commercial property.
- This is a very flexible process. You can create and structure the note in a wide variety of unique ways to meet varying buyer / seller needs. While most sellers will want to get all their cash right away, we can accomodate the seller who just needs some cash now and the rest at some time in the future. This is called a partial purchase and often provides the greatest return to the seller. We can give you some options , so you can compare and choose what best suits your circumstances.
- At closing, the seller assigns the mortgage note to our investor. The buyer's down payment , plus the funds that will be wired are used to pay all closing costs. The seller collects the balance of the funds. The buyer will then start making their payments directly to our investor. You've got you're money, you're out of the loop it's a done deal ! Everybodies happy.
A SIMPLE EXAMPLE MAY HELP:
Set SALES PRICE at appraised value = $100,000
Buyer offers 10% down = $10,000
You create a note for 90% = $90,000 Terms are 10% interest for 30years
Buyer agrees to pay $789.81 ( Principal & Interest ) monthly for 30 years.
The investor agrees to pay $ 82,500 plus the buyer's $10,000 down payment and the seller gets a total of $92,500 less reduced closing costs to cover appraisal and title work.
You get all of the above benefits, on a deal that would NOT have been do-able with traditional financing. Temporary Seller Financing is a win-win strategy for quickly selling a property at top dollar.
