TriMark Capital Funding, Inc.

So the real estate market is still in turmoil, there are 15 other houses for sale in your neighborhood (5 on your block alone!), your house has been for sale for months and NOBODY is looking at your home. In a nutshell you’re having a rough time selling your home and your real estate agent says the market is stagnant and you have no choice but to just wait it out. Is there anything you can do to make your house stand out from the crowd, attract quality buyers and sell the darn thing quickly?

Absolutely! Consider selling your property using seller financed real estate notes.

Think about it. A large part of the problem with real estate not moving quickly right now is a lack of buyers who can ultimately qualify for financing via conventional means i.e. a mortgage company or bank. Obviously there are still plenty of good homes available, in fact a lot of GREAT homes thanks to improvements and upgrades made by motivated sellers in hopes of ’standing out in the crowd’. Obviously there are lots of people who are interested in buying good homes at good prices - it’s not like everyone just stopped needing a home. And since real estate values have dropped nationwide, it’s an excellent time to buy. So what exactly is the holdup?

Financing. Or more accurately, the LACK of financing.

Because most mortgage lenders are still in shock from the sub-prime meltdown and most news media are feeding into those fears, lending requirements have been tightened and the result is that many otherwise qualified buyers can’t get financed. Perhaps they have less than stellar credit, or the new higher interest rates push their debt-to-income ratio out of whack. Or maybe they’ve relocated or changed jobs so their employment history sends up a red flag. There could be many reasons but the bottom line is that somewhere during the underwriting process their application gets shot down and you can’t sell them your house.

Enter seller financed real estate notes.

Using nothing more than your own common sense underwriting guidelines, a title company and some legal forms, you could offer seller financing for your home and a MOB of motivated buyers will flock to your door. You give them your list of qualifications and then you choose the best one from the pool of buyers who meet or exceed your qualifications.

So what exactly are “Common Sense Underwriting Guidelines”?

• Owner Occupied is ALWAYS the safest bet. If the house is going to be the primary residence for someone, they will fight tooth and nail to hang on to it when the going gets rough. This translates into a much lower default risk for you, which is obviously a good thing. If you’re selling your house to someone who doesn’t plan to live there but instead intends to rent it out, there is a much, much greater likelihood that they will ultimately default on the note. If they can’t find a renter, they just stop making their payments to you - after all, they STILL HAVE A PLACE TO LIVE. If that happens, they will walk away, leaving you with the note and the house in whatever condition the last renter happened to leave it in. To combat this, insist in writing that the buyer will occupy the house and not sublet it. If you must sell to an investor, insist on a 20% to 25% cash down payment minimum. You should also be aware that if you plan to sell real estate note payments to TriMark Capital Funding, Inc. or any other note buyer for that matter, you’ll get less for it if the house is non-owner occupied.

• Good Credit. Most people automatically assume someone has bad credit if they can’t qualify for a mortgage. This isn’t always the case. In fact, particularly in the current market, this isn’t the case a lot of the time. And what you’re looking for here isn’t JUST a particular score. You’re looking for a demonstrated propensity for paying one’s bills on time over a period of time. Anything above a 650 FICO mid score is usually fine (get a tri-merged credit report and average the 3 scores - that’s the mid-score, and they can order them here for FREE). Be sure to peruse the report for both spouses and look for things that stand out - charged off credit cards or other debts, collections, foreclosures, judgments, IRS tax liens, bankruptcy; that sort of thing.

• Good Down Payment. If cash is king then buyer equity is the queen. And if there is one thing that motivates people to continue making their house payment on time, even when the going gets tough, it’s the prospect of losing tens of thousands of dollars of their own money along with the place where they live. That is a BIG motivator. Insist on a minimum of 10% cash down, but bear in mind that whoever offers the largest cash down payment above 10% should certainly get preferential consideration. A lot of people nowadays are selling their homes they bought in the last 5 to 10 years and cashing out some extraordinary equity so it’s not uncommon for buyers to have a lot of cash for a down payment on a new home.

• Appropriate Interest Rate. This is a touchy subject for a lot of people because they think they need to offer 6% in order to be attractive. Don’t do that. There are risks and hassles and conveniences associated with seller financed real estate notes and the interest rate you charge needs to reflect that. As a general guideline we recommend nothing below 9.5%. If they balk, move down to the next one on your list. Remember, you’re selling to people who for whatever reason can not get financing through a bank or they would have already. You’re incurring the risks of a lender and offering the convenience of selling them a house without having to qualify for a bank loan. Risk and convenience both have price tags.

• Have an Exit Strategy. Creating a note with a 15 or 30 year term is not recommended, because if for some reason they stay in the house that long and for whatever reason you can’t sell the note, you’ll be servicing it for three decades! Instead, you’ll do better with a fixed-rate interest-only note with a 5 to 7 year balloon. This means you’ll be earning a nice cash flow for 5 to 7 years, plus there is every reason to believe that the current mortgage and real estate crisis will have resolved itself by then so the buyer should be able to either sell or refinance without any trouble. Plus 5 to 7 years is plenty of time for anyone with minor to moderate credit blemishes to clean up their credit so they can refinance later on. And the biggest reason is that if you decide to sell real estate note payments or the entire real estate note at some point, you will take MUCH LESS of a discount with a shorter term of 5 to 7 years as opposed to 15 or 30 years.

Our website will provide you with much more information about your options to sell real estate note payments.

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