The loan to value is the single most important aspect! Real estate values are cyclical, markets go up,
markets go down and frequently property sellers offer seller financing to attract buyers. Selling with little or no
money down is appealing to many buyers and may help sell the property sooner. In markets that were continually
appreciating this has not been a problem.
In today's economy, when the property values decline, your payors are more than 100% loan
to value. In today's market many homeowners owe more than their property is worth. We have a solution if you have
the flexibility, give us a call or
send us an e-mail, we look forward to working with
Interest Rates and
The interest-rate and term of the note you created may have
a significant impact on its present value, the lower the interest-rate and the longer the term the
bigger the discount.
Unfortunately sometimes property sellers eager to sell their property create
seller financing with terms that are just "too good" for the buyer.
For example: 100% financing (no money down) at 5% interest with a 30 year amortization
for a buyer who has marginal credit.
This type of home buyer could not get these favorable terms anywhere! Yet sometimes as
property sellers one might create this type of note with the expectation of selling the note at a reasonable price.
Or, although there was no expectation to sell initially, now a life altering event causes the need for cash. This
note seller is shocked to find out their note is worth $.50-$.60 on the dollar… why?
The simple answer is the time value of money. An investor purchasing this type of note from a private party or
an institutional buyer will expect a 9%-14% return on their investment, and that note has to be discounted for the
entire 30 year term even though the payors may sell or refinance in 2 - 5 years.
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