Owner financing have come a long way from its original form as to where anyone and everyone with a little cash at hand could have an owner carried note created. There have been many stories in history how these deals where closed not with any sort of documentation but simply by a firm handshake and the borrower promising to make payments according to verbal agreement.
Due to a downturn of today’s market a greater sophistication of the industry has become more standardized, but don’t be discouraged; I can tell you common sense underwriting still drives the transaction. In essence, the owner financing industry has developed to the point whereas now it’s a marketable commodity. Mortgage note buyers now have at their disposal measurable statistics on industry trends, sophisticated financing models, as well as collection and servicing software.
This evolution is great news for individuals holding real estate notes or for those considering selling a property and providing financing, because it allows you to help protect your investment by building in a variety exit strategy whether you sell the loan or collect it to maturity.
Therefore, one of the most important thing to remember for someone thinking about seller financing is that it is in his or her best interest to qualify and gain a comfort level with the buyer prior to the sale by obtaining as mush information about the buyer as possible in order to ascertain their ability to make payments and honor all other covenants of the loan documents now and in the future.