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 Lets face it.  Most people, who took back a note on a property, really didn’t have a choice in the matter.  The property they were selling may have had a few complications.   The buyer may not have qualified for a bank or FHA Loan.  The property may have been on the market for a considerable period of time and the seller decided to hold the note.  The property was in need of repairs so that the town would not issue a certificate of occupancy or the property could be in a rural area where banks generally do not finance.


One rule that note holders need to understand is the smaller the down payment, the more difficult it will be to sell the note on a full purchase.   Generally speaking, less than 10 percent of a down payment will be difficult to sell the note for a fair price.   Our suggestion is wait till there is at least a 15 percent equity build up in the property before exploring the sale of your note.   Try to keep the term of the note no more than 20 years.   The longer the term of the note the greater the discount will be in the general market place.


A shorter-term note, less than 12 years, would make more sense to sell on a full purchase.   If the note exceeds 15 years, it might make more sense to sell the note on a partial.   Consider selling 5 or 10 years worth of payments.  This way you receive the cash you need today and still receive financial security in the note down the road.  You get the best of both worlds.  This will also minimize the discount you are receiving on your mortgage note.


NO MONEY DOWN TRANSCTIONS:  Do realize when you sell a property with no money down, it impacts the desirability of your note in the marketplace.  Initially there will be very little interest in that note.  As time goes by and your new buyer is making timely payments your note will eventually be saleable.  Expect to wait at least 3 to 5 years from the sale, to selling a no money down note.  At that point there should be some equity build up in property.  Here again, a partial sale of note is more likely in the mortgage holder’s best interest.


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