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Sellers Select Realty Services

23225 Tamyram Rd

Sky Valley, CA 92241

Tel: 760-329-3650

Fax:760-329-1265

Simultaneous Note Purchase Plan - Explanation

Palm Springs Desert Area Homes, Condos & Real Estate

The Simultaneous Note Purchase Plan

Most Sellers of real estate know about the "seller carry-back" scenario. This is when the Buyer gets conventional first position financing through a bank and the Seller agrees to carry-back a second position loan for the balance of the purchase price. Sellers know that they can then collect payments on the second position loan or sell it at a discount for cash.

However, most Sellers do not know that they can actually originate the first position loan on their property and then sell the loan for the cash they want, simultaneously with the sale of the real estate. This is exactly what our Simultaneous Note Purchase Program does. If the Seller desires, a second position loan can also be structured in the usual way.

The Simultaneous Note Purchase Plan in fact mirrors (but with much less formality) what happens with the creation of a conventional mortgage upon the sale of real property. When a conventional lender provides the Buyer with money for the purchase of a home, a Note and Deed of Trust (Mortgage) is created. This is the obligation of the purchaser to pay money to the lender in accordance with an agreed schedule. The lender almost always sells this obligation on the secondary mortgage market. The Simultaneous Note Purchase Plan is only different because it offers the Seller direct contact with this secondary market. With this Program the Seller takes back a first position loan on the property and then sells it simultaneously with the sale of the real estate.

With a Simultaneous Note Purchase, funding is done the same as with any other real estate transaction. Closing is done through a national title/escrow company of the Seller's choice within approximately ten days after all necessary documentation is received by the note purchaser. The Title/Escrow Company will issue the title insurance policy, pay off any existing loans, transfer the title, pay the recording fees and (most important) pay the Seller. The Buyer's only expense his share of the customary closing costs on the real estate portion of the transaction. The cost of the appraisal is an item for negotiation between Buyer and Seller.

Closing costs are in fact low. The Buyer is not faced with paying points, junk fees and loan origination fees. Closing costs are pretty much confined to an appraisal (around $400) and standard title and escrow/closing fees.

Some Reasons for Using the Plan

The buyer and/or seller need quick closing.
The buyer has little, bad or no credit.
The buyer lacks a down payment or a large enough down payment.
The buyer is a newcomer to the area and has not yet established stability.
The buyer is self-employed or retired.
The buyer and seller want to avoid the financial institution hassle.
The buyer has been turned down by conventional financing.
The buyer has high debt ratios; too many financed properties; previous bankruptcy or foreclosure.

Getting Full Value

Real estate sold in this manner generally sells for the full-appraised value. There is an old maxim: you can always get your price if you offer favorable terms. With this owner carry-back type of financing you are offering your buyer terms he cannot get elsewhere. Here is how financing terms affect price:

With cash or new loan, expect lowest price.
With assumable loan, expect a little higher price.
With an assumable loan and/or where seller carries second loan, expect next highest price.
Where the Seller carries first loan, expect highest price (the simultaneous note purchase program).

What About the Discount?

Whether you list with an agent or sell yourself, you will never get 100 cents on the dollar, unless someone pays you all cash at full appraised value – and how likely is that? It is not likely unless you use the Simultaneous Note Purchase Program. When you list with an agent you immediately pay a 6-7% discount (the commission). On top of that, realtor statistics show that approximately 90% of all homes listed with an agent sells for 5% less than the listed price. So this is a total discount off the price of 11-12%. And on top of that, the Seller may be asked to pick up some of the Buyer's loan fees.

However, because you are offering full owner financing, with a simultaneous note purchase you can always expect to get your full-appraised price and minimize the overall discount. The note itself will be purchased for between 90 and 95 cents on its face dollar value. But the face amount of the note is less than the appraised value of the house. You get the difference in cash and, if necessary, a second position note that you can hold or sell.

Click here for an explanation of Equity and Cash and why there is always a Discount. And find out how, with the Simultaneous Note Program, you minimize the Discount.

The Process

We Will Guide You All The Way

Place a "For Sale by Owner/Owner Will Finance" sign on your property. Next place an advertisement in your local paper. The ad should begin "Owner Will Finance, Easy Qualify." Include in the ad "No Points, No Banks Required." Then briefly list the features of your property, the price, and your phone number.
Show the property to 3 or 4 prospective buyers. Have them complete the standard 1003 Uniform Residential Loan Application and Authorization to Release Credit Information. Fax these to us. We will review the information and help determine your best prospect. We are able to pre-approve the buyer, advise you on the best structure for the transaction, the exact value of the note to be created and make a firm purchase offer. This will only change if the appraisal comes back at less than the agreed purchase price.
Have your Buyer complete a Real Estate Purchase Agreement appropriate for your State. Insert in the contract "Subject to approval of Buyer’s credit" and "Subject to Seller's ability to sell the owner financed note on the secondary market at a price satisfactory to Seller." Select a local title company and closing agent of your choice.
Collect an appraisal fee from the Buyer. This is approximately $400, depending upon the appraiser selected by the note purchaser.
We work with your title company or closing agent to create and gather all the required documents and set a closing date. Just prior to closing, our investor wires funds to the closing agent with disbursement instructions.
At closing, you create and then simultaneously sell and assign the mortgage note to our investor. The Buyer's down payment plus the investor's funds are used to pay closing costs and pay-off your lender (if you have one). You collect the balance of the funds.
Click here for some general tips for FSBOs.

Structuring the Note

There are many ways to structure a note. To arrive at a structure to suit all parties (Seller, Buyer, Investor) takes a cooperative effort and can be a back-and-forth process. To help us quickly propose an initial structure, please provide the following:

Form 1003 completed by Buyer.
Property Description: Address, City, State, Zip; # bedrooms, # bathrooms, square feet, type of neighborhood, type (condo, single family residence, mobile home, land, etc)
What is property selling for?
What will property appraise for?
Will buyer occupy property?
What is maximum down payment Buyer can pay?
What is maximum monthly payment Buyer can pay?
Is the Buyer open to a balloon payment? If so in how many years?
What is the minimum amount of cash Seller needs at closing (including down payment)?

The Paperwork

You thought you could avoid it? With real estate, there is not a chance. But with the Simultaneous Note Purchase plan there is a lot less than with a regular transaction. Email Tony to see what is involved.

Home Page

Sellers Select Realty Services

23225 Tamyram Rd

Sky Valley

CA 92241

Tel: 760-329-3650

Fax:760-329-1265

This Is Coachella Valley's Unique Real Estate Web Site

Palm Springs Desert Area Homes, Condos & Real Estate are to be found in the Coachella Valley cities of Palm Springs, Palm Desert, Cathedral City, Rancho Mirage, Indian Wells, Bermuda Dunes, La Quinta, Desert Hot Springs, Thousand Palms and Indio. These are the cities that form the Greater Palm Springs Desert Area and are home to some of the finest living and the best resort real estate in the world. If you want to sell or buy homes, condos, or real estate anywhere in the Coachella Valley, this site will provide the little known information you need and the solutions you seek.

Home Sellers

Home Buyers

Investors

Referrals

Resources

Ebook

Contact Us

Simultaneous Note Purchase Plan - Explanation

Palm Springs Desert Area Homes, Condos & Real Estate

The Simultaneous Note Purchase Plan

Closing costs are in fact low. The Buyer is not faced with paying points, junk fees and loan origination fees. Closing costs are pretty much confined to an appraisal (around $400) and standard title and escrow/closing fees.

Some Reasons for Using the Plan

The buyer and/or seller need quick closing.

The buyer has little, bad or no credit.

The buyer lacks a down payment or a large enough down payment.

The buyer is a newcomer to the area and has not yet established stability.

The buyer is self-employed or retired.

The buyer and seller want to avoid the financial institution hassle.

The buyer has been turned down by conventional financing.

The buyer has high debt ratios; too many financed properties; previous bankruptcy or foreclosure.

Getting Full Value

With cash or new loan, expect lowest price.

With assumable loan, expect a little higher price.

With an assumable loan and/or where seller carries second loan, expect next highest price.

Where the Seller carries first loan, expect highest price (the simultaneous note purchase program).

What About the Discount?

Click here for an explanation of Equity and Cash and why there is always a Discount. And find out how, with the Simultaneous Note Program, you minimize the Discount.

The Process

We Will Guide You All The Way

Collect an appraisal fee from the Buyer. This is approximately $400, depending upon the appraiser selected by the note purchaser.

We work with your title company or closing agent to create and gather all the required documents and set a closing date. Just prior to closing, our investor wires funds to the closing agent with disbursement instructions.

At closing, you create and then simultaneously sell and assign the mortgage note to our investor. The Buyer's down payment plus the investor's funds are used to pay closing costs and pay-off your lender (if you have one). You collect the balance of the funds.

Click here for some general tips for FSBOs.

Structuring the Note

There are many ways to structure a note. To arrive at a structure to suit all parties (Seller, Buyer, Investor) takes a cooperative effort and can be a back-and-forth process. To help us quickly propose an initial structure, please provide the following:

The Paperwork

You thought you could avoid it? With real estate, there is not a chance. But with the Simultaneous Note Purchase plan there is a lot less than with a regular transaction. Email Tony to see what is involved.

This Is Coachella Valley's Unique Real Estate Web Site