When you sell your next house, have you thought about financing it yourself?
Most times when I suggest this, people look at me like I just grew a third eye. But really – if you haven’t considered what seller financing can do to your bottom line, you’re leaving money on the table when you sell. You should say YES to seller financing, and I’ll explain why.
Sell Your House With Financing Even If You Owe Money On It
First thing I usually hear is – “How can I sell the house with seller financing? I have a mortgage! I have to pay the bank off, right?”
Well yes and no. You can create a new mortgage for your buyer subject to the underlying existing loan – in most cases. It’s not illegal – although the bank technically doesn’t like that, and has language in the loan saying that they don’t want you to do that. It’s called the ‘due on sale’ clause.
But – you have to remember it’s your house, and you get to decide how you want to do things, not them. You can use an all-inclusive trust deed also known as a wraparound mortgage. In fact, I’ve included a snapshot of its description by a well-known title company, Old Republic, so you can be sure that your local title company can help you finalize the deal.
Tip 1: Seller Carryback Financing For Better Returns
So if you own a property you want to sell for $100,000 – just to use a nice round number, I’ll show you how it might work. Let’s say you owe $60,000 to the bank. With seller carryback financing, you can sell your house for $110,000 because it’s worth more with financing. While you don’t have to, I suggest you consider doing it with two loans in order to create the highest value to you. You’ll have $60,000 on the first mortgage held by your bank, and with a down payment of $20,000, you carry a second mortgage for $30,000 for 15 years at 8%.
Boom – you’ve just put $20k in your pocket, which is probably close to what you were going to get to begin with, minus closing costs and agent fees. AND you’ll get $286.70 every month for the next 15 years according to my mortgage calculator, unless your buyer sells first. And he probably will, because most people own their properties for an average of 7 years.
Tip 2: Let An Attorney Help You With The Paperwork
Your first mortgage will get paid down every month of course, and your agreement will stipulate that if your buyer fails to pay, you’ll take the house back and sell it to somebody else. A good real estate attorney can easily draw that up for you. It’s totally worth the money too.
An extra bonus is that you can sell that payment stream of $286.70 in whole or in part to a note investor like myself, so you can pocket your money sooner if you like. Now that’s a whole other subject here and on my company’s website because I buy notes and help others to do the same. You can take that money and use that monthly payment to cover house expenses, or a car loan, or put it in your Roth IRA after taxes.
Tip 3: Defer Capital Gains Taxes
And by the way if you sell your property by financing it, you’ll avoid paying a big capital gains tax. You’ll pay it in smaller chunks over time, which is much better. Believe me – I’ve written some big checks to Uncle Sam and it’s not particularly fun.
So how do you do this safely, and securely? You don’t want to end up with a MESS on your hands. Well – let me help you with that. I’ll email you my free FREE REPORT on the 10 Steps To Smart and Safe Seller Financing. If you do just a couple of the 10 things on the list, you’ll earn thousands of dollars more than you would otherwise. Keep it on hand when you want to sell, and follow the steps to put more money in your pocket.
And then call me when you want to sell your note – and I’ll show you how to cash out and get a lump sum.