Why Should I Take Payments When I Sell?

Why Should I Take Payments When I Sell?

Would you like to know ALL your options before making such an important financial decision?

             To anyone reading this, the assumption is that you are trying to sell a property and you are considering selling quicker by taking back a second mortgage note however, you may have some reservations or perhaps don’t quite understand all of the advantages. First of all, let me tell you my feelings: I do not want just cash! If you get large chunks of cash for the equity in the house you have to pay excessive taxes on it and the money just disappears. So my question is really simple: Why would you ever want to take cash? Let me give you several points to think about…


             The mortgage note secured by your house with monthly payments coming in is going to produce a steady monthly income. (I will explain later just how secure it is, and why financially you will be better off if they don’t make their payments and how we totally have verified the Buyers are legit). These checks will keep coming in if you are alive and well, sick and in the hospital, or dead and gone. Surely you realize that even though you write a contract with payments coming in for 25 or 30 years, the buyer of the house may refinance or resell the property in 8 to 10 years or whatever and cash you out, but for a long period of time you are going to receive these steady checks. Young families and older people alike who are looking forward to retirement should think about having a higher interest on their money like 5, 6, 7 percent on their money as opposed to less than 2% per year currently being paid. To help the buyer(s) one could structure the payments on a graduated starting smaller at first and increasing as time goes by. You could later perhaps sell the note later, and with the payments you already collected, have possibly received the full amount of the original mortgage note that was created.


             By selling the house this way you will be able to claim your profits on the installment sales method. Simply put, you will be able to claim them as you receive them. The IRS Form 6252 is the Form that will be used. Always check with your accountant or CPA along with your Attorney before you sell this way, to be sure of all the options available to you at any given time, as law are always changing. 


             By selling you house this manner, normally you don’t have to take discount, but in fact sell at or above market value. This should improve your monthly income from the mortgage note. You will sell faster and for more because you will be selling to a larger group of buyers who under today’s very strict standards are keeping them out of their chance to purchase now, even though they make a great monthly income.


             The monthly income stream can be used for some other monthly payments you have or will acquire in the future. You could take the mortgage note and trade it for other properties or for a car. It is a marketable item that has value (correctly structuring the mortgage note will increase the value). Let me give an example: If you sold your house that had equity of $40,000. And you received $400 month for that equity but, you needed the cash to buy a new car. If you used the cash to purchase the new car, what would he have to show for it in 5 years? Yes, the car would be free and clear and worth much less in 5 years, because you were going to take the cash today and pay for the car. However, if you received the $400 month and part or all went towards the car payments in 5 years the car would be paid off but, you would still be receiving the monthly payments for years. If it was a 30 year mortgage note you could go and buy a new car every 5 years five more times. Remember the tax savings by selling on the installment sales method.

I see that most people have never been educated on the value of receiving monthly payments, what they are and what they can do. This is the way Americans used to do business before the Banks got involved. Now the Banks have gotten such a hand on it that people have forgotten how to be creative. 

I have been trained by Attorneys and Title Companies. I have done a lot of these transactions. I protect all interests in the transaction and they are always closed at Escrow/Title companies and overseen by an Attorney. There are many ways to give or take title to a property that can be either advantageous or dangerous depending on the specific situation and protection of your interest as needed (Lease/Option, Uniform Real Estate Contract, All Inclusive Trust Deed, Contract for Deed, Land Contract etc…)

                                         Sellers Benefits                                                                                                                                  

*More qualified buyers
*Fast closing                                                                                                                                                                   
*Large Down Payment (for your further security)
*Easy way to sell properties that do not conform to traditional lending guidelines
*Higher selling price; no appraisal needed (although buyers are advised to obtain one)                                  
*Tax deductions, may qualify for deferred gain (always check with your CPA)
*Great way to establish cash flow secured by real estate
*Higher rate of return than money market accounts
*Position can be sold for quick cash at a later date

                                        Buyers Benefits                                                                                                                                                               

*Full benefits of ownership: all profits; tax benefits; exclusive rights to use the property, subject only to the terms of the mortgage               *None of the hassles of qualifying for or obtaining an institutional loan (although the seller could ask for a credit report)            
*Negotiate terms (length, rate, payment amount)
*Low closing costs; no lender fees                                                                          
*Fast closing                

                                     DUE DILIGENCE PERFORMED ON ALL BUYERS 
All transactions Close through a Title/Escrow Company or Attorney

The below Screening & Verification process is performed on all potential Rent, Lease, Lease with Option, or Owner Finance Buyers of Your Property:

*A completed credit application is done (approved by Mortgage Broker with the “Ability to Pay”)
*Copies of Driver’s License.

*Full name and date of birth for all occupants (including children).
*Social Security Number(s) for all adult occupants.
*Full Residence History for all adult occupants for the last 2-3 years, including: address, name of landlord(s), contact information for landlord(s), dates of residence and reason for leaving.
*Full Employment History for all adult occupants for the last 2-3 years, including: name of employer, contact information, tenant/buyer title, tenant/buyer supervisor and tenant’s income.
*Name and account number for Bank accounts (savings and checking).
*Two emergency contact numbers – must be two nearest relatives not living with the tenant and/or buyer. Get the Name, relationship, address and phone number. It’s best to get the name of parents when possible.
*Get the Tenant / Buyer written authorization to verify the information provided and to obtain a credit report or any other supplemental information that you might need in the approval process.
*Have the Tenant / Buyer pay to pull a credit report. Call this a “non-refundable application fee”.
*Screening includes a Verification and Validation of: SSN Validation, OFAC/Patriot Act Search, Evictions and Suits, Liens and Judgments, Bankruptcies, Criminal Records Search, Sex Offender Search, Collections, Social Security Death Index, FICO Score, Validate Applicant Identity, Name, Address, & SSN Name Match.
*The Tenant/Buyer will have substantial skin in the game with the Money Down through an Option Amount for a Lease Option or Down Payment with an Owner Finance situation. Enough for one to be quite comfortable and make it worthwhile if you had to take property back and do it all over again. Ask me how I know?
*Dodd Frank & Safe Act Compliant (If applicable)   

All Seller Financed transactions are closed by a Title Company, or a real estate Attorney, and are subject to the Dodd-Frank Act and the SAFE Act. A Residential Mortgage Loan Officers (RMLO) is used to approve the Buyers as if they were getting standard Bank loan, to prove that the Buyers do qualify for the seller financing, and have the “ATP” Ability to Pay for the Seller Financed loan. All Buyers must also pass our screening and background process as listed above. After you have all this information you as the Seller must approve of the Buyers as well. Always consult with your licensed CPA and/or your Attorney.

The possibilities are endless as there are Sellers and Buyers.