By Vernon Brabham
RISMEDIA, Nov. 14, 2008-As most of you know, the quickest way, and sometimes the only way, to sell a property or business is through use of seller financing. When a seller takes back a note for part of the purchase price it is much easier to conclude a sale. Why? One reason is that it makes it easier for the buyer, since banks have fairly strict lending rules, even if a buyer has a good credit rating. Another reason is that the seller can often give more lenient terms.
Now you have already ‘been there and done that’ and the fact that you are reading this article indicates you are interested in the subject addressed here.
What if after the sale you decide that you really need part, or all, of the selling price now instead of waiting months, or years. You don’t know what the money will be worth in the years to come and you don’t know if the buyer will make payments as promised. Of course, there is always the option of foreclosure, but who wants that?
In such a situation, what many sellers do not know is that the note can be sold. If you, the note holder, do not need all of the balance you can sell only a portion of it and still have income in the future. This can be done, and frequently is, no matter what you have been told. This can result in something like having your cake and eating it too! For instance, if you have a $50,000 note at 10% for 20 years and you are receiving payments of $482.51 per month, you have two options:
– You can hold the note and receive the payments, or
– You can be a creative seller of your note.
You could sell just 84 payments for $22,957 cash today then receive the note and the payments back after 84 payments, it would still have a balance of $40,530.90 You would still have most of your principal and would have the immediate use of $22,957.
On the other hand, let’s see what might happen if you hold the note and receive the payments:
– You worry about default.
– You worry about IRS income tax reporting requirements.
– You worry about mishandling of the practice.
– You worry about bankruptcy of the payer.
There are many reasons that a note-holder may need money today rather than in the future; a health issue, sending a child to college, an investment opportunity, and similar situations.
So, if any of this applies to you, the reader, or to anyone you know you should investigate the possibility of selling your note and getting money today instead of a long drawn-out future.
Vernon Brabham is a retired Optometrist who, at one time, sold his own practice. He is also a long-time entrepreneur and author.