Well, 2013 is here. Let’s start the year right, what do you say?
If you will be selling a property this year by using an owner carryback, please consider doing the following to protect yourself and create the strongest note possible:
1. Ask your buyer to run his own credit report and give you a copy. If he refuses, find another buyer.
2. Get the biggest downpayment possible.
3. Use a minimum interest rate of 7%.
4. Amortize. No interest only payments.
5. If a balloon payment is involved, don’t have a due date before 7 years.
6. Use a 3rd party servicing company to collect the payments for you.
A risk always exists when you decide to take the place of the bank and agree to allow your property to be sold by offering a seller carryback. The biggest risk of course is the risk of foreclosure, with its financial and emotional pain. The stronger the terms, the less the risk. This way you protect yourself as much as possible on the downside. And, should you decide to sell your note, the terms you created will be more attractive to a potential note buyer and help to maximize the cash you receive.
Happy New Year!