Owner financed loans fall outside of the traditional lending environment. Since you are not working with traditional lenders such as banks and credit unions, you are, in effect the bank.
An experienced real estate attorney knowledgeable in owner financed transactions can help you set up the terms of the loan and prepare the documentation needed but what happens after the closing is just as important.
Note owners may not realize that there are more responsibilities to owning a note than collecting payments and depositing them into a bank account on a monthly basis.
Depending on the terms of a loan, some other obligations may include:
1.) Annual 1098 Mortgage Interest Paid statements to the borrower and IRS reporting.
2.) Accurate payment posting and payoff statements.
3.) Annual escrow disclosures.
As an owner of a real estate loan or note, you may be overlooking these federally mandated requirements.
Many note owners may not have the capacity or knowledge to keep up with these requirements so they are now looking to outsource this responsibility. To do this, they need to find a reputable loan servicing company.
There are many choices when it comes to choosing a loan servicing company; however, not all companies are the same.
When you start looking for a company to service your owner financed loans you must consider these critical factors:
1.) Is the company properly licensed to work in the state where the property is located?
2.) Will the company work with a small investor as well as larger investors? You may not want to work with loan servicers that have too many large investors as their clients because you may not get the same level of service as their larger clients.
3.) How long has the company been in business? If it is a new company does it have experienced employees who have a track record in the industry?
4.) Does the company provide consistently good customer service? Will they provide referrals from borrowers as well as note owners?
5.) Are the fees for different services you may need comparable to industry standards?
6.) Can you get your questions answered quickly or your concerns resolved in a timely manner?
7.) If the company is large and utilizes different departments to handle different business aspects such as payment processing and collections, can you reach the head of each one of those departments in a timely manner?
If you service your own real estate loans and are considering having your loans professionally serviced be sure to check with Investor Loan Services.
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If you currently own a real estate note and are in need of immediate cash, we would like an opportunity to bid on and possibly BUY YOUR NOTE! With over 20 years experience in the private note industry, our experienced staff is available to provide you with a quick quote and help make it easy for you to get the most for your note. Visit us today at www.notebuyingusa.com or contact us at 1-877-399-1211. If you are considering offering owner financing when you sell your property, please click here to receive your free copy of “10 Critical Steps to Creating a Sellable Note”.
This information is intended to be used as a general guide. It is not intended to constitute legal advice and is not a substitute for the advice of an attorney. While every effort has been taken to present the information accurately, this document may not be infallible. No warranty is made that these materials are current, complete, accurate, or suitable for any particular purpose. You should seek advice from your attorney before proceeding with any real estate transaction.
