The Demographics of Seller Held Mortgage Notes and Deeds of Trust

Who’s interested in borrowing on seller financed mortgage, deed of trust or similar arrangement? If you decide to manage your own mortgage note you’ll be dealing with a more educated, real estate savvy group as a rule; many people don’t know that seller-held borrowing options exist, or if they do, aren’t quite sure of their advantages.

When you pursue seller financing you may have some educating to do, in order to highlight the differences between your proposed loan and institutional options. This is especially important these days, when institutional lenders have engaged in some questionable practices, but this can make your note more attractive, once you explain that this isn’t some predatory arrangement that will push the borrower “underwater.”

Aside from increased real estate knowledge, your prospective borrowers will be members of groups able to pay across shorter periods of time, such as five years. If you’re only applying seller financing to part of the loan this won’t necessarily equate to a higher income, but this will almost definitely be a factor when the note covers most or all of the property. Increased income may not be as simple as a bigger paycheck, however. The demographic includes young professionals with no children and few other debts who want to buy a home before starting a family and truly settling down, and acquiring all of the ongoing expenses that entails.

If you examine borrowers from this demographic be careful to examine not just current finances, but earning potential across the payment period. Younger professionals are more likely to switch employment, so if you have a freelancer or career climber on your hands, make sure that he’s likely to be making money wherever he ends up.

Another important group is the semi-professional or professional real estate investor. Members of this group are often difficult to assess because they are partially or completely self-employed. Take a keen look at their track records in the business, and pay attention to how stable their incomes are over time. Even if you see a career full of windfalls and dry spells that even out to a fair amount of wealth exercise caution, because a dry spell while under the terms of your loan could lead to a missed payment. Furthermore, you of course want to ensure that everything a real estate investor does is legal and transparent.

Remember, if you decide on seller financing it isn’t a straitjacket. You can always sell your note. Ask for a free quote on your note to explore the possibilities.