Selling a Mortgage – General Information:
CEG specializes in buying owner-financed mortgages.
First, what is an owner financed mortgage or deed of trust? An owner financed
mortgage or deed of trust is created when the seller of a real estate property
is also the bank for the buyer of the property. For example, assume that you own
a property free-and-clear (without a mortgage) and that you want to sell it. If
the buyer gets his financing from a bank, you would come away from the sale with
cash. Without another investment in mind, you would probably put the cash into a
money market or certificate of deposit account earning a relatively low interest
rate. Not very lucrative….
However, instead of receiving all cash from the sale, you would hold the
financing for the buyer. In other words, they would give you a down payment (say
10%), and you would hold the first mortgage (say 90%). They would pay you a
higher rate of interest than you would earn with that CD or money market
account, and you would collect monthly payments from them for the duration of
the mortgage – usually 5–30 years. This financing concept is popular for sellers
who want a better return on their money (they might also get a higher sale price
for their property by offering this financing).
Once these mortgages are created, however, priorities can change for these
sellers who are receiving monthly payments. They may want to buy another
property, pay for a child’s college education, start or expand a business, etc.
In these instances, collecting monthly payments is no longer appealing. They
need to raise cash. How can they raise cash? They can simply sell their
mortgage! Depending upon how much money they need, they would sell the entire
mortgage to CEG or just part of it. For a discussion on selling part of a
mortgage, click on Sell All or Part.
When a mortgage is sold, it is sold for less than face value, or in other words,
at a discount. If you are receiving payments on a mortgage whose outstanding
balance is $250,000, you would not be able to sell that mortgage on the
secondary market for $250,000. You will have to take less than the $250,000 in
order to attract an investor like CEG to buy it. For a discussion on discount,
click on Why a Discount?.