This episode breaks down the mechanics of converting an owner finance deal into immediate cash through a pre-arranged note buyer. The Georgia lakefront lot faced a buyer’s HELOC failure, forcing a pivot from a $95K cash deal to $110K owner financing. By reverse engineering note buyer terms upfront (80% buyout at closing, 50% down payment requirement, specific interest rate parameters), the deal structure allowed immediate exit at roughly $90K while avoiding months of payment collection or uncertain note marketplace exposure.
Key Takeaways:
- Reverse Engineer Note Terms Before Signing: Line up your note buyer first and build their requirements into the owner finance offer, rather than hoping to sell the note later on platforms like PaperStack where buyer pools and timelines are uncertain.
- Bump Owner Finance Prices 20% Minimum: When converting from cash to seller financing, increase the total price to account for the note sale discount (typically 80 cents on the dollar), maintaining your target net proceeds despite the structure change.
- Negotiate Commission on Exit Value, Not Sticker Price: Push for commission calculations based on your actual cash-out amount rather than the inflated owner finance list price, or negotiate the commission percentage down to offset the difference.
Tune in to hear the complete breakdown of structuring table close note sales, including how to position terms with buyers and manage the double close process at closing.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital vacant land funding partner. So today I just wanted to go in a little bit more depth about some of those deal updates I’d provided end of last week. Specifically about that lake front lot in Georgia that ultimately we
decided to take an owner finance offer on it, but lined up a note buyer to exit us out of the property. So we could fully get back the cash that we were anticipating and not have to be stuck potentially collecting payments longer term. Obviously, it’s always the pros and cons.
collect a whole bunch of notes. You can create consistent cash flow. Your overall returns can be higher. You have to be careful, know, net of inflation and general costs running your business. But generally that that’s going to be the case with appropriate interest rates versus exiting out sooner with tableclothes, selling the note or potentially seasoning the note a bit.
longer. So in our case, and similar for most funders, we’re always looking to get our cash out ASAP since the level of acquisition activity and the cash that we need on hand is more significant than most other businesses within the land space. the way that we strategized for
this one, you know, you have a whole bunch of options. Like some folks say, yeah, I can just take a one or financing offers. and you know, either hold the note, or think, okay, yeah, maybe I can sell it or maybe listed on paper stack for instance. but you’re not entirely sure who your buyer pool might be or how long you might have to season the note. So to me, I would rather reverse engineer the terms of the
owner financing so that I have a table close note buyer ready. And so we can just cash out of the deal as if it was a cash deal. So, you know, assuming your asset is of high quality enough and that you can meet the note buyers terms they request. Generally, you can expect to exit at about 80 cents on the dollar.
for the total sticker price of the deal. So in this case, for this lakefront lot we had in Georgia, initially we had negotiated up to a 95k cash offer with 50,000 that was going to be provided via cash and the remainder via HELOC from the buyer. However, the buyer’s HELOC fell through
Um, so then he had initially proposed owner financing now had to go back to that option. Um, but because we were, uh, you know, going to consider it, um, but then we had to, again, reverse engineer our anticipated, um, exit, uh, you know, with a note buyer, um, cashing us out of the deal. So, you know, if we just stuck at that same, you know, 95 K cash price, but had owner finance.
our total return is going to be significantly lower. So, it’s pretty common knowledge. Yeah, generally with owner finance deals, you want to have a higher price than just a cash deal whenever possible to account for some of the inherent risk or if you’re looking to sell the note like we would. So, I just tried to quickly reverse engineer.
you know, adding 20 % on top of that 95 K, which is like roughly 114,000 said, okay, yeah, we could do this on our financing, but we want to exit at roughly the same amount. Um, the buyer came back at 110. You’re like, okay, it’s still a little bit lower, but I still want to exit this deal. We’ve held this asset for longer than I would like. Um, so, you know, we’re going to be short a few grand from what we were anticipating at that 95 K.
cash price, but it’s not much. So we can accept that. And then going back to my note buyer and what really helped here too is that we had the buyer was willing to do a 50,000 down payment. So that de-risks the property significantly for a note buyer. They normally would request a credit check. In this case, they were willing to waive it because
the down payment was so significant, know, nearly half the value of the property. And so got their interest rates terms, you know, the, the, the max length of years they were willing to, you know, underwrite the, property from a, you know, note holder perspective and, you know, willing to waive a prepayment penalty because the buyer was requesting that. So,
We lined up all of those terms and then also confirmed with her note buyer, hey, here’s the asset, confirming that you can cash this out at 80 % of the value of this property. because we knew them well, I’m like, yeah, I’d like to exit at 90K, roughly. I could be more satisfied with that. So if we just took 110 and 20 % off of that, it ends up being at 88. So we were actually able to.
you know, our note buyer was like, I can, I can get you up to 90. It’s okay. Um, so it was more of a relationship play from that perspective. And, you know, it helps us feel a little bit better. Uh, cause you also have to account for the commission that, you know, assuming you’re using a realtor is being charged on that total sticker price, not the value that you were being cashed out of the deal from. So
that naturally would cost a bit more. We were about to pay 6 % on $95,000 cash. Now it was going to be on 110,000. So it’s a bit more significant. So we also went back to our broker and like, hey, just so we can eat a little bit less pain here, do you mind if we adjust the commission to be associated with that exit price that we’re anticipating, roughly 90,000?
just going back and forth with the brokerage, they weren’t able to do that, but we were able to negotiate just a point off of the commission instead. And actually we had them at 5%. So it was even a little bit better. So we went, we got them down to four total there. that roughly equates to what we would have expected from a commission payment based on the total cash out value versus the sticker price. So.
You know, we’re always trying to be mindful of that. And if you can save a couple grand here and there from a property, it’s just worth asking. Especially if you have a better relationship with a realtor and hopefully bring in more business in the future there. So that’s the way that we handled.
that piece. And then we just got all the terms that the note buyer was expecting. We translated that over to an offer sheet for the buyer of the property. And we still had RLC as the note holder via and seller finance deal. So we don’t actually have to bring in the note buyer to over complicate the deal. We just bring them in at the time of close.
with the closing attorney. So then they can provide all of their various paperwork and it’s effectively a double close situation. So you basically assign over the note. We get cashed out of the deal upon closing and then the note transfers over to the note buyer. So pretty simple process from that end reduces the complexity a lot so long as you can reverse engineer.
the terms beforehand. So to me, I would always try to get that type of lined whenever possible versus like taking the risk. I gonna, you know, potentially have to wait for longer on paper stack? Do I really know the buyer pool for these assets from a, you know, note buyer perspective?
I would rather reverse engineer and get squared away, even if it is possible. Maybe I can get like a little bit better rate on paper stack or, maybe I couldn’t meet the terms that the buyer was wanting in relation to note buyers that I know. So then you have to consider other options potentially, but in this case, we were able to, you know, effectively get this done within 24 hours.
make an adjustment and you know, we were signed on the offer ready to close with our attorney and, know, exit this deal in less than 30 days. So, at least from a closing perspective, again, we’ve held this one for several months. had to take it off market and back on market. So not, my, my favorite asset at the moment, but it’s still going to be a favorable return for us. probably even better than I was expecting compared to, a couple months ago. So.
Just wanted to share how we structured this one. And hopefully this helps you utilize certain strategies and tactics in your own business. I’ll let you know how things go when we actually close out of this one. We also had a prep and amortization calendar for the buyer to just FYI. You can have your note buyer prep that as well. That was just one other piece to mention there, but
We have another possible owner finance deal that we’re going to take a look at as well. But hopefully this was helpful. If you’re looking for funding, SeriousLand.Capital or Land Daily Diligence Facebook group for zero cost review of your land deals and LandPricer.ai for the most accurate and simple way to price land. that, take care, subscribe and share. Bye.
