As you may already be aware, a Contract Servicing Company is vital to the success of a Contract for Deed Agreement when used as a strategy to purchase property. It has been one of the most often used methodologies over the years for building wealth while solving problems for countless owners needing to dispose of properties they no longer need, want, can afford or have outlived their usefulness in terms of tax benefits or appreciation or cash flow, and for prospective homeowners and/or for investors, rehabbers to acquire residential and commercial property.
During period of high interest rates or times of economic crisis, such as now when the economy is in tatters, when banks have slammed the lid and locked the lending box for all except those who do not need a loan in the first place; various forms of non-traditional and non-institutional strategies have emerged to get the housing market moving again. These include the Land Contract as well as financing alternatives such as financing structuring using the All Inclusive Trust Deed (AITD) and Subject2 (an existing loan) transactions.
The owners of the Note Servicing Center (NSC) with over 35 of real estate and finance experience as Brokers, Lenders and Investors, are keenly aware of the situation and have stepped forward and up to the plate to augment services to meet the special needs of those involved in any one or more of the aforementioned niche’ transactions. The use of a a servicing company as a “third party” authority is a “built in” safeguard to minimize risk and expedite successful negotiations and closing the deal.
From experience dealing both personally and as an agent and a servicing entity the most hazardous risk innate to the Contract for a Deed) or a Subject2 or AITD for that matter, stems from the risk of the Owner failing to make the payments on the property so that it ends up in foreclosure. Additional risks are the failure of the owner to pay annual property taxes causing the vulnerability of the property being sold at tax sale. In the case of a Common Interest Development, the HOA have also been known to be in default, causing the property to be encumbered by Assessment and Penalties.
If you are considering a Contract such as a Contract for Deed as a method to ultimately acquire real estate or as a means to build wealth through moving your rights under the Option to a third party purchaser, consider how you plan to manage those risks at the time the transaction is structured. You may want to require as a condition of the transaction that a third party servicer be contracted with to help reduce these risks. With the agreement in your contract with the Owner, the NSC can set up your account so that the underlying mortgage is paid and if the taxes and insurance are not being paid as part of the amount due the underlying lender, NSC can set up your servicing to pay the Owners mortgage from your Contract of Sale payment. If there is excess funds due the seller/landlord, we can forward those funds also or if not due them, can deposit them electronically to your account.
With proper documentation and sufficient funds held in and escrow/impound account, we can also pay property taxes and hazard insurance. Of course arrangements must be made for the NSC to receive the tax bills and insurance invoices. The timing of the due dates on the underlying mortgage, the clearing of the Contract for Deed payment to be confirmed as good funds rarely coincide with the due date of the underlying, therefore, we require at least one months mortgage payment be collected at the time of set up of the account. This method helps to mitigate late payments to the lender when the contract payment is not made in a timely fashion.
The Note Servicing Center is licensed by the Department of Real Estate and cannot lawfully withdraw trust funds from other investor accounts to cover the mortgage payments of the seller/landlord when the tenant is late. There is no magic stash of cash from which to draw. The good news is: We are able to make it possible for you to acquire property and build wealth using the skill set by taking care of the minutia, the details and administrivia that generally drains the fun and profit out of what could otherwise be a successful and profitable transaction.
The Note Servicing Center provides ACH automatic withdrawal from your account or payment coupons and envelopes. We keep accurate payment records and payment paper trail for your use when qualifying for a loan to purchase the property.
THE NOTE SERVICING CENTER OFFERS:
- Automatic withdrawal from the Tenants account for payments
- Deposit funds electronically into your account or by your agreement with the tenant/optionee, will pay the underlying mortgage obligation
- When funds are deposited into the NSC escrow will pay taxes and insurance
- Provides monthly statement of account
- Provides year end IRS statement
- Sends out late notices
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