We all know that physical real estate is sold every day, but also so are real estate contracts. Who buys real estate contracts?
It depends on the type of contract.
Selling Purchase Agreements
The most common type of real estate contract is referred to as a purchase and sale agreement. In these types of contracts, the Seller agrees to certain selling terms, and the Buyer agrees to certain buying terms. Sometimes they allow the Buyer to assign their buying rights to another party. Before closing, they sell their rights as the Buyer to someone else.
Why would a Buyer choose to assign their rights? Let’s say they convince a Seller to sell a property for a low price, and then convince someone else to buy the property for a higher price. By selling their contract and assigning it to someone else, they can pocket quick cash at closing without needing to take ownership of the property.
Many real estate investors buy and sell these types of contracts.
Selling Seller Financing Contracts
When a Seller agrees to accept payments for a property sale over time, it’s called seller-financing. When this happens, the Seller receives a contract from the Buyer promising to make payments on agreed-upon terms.
These contract types can include:
- Promissory Note
- Contract For Deed
- Land Contract
- Installment Contract
- Installment Sale Agreement
- Real Estate Contract
- Real Estate Installment Note
- Bond For Deed
Some are different names for the same type of agreement, others very in ways we won’t cover here, but all entitle the Seller to receive at least one payment (but usually monthly payments) AFTER the Buyer receives possession of the property.
Following closing, the Seller has exchanged property for “paper,” and has the option to sell their real estate contract to someone else.
In exchange for cash now received by the Seller, whoever buys the real estate contract receives the right to receive future payments.
Who Buys Real Estate Contracts? (Seller Financed)
Cash flow investors such as note buyers, private investors, Wall Street investors, and banks buy real estate contracts.
Most note buyers (such as Porch Swing Funding) and some private investors specialize in working with seller-financed contract holders.
Banks and Wall Street investors focus on institutional originated mortgages.
You can learn more about working with promissory note buyers (aka contract buyers) in the article we’re linked to in this paragraph.
Most buyers will appraise a note a no cost. Contact Us
Summary
Although somewhat niche, there’s a healthy market for seller-financed real estate contracts.
When offering seller-financing it’s good to know that contracts can be sold. It’s also good to know who buys real estate contracts in case you ever find yourself wanting or needing cash in exchange for a note you hold.
