At this point in the transaction, the Buyer has spent over $17K and the Seller has lost $57K. The remaining loan from the lender is going to be $108,000. Let's assume that at current interest rates, our Buyer will receive a 6.5% interest rate over a 30-year fixed-rate mortgage. Over a 30-year mortgage, the Buyer will spend $245,746.80 to repay the mortgage. Here is the profit and loss of a typical traditional lender real estate sale:

At this point in the transaction, the Buyer has spent just over $3600 and the Seller has only lost the $50K to pay their existing mortgage. The remaining seller-financed amount is going to be $118,800. The seller doesn’t have the overhead of a traditional lender so let's assume a negotiated interest rate interest rate of 3.5%. Since the rate is lower, the Buyer agrees to a shorter 20-year financing term. Over a 20-year term, the Buyer will spend $165,360 to repay the mortgage. Here is the profit and loss of a typical traditional lender real estate sale:

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Costs:

Down Payment: The buyer typically makes a down payment as a percentage of the purchase price, typically between 3% and 20%.

Loan Origination Fee: This fee is charged by the lender, typically between 0.5% and 1% of the loan amount.

Appraisal/Inspection Fees: These fees are paid by the buyer but required by the lender, typically between $350 and $700 per inspection or appraisal.

Title Insurance: This fee is paid by the buyer but required by the lender, typically between $500 and $1000. This insurance is to guard against any undiscovered problems related to transferring the title of the property.

Attorney Fees: This fee is paid by the buyer for a lawyer to prepare, notarize, and file all the documents generated by both parties during the purchase, typically between $500 and $1500. A lender requires a lawyer to complete the closing.

Escrow Fees: These fees are paid by the buyer but required by the lender, typically between $300 and $700. This is an administrative fee charged for the opening and closing of multiple holding accounts used to process the funds for the transaction.

Recording Fees: These are fees charged by the county of record to file the Deed of Trust and loan documents, typically between $100 and $250

Mortgage Insurance: This fee is paid by the buyer but required by the lender, typically between 1% of the loan amount initially and between 0.5% and 1% annually. This insurance is to protect the lender in case of default. This is insurance a lender forces a buyer to purchase that names the lender as beneficiary.

Initial Escrow Funding: This fee is paid by the buyer but required by the lender, typically 3 months of property taxes and insurance premiums. For our $120,000 example property, we’ll assume property taxes are $2000 and insurance is $1200.

Real Estate Agent Commissions: These fees are typically paid from the seller’s proceeds and are split evenly between their buyer’s and the seller’s agents, typically between 5% and 7%.

Old-Fashioned Bank-Financed with Realtor

Sale of a $120,000 property

Creative Financed with JMPI

Sale of a $120,000 property

Seller

Real Estate Agent Commissions

$7,000.00

$12,000.00

Down Payment

Buyer

Origination Fee

Appraisal/Inspections

Title Insurance

Lawyer/Title Fees

Escrow Fees

Recording Fees

Mortgage Insurance

Initial Escrow Funding

$810.00

$950.00

$750.00

$1,000.00

$500.00

$175.00

$810.00

$800.00

Existing Mortgage Payoff

$50,000.00

Seller Costs

$57,000.00

$7,500.00

Buyer Costs

Only 26% of the money spent by the Buyer goes to the Seller

Seller's Profit

$63,000.00

$251,041.80

Buyer's Loss

Money Collected By Others

$188,041.80

The entire process concludes 10 years faster, the tax burden is minimized, and 85.7% of the money spent by the Buyer goes to the Seller.

The Seller received 96% of the sale price even after they paid the $50,000 existing mortgage!

If there weren’t an existing mortgage to pay, the Seller would have been paid 138% of the sale price!

Buyer Costs

$3,625.00

Down Payment

$1,200.00

Buyer

Seller

Existing Mortgage Payoff

$50,000.00

Title/Escrow/Insurance

Recording Fees

$2,250.00

$175.00

Buyer Costs

$50,000.00

Seller's Profit

Buyer's Loss

Money Collected By Others

$115,360.00

$168,985.00

$2,425.00