Iowa note holders are often farm families and small-town owners who sold on a real estate contract and have been paid faithfully since. We bring that contract or note to several buyers and show the pricing.
What holds back the price of Iowa paper.
The same worksheet comes with every offer.
| Remaining balance | $129,400 |
|---|---|
| Payments left | 168 |
| Buyer’s target yield | 8.0% |
| Purchase price | $115,000 |
| Discount from balance | 11.1% |
| Our fee | shown on every offer |
| Sell the whole note | Sell 60 payments | Keep it | |
|---|---|---|---|
| Cash today | $115,000 | $56,200 | $0 |
| Payments still coming to you | None | 108 payments of $1,140 | 168 payments of $1,140 |
| Total you receive | $115,000 | $179,320 | $191,520 |
| What you give up | Every future payment | The next five years | A lump sum now |
Illustrative example. Totals add up the payments as scheduled; they assume the payer keeps paying and are not adjusted for the value of money over time.
The promissory noteThe mortgage or deed of trustA payment historyThe closing statement from the saleSeller financing in Iowa is tied closely to the land. Farm ground is the state’s main asset, and it often passes from one generation or one neighbor to the next on a contract, with the seller paid over a long stretch of years. A retiring farmer near Ames, Mason City or Fort Dodge may hold a contract on a quarter section. A widow may hold one on the acreage and home place after the tillable ground was sold.
Towns produce their own paper. In Des Moines, Cedar Rapids, Davenport and the rest of the Quad Cities, Waterloo, Sioux City, Dubuque and Council Bluffs, owners have sold older houses and small rentals on contract to buyers who could not get a bank loan. In a county-seat town, a seller-financed sale is sometimes the only practical way a house changes hands.
The real estate installment contract is the document behind much of this. You keep legal title, the payer takes possession and pays you, and the deed is delivered when the price is paid. Iowa law provides a forfeiture process for these contracts, a way of ending the contract after a default short of a full foreclosure, provided the required steps are followed. Where a lender-style loan was made instead, Iowa commonly uses a mortgage, and a mortgage foreclosure there generally goes through the courts.
Whether forfeiture or foreclosure is the right route for a given contract depends on its terms and the circumstances. Have an Iowa attorney confirm which applies to yours, because a buyer will read the document with the same question in mind. The buyer starts from the return needed on what they pay you, and the route to recovering the property is one of the risks that moves it.
Because farm income arrives at harvest, a farm contract may call for one or two payments a year. That is normal in Iowa and unfamiliar to a buyer whose other notes pay monthly. With an annual payment the buyer waits longer between checks and learns later if something has gone wrong, so some decline and others are comfortable. When you tell us about your Iowa note or contract, state the payment dates plainly so that it goes to buyers who accept annual pay.
On farmland, buyers want support for the per-acre value, such as a recent appraisal or nearby sales, and want to know whether the ground is farmed by the payer or rented out. On town property the buyer looks at the condition of the house and how many comparable sales exist, and in a small town there may be few.
In both cases the down payment your payer made, and the principal paid since, count for a great deal. Together they make up the payer’s equity, which a buyer measures as investment to value.
Get out the contract or the note and mortgage, the abstract of title if you have one, and a record of each payment received. An abstract is the bound history of a property’s ownership. Abstracts are still in everyday use in Iowa, which is not true of every state, and an Iowa title company or attorney can tell you whether yours needs bringing up to date. Before you ask for a price, decide whether you would sell all of the contract or only some of the payments, which is called a partial. Keeping the contract is always one of the choices.
Yes. Real estate installment contracts are common in Iowa and can be sold in full or in part. A buyer generally takes an assignment of the contract along with a deed, and will check that the contract was recorded and that your own title is clear.
Mortgages are the commonly used instrument in Iowa, and foreclosure of a mortgage generally runs through the courts. Installment contracts are a separate arrangement with their own process for ending the contract after a default. An Iowa attorney can explain which applies to you.
Yes, though it changes who will bid. Annual payments mean a buyer waits longer between checks and learns later if something has gone wrong. Some buyers avoid them and others are comfortable, so it is worth asking more than one.
It can. Buyers rely on recent nearby sales to judge value, and in a small town there may be few. A buyer may order a valuation from a local agent. Strong equity and a long payment record help offset a thin sales record.