How Much Can You Really Sell a Note For? - Posted by Frank

Real Estate Investing
1

Posted by Mark-NC on April 03, 2000 at 16:29:47:

Frank,
To make it short and sweet. It all depends on the payor, the structure of the note and the property.

You can expect up to 95% and more insome cases if structurd properly.

Mark

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How Much Can You Really Sell a Note For? - Posted by Frank

Posted by Frank on April 03, 2000 at 14:19:09:

I was talking to a seller last night who was willing to finance the deal but didn’t want to hold a note for more than 5 years. I told him he could sell the note for cash and his response was “yeah, but I’d only get 50% or less of its face value”. I didn’t know how to counter this statement. So that leads me to my question - in general, how much can you really sell a note for? (in terms of percentage of face value).

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There is NO standard answer - Posted by Michael Morrongiello

Posted by Michael Morrongiello on April 03, 2000 at 18:07:57:

Seller financed notes created are considered real NON conforming paper in a mortgage industry that is known for its conformity.

Over the years there have been attempts to “merge” the two industries closer towards one another. (this is good and bad). Yield spread premiums, discount points, Sub - prime lending programs and many other “sub - prime” lender products have come from creative deal structuring techniques.

When creating a seller financed note there are several key areas to be address that will determine what that note is worth if sold for cash.

  1. How much cash as a down payment from buyers ?
  2. What type of property? (residential, commerical, land, etc.)
  3. What is the payor credit profile like, their credit scores, and thier employment background?
  4. What is the interest on the note?
  5. What is the amortization term & payment amt.?
  6. What is the starting LTV% point for the note?
  7. IS the note seasoned or newly created?
  8. Is this a quick flip resale with a large run up in value, etc.

On a properly set up & structured seller carry back note that secures a residential type property that is owner occupied, our firm and many other note funders can fund 93% -95% and occasionally more of the outstanding principal balance of note obligation. We do it all the time. However don’t expect us to fund at a 90% LTV on a sub-prime situation.

Michael Morrongiello