Posted by Dario on May 08, 2007 at 20:48:03:
Although very few, there are a couple of companies I kow of (Again not many) that will actually buy this type of paper provided the buyer’s employment can be verified and has been employed a minimum, I think, of 2 years.
The buyer should be in a postion of being able to make the monthly payments calculated at about 2% more of the target interest rate (i.e., if 8%, calculate at 10%). Also, he may need to put down at least 5% down (as always the more the merrier) and the terms of the note should be tweeked to make it more saleable.
If, say the buyer can put $4,000 down and the seller carries a $76,000 note it may look like this: N=240 I=9.50% PV= 76,000 PMT=708.42 with a balloon payment in 5 years of $67,841.69. This situation sometimes applies to people that don’t have a social security number or have very bad credit, but again, I know of a couple of companies that actually buy this type of note. If you don’t like ballon payments you can add a step payment, increase the monthly payments, etc.
I actually had almost the exact same transaction not 2 months ago happen that is why I’m chiming in.
Of course I would rather see the opinions of John Behle, Michael Morrongiello or David Butler for a more accurate take on this scenario.
marketable simo close note? - Posted by lukeNC
Posted by lukeNC on May 08, 2007 at 14:12:23:
I’m attempting to get in on this stuff…
I have a seller who owns a home free and clear, its worth about $85k, and is selling for $80k and is willing to carry a note. The buyer has no credit but $3000 to put down.
So the note would be 8% fixed, 30 year amortized with a principal balance of $77k.
Seller is looking to net $60k from an immediate note sale. Big problem i see is a “no credit” buyer.
How possible is this?
A Marketable Note… - Posted by Michael Morrongiello
Posted by Michael Morrongiello on May 09, 2007 at 24:36:01:
Luke:
When you say the buyer has “no credit” are you sure he does not have only derogatory credit? Cause that is consider BAD credit not simply a “no credit” situation
Buyer is putting down less than 5%, on a new sale, with a new HIGH LTV loan to value unproven Note and no track record of payments. Truthfully the 8% interest rate is also low for this sort of borrower…can that be tweaked as well?
To offset the no credit - does a VOR exist? Water bills, electric bills, Does the proposed buyer have strong stable employment, etc.?
It very well may be possible to take on this type of note with some additional positive feedback and hard documentation.
I would rather see the Note seller share some of the risk with either HOLDING the Note for a few months to establish this so called No credit buyer can and will make the payments OR lower the LTV - loan to value of the 1st lien that would be seller financed to around $60K or less - then we buy this Note and have the seller retain a subordinate 2nd lien…
So, its feasible but more detailed info is warranted.
Warmly,
Michael Morrongiello
www.sunvestinc.com