Posted by mike on November 30, 2000 at 22:23:07:
I would go to a note buyer website and see what their criteria is first so you will have an idea how to structure the note and what the criterias are on which they will accept, seasoning, creidt scores etc play big on how much of a bite they will take out of the note.
basic premise here it seems is 'sell the note before you create it"
my owner created mortgages - Posted by bill
Posted by bill on November 30, 2000 at 20:59:38:
I have a number of rehabbed properties that I would like to sell. I had considered offering owner financing and then selling that note at closing…are there many buyers out there? Obviously, I would want to work with such a note buyer from the start to ensure that the note and the new homeowners met their requirements to ensure I got the best price for my note…any suggestions?
Bill
Re: my owner created mortgages - Posted by David Butler
Posted by David Butler on December 01, 2000 at 15:11:33:
Hello Bill,
JohnBoy is right… owner financing is just one more tool in your dealmaking kit, and it should only be used when it BEST meets the NEEDS and objectives of the parties, as opposed to alternative financing structures.
Seller carryback financing tends to run in the inverse of the economic cycles affecting institutional lending markets - during “easy money” cycles, such as those we have been through these past six years, private paper originations tend to contract. This was particularly so with the emergence of the high LTV subprime markets that exploded during this last “easy money” cycle. However, the recent hemmorraging in the subprime markets has helped to set the stage for an increasingly “tight money” cycle to begin developing again.
During “tight money” cycles, private paper tends to have a strong resurgence… an event that looks like it has already begun to reemerge. And I will have to disagree with JohnBoy on one minor point… even during this past “easy money” cycle, there have been numerous instances where alternative financing options did not meet the NEEDS of the deal participants, either in the subprime, or the conventional lending markets. This is particularly so when either the buyer, the seller, or both, are investors… which brings a whole other layer of financing strategies to the bargaining table.
Certainly, owner financing should be looked at in every transaction… but only on its merits in facilitating that transaction. You may find it helpful to have a look at several recent posts I made in the Cash Flow Forum, at:
Buying 2nds
http://www.creonline.com/cashflow/wwwboard3/messages/8648.html
and, more particularly,
Creating Notes for Max Resale
http://www.creonline.com/cashflow/wwwboard3/messages/8611.html
This last one will provide you with the link to a very important FREE report directly related to your objectives, with regard to NOTE GRADING/PRICING GUIDELINES.
Hope this helps, and best wishes for your success!
David P. Butler
Re: my owner created mortgages - Posted by JohnBoy
Posted by JohnBoy on December 01, 2000 at 08:17:25:
Why take a discount on a note when you don’t need too???
If you can find a note buyer that will buy the note, then trust me, you can just as easily, and more likely, easier, find a bank to finance them just as well and have a lot less hoops to jump through!
To get a decent price for your note they will require the SAME criteria as a lender would if not more.
The time to consider selling a note is when you have a deal that you carried the financing on and later you decided you needed to get the cash out of the deal. You are unable to get your buyer to refinance to cash you out, they have to much time left to go on paying on your note, so you sell it instead to get your cash now! Other than that, WHY create a note to sell at closing just to have to discount it when you don’t have too?
Work with a good mortgage broker that has programs to get your buyers financed. If the buyer can’t get financed through a lender with all the programs available today, then you would have a very hard time finding a note buyer as well. The only exception may be taking a BIG discount on your note.
Also, most note buyers want a 80% - 85% LTV first. You can probably find lenders to beat that by getting your buyer 90% - 95% LTV with you only having to carry back a second for 5% - 10% vs. 15% - 20%. More cash in your pocket at closing and NO discount to take on your note!