Note marketability - Posted by David

Posted by SteveS(CPA) on April 18, 1999 at 24:14:03:

Try American Note Network.

Note marketability - Posted by David

Posted by David on April 17, 1999 at 22:34:23:

I have a property that I need to sell, 3/1 SFR in a nice community. FMV is 90-95K, bottom end in this community.

I’ve been trying to sell it for three weeks now, have generated a ton of interest, but no firm offers. If I carry back paper in two notes, 90/10, what could I reasonably expect to sell the first for? Is there even a market for the second?

Re: Note marketability - Posted by mike

Posted by mike on April 18, 1999 at 10:20:36:

why no offers? no down pmt? take a note on their granny’s house as down pmt, and then send the buyer off to get a new conventional 1st, you sell granny note. you cash out, buyer gets in no money down, everybody wins. granny could take a note on your old house for better terms than you got, and even she wins…

Notes - Posted by Sean

Posted by Sean on April 18, 1999 at 09:07:22:

Notes sell based on their payments, not on their face value. So I couldn’t tell you what your notes were worth without knowing the payment schedule.

You’ll have difficulty selling a 90% note and those that will buy it will pay you what they would pay for an 80% note. Once they have it, they’ll chop it into an 80% note and a 10% note and sell the 80% for what they bought yours for and pocket the 10% note for their trouble.

Three weeks seems like a short time to expect the property to be sold. Try a lease-option. You could move a tenant/buyer in there a lot faster, though you’d be waiting a year or two to get your money out.

Re: Note marketability - Posted by David Alexander

Posted by David Alexander on April 17, 1999 at 23:35:39:

Unless you have private funds buying the notes, you will not get anyone to go into them more than an 80%LTV for your notes. So structure your note at the 80% mark to maximize the sell. The second on the otherhand would have to be sold to a private Investor most likely, around the 50% mark max.

David Alexander

Re: Note marketability - Posted by Max W.

Posted by Max W. on April 18, 1999 at 24:34:32:

The transaction you are describing is a simulaneous closing which is also called table funding. If you find a funding source and work with them in structuring the note to meet their yield requirements, a $1,000 discount is not difficult to achieve.

Why are you doing 100% financing? Your buyers should be able to come up with some sort of downpayment (especially for a nice property in that price range.) The source of the downpayment usually does not really matter. Family members are often willing to help out. A downpayment will make the numbers work more toward your favor and make the note easier to sell. Some institutions require at least 5% down on a simultaneous deal (unseasoned note.)

If you create a first and a small second note, make sure the ITV (investment-to-value) not LTV, is 80% or less to meet the guidelines of most institutional funding sources. Your LTV may be slightly higher than 80% because of the discount. Note buyers use ITV as their buying criteria, not LTV.

Another option would be to sell one larger note (First position) and retain part of the balloon and / or payment stream (partial) for yourself in the future. This would eliminate the need to create and sell a second. Hope this helps.

-Max W.-