Paper offers question - Posted by PBoone


#1

Posted by Farr on October 20, 1998 at 09:42:46:

Good point Marvin! Sometimes I get so focused on one point, I miss telling about the obvious

Tom Farr


#2

Paper offers question - Posted by PBoone

Posted by PBoone on October 19, 1998 at 15:00:04:

There was an add in the paper that read:
"2nd position mortgage $7250.00 12% 5 year balloon"
Talking to the guy here are the particulars
Purchase Price - $145,000.00
10% down $7250.00 cash $7250.00 note
No seasoning buyers have blemished credit. (old bk)
I offered the guy $1000.00 for the note because of no seasoning and such a high LTV.
He said that others were offering $5075.00 or 30% discount.
My question : Does only a 30% discount on such a high LTV sound right? This is my first offer for a note. What other way could this have been approached.
My personal opinion: To High of LTV
Pat


#3

Re: Paper offers question - Posted by Marvin Seawood

Posted by Marvin Seawood on October 19, 1998 at 22:10:43:

Pat,

In addition to what Tom said, there is an additional
risk to purchasing such a small second - if you did
not get paid, would you be prepared to keep the first
current while you foreclosed on the second?

Marvin


#4

WHOA, Nellie! - Posted by Farr

Posted by Farr on October 19, 1998 at 17:07:27:

Tell me your name isn’t Pat Boone!

Kidding aside, I wouldn’t touch this one, Pat. The buyers certainly don’t have any commitment if they’re using a note as a down. It isn’t any wonder they’ve had credit problems in the past.

My opinion on real estate notes is that the COMBINED loan to purchase price should NEVER exceed 80%. Banks don’t do it without PMI or government guarantees! Why should investors? Did you notice that I said loan to purchase price versus loan to value? Oftentimes, note sellers attempt to pump the value of the collateral to make an otherwise undesirable note appear worthwhile.

Run, Don’t Walk From This Seller!

Tom Farr