Your question is a good one that has been covered well on this board. For example, look down a bit for exchange entitled “note creation question” and/or search the archives. In my judgement, the amount of “proveable” out of pocket cash that the buyer has into a deal is often the primary consideration, as well as the timeliness and documentation quality of the payments.
Additionally, you will need to make some assumptions regarding property value and interest rate movements, as both of these could importantly impact the value of your note(s).
setting up notes so marketable in 2-3 years - Posted by Robert
Posted by Robert on February 11, 2001 at 23:34:49:
We sell on CFD all the time. We have lots clients that may not be able to refi in that amount of time. Yet, we will have to pay the balloon we have so, what are some basic parameters, besides credit, that make a note marketable with 2-3 years seasononig? i.e. IR%, Terms, etc.
Thanks, Robert
Robert:
Borrowing short and lending long can be VERY risk, so here is another option or exit stratergy to consider…
When a purchaser of your homes under one of your contract for deeds has some of their cash at risk, and they have demonstrated that they can make the monthly installment payments due under the contract for deed timely then it becomes VERY feasible for you to consider “rolling” these individuals from the contract they are purchasing under into a longer term SELLER FINANCED type deal. The existing contract can be amended or modified or the contract for deed arrangement can be converted into a more customary type sale with you giving them legal title, and taking back a mortgage (or trust deed) and promissory note.
Your “paper” then can be cashed out through its sale.
The nice thing about an established payment history or “seasoning” on a contract for deed is that it creates a level of comfort for any prospective paper funder (including ourselves)to acheive regarding the debtors ability to make future payments regardless of their past credit history, profile, scores.