What am I likely to get for this note... - Posted by BP

Posted by BP on May 14, 2007 at 19:43:08:

Thank you both for your replies!

What am I likely to get for this note… - Posted by BP

Posted by BP on May 14, 2007 at 11:18:18:

Hi, I am selling a SFH on terms, and will be getting the follwing:
price: $79,900
down pymt: $2,000
1st mortgage: $77,900
int rate: 9.5%
P & I: $655/mo.
length: 30 years fixed
pre-pay penalty: 4 years (6 mos. interest)
buyer will put down 2k, has credit score under 550, no seasoning, good rental pymt history.
What can I realistically get for this note?

Re: Pluses Vs Minuses - Posted by Michael Morrongiello

Posted by Michael Morrongiello on May 14, 2007 at 18:56:04:

David is on target- some additional input - Here is how we shake it out and look at things.

Draw a T Bar and on one side Add up the (+) PLUSES and contrast them on the other side with with the

Low money down
sloppy credit payor
Marginal Low credit scores
prepayment penalty (we don’t like them!)
New sale, no proven track record of payments

Now for the PLUSES…

  • perhaps the 9.5% rate
  • what Else?

There are virtually NO Pluses or positives here…

Only seasoning this Note and creating a track record of proven payments will alleviate some of the perceptions of risk. Either be prepard to do that or find another better suited credit buyer - or see about bringing in a clean credit co-signor as well.

My .02 cents…

Michael Morrongiello
Author of Paper into Cash- the Convertible Currency - Creating Marketable Real Estate Notes

Re: No Wine… - Posted by David Butler

Posted by David Butler on May 14, 2007 at 12:20:32:

before its time!

Hello BP,

Given the down payment and credit situation presented, I believe you are going to have to sit on this note for some time to let it gain some seasoning, a solid payment history - and for me personally - at such time as it has gained at least 10% Payor Equity (combination of down payment plus reduction of loan principal).

That being said… there may be a buyer who would consider doing a partial purchase for perhaps 50% of the note balance. There may also be a local investor who might be willing to buy the whole thing, though I believe you likely be looking at roughly 65 cents, to maybe 70 cents on the dollar maximum, if the investor is an astute note buyer.

Just not a strong enough Payor, nor protective equity, to make this an attractive deal on the surface, in terms of the broader market of potential note buyers.

If you are an investor yourself, you may find some good use for this paper, even in the near future, in terms of buying another investment property, or as part of an exchange accomodation. Obviously it will have to be the right situation, in order to achieve maximum value - but it is another possible avenue for gaining liquidity and much value as possible in the near term.

Hope that helps, and best wishes for achieving your objectives here. And…

Have Fun For A Living!

David P. Butler