Several first time home buyers find the experience to be a demanding one. The economic and psychological advantages of purchasing a home for the first time do not shock most people. There are several things involved in buying a home that the naive home buyer could be unaware of and need to know.
The first thing to be aware of is that buying a home is complicated, and employing a real estate agent will make the process much less difficult. Agents understand how the process works; they have information on neighborhoods, and real estate markets that the average person does not. Around every bend, your real estate agent will be there to help with all the questions you have.
Next, know what you want before you begin looking at or visiting houses. If there are important features you are looking for in your first home, build a list of them ahead of time. Your realtor can not read your mind, if you let her know what you are searching for, this will help to narrow down your search. If there are certain features you are searching for in the neighborhood you reside in, express these to your agent as well.
Then, consider questioning mortgage lenders before looking at houses. See as many financial groups as you can; this will guarantee that you receive the mortgage that is right for you. Think about your finances, and decide in advance what you can afford. If your lender offers you more than you have said you are able to afford, you do not have to take it all.
Fourth, when you begin visiting properties for sale, you ought to bring a notepad and a digital camera. You will view as many as 10 properties in a typical trip, remembering all the features of each one will be difficult. An easy rating system for the properties you view as well as a catalog of distinguishing features will help you recall the homes you preferred. Write down notes on neighborhood features as well; this is just as crucial as remembering the best features of the properties you see. All this might not be required if you really like the first house you view; however, it is best to be prepared.
On a final note, be ready for a lot of financial expenses involved in buying a home. Home buyers that have not gone through the home buying procedure previously might be aware of the down payment cost, but they may not realize there will be other financial obligations involved. A down payment is 1-3 % of the whole cost of the house. First, however, you will need to offer earnest money. Earnest money is put down at the time of the primary offer you make on a house; it proves that you are sincere. The home buyer will also incur some closing costs, which includes anything needed to process the deal. You must be ready to cover all of these costs from the outset of the house purchasing process.
The Office of Federal Housing Enterprise Oversight (OFHEO) today released the maximum conforming loan limits that will be in effect through year-end as a result of The Economic Stimulus Act of 2008. That legislation permits Fannie Mae and Freddie Mac to raise their conforming loan limits in certain high-cost areas. The new limits are a function of median home prices as estimated by the U.S. Department of Housing and Urban Development (HUD).
The maximum for temporary conforming loan limits, which apply to loans originated in the period between July 1, 2007 and December 31, 2008, are as high as $729,750 for one-unit homes in the continental United States. Two, three and four-unit homes have higher limits as well. Fannie and Freddie are reported to be working out new underwriting standards and expect to begin offering the new loans soon.
The Fed’s economic stimulus package approved earlier this year called for temporary increases on conforming and FHA loan limits to allow troubled borrowers to refinance out of sub-prime loans and make it easier for many new buyers to qualify for mortgages in high-cost areas, particularly in California where home prices remain among the highest in the nation. As a secondary effect, it is hoped that this will act as a stimulus to encourage buyers back in to the market.
Before this relief, many buyers in California needed to finance with Jumbo loans just to purchase medium income homes in many of our metropolitan markets. A jumbo loan, or non-conforming loan, is simply a loan that exceeds the conforming loan limits. Because Fannie Mae and Freddie Mac do not buy these loans, the secondary market for jumbo loans is less competitive, and as a consequence, the interest rates for these loans are higher. Jumbo loans are also more stringent in overall requirements for qualifying. At some points in 2007, the credit crunch experienced by banks made Jumbo loans difficult to obtain, even for those borrowers with superior credit.
To view a list of the new FHA Mortgage Limits by county, go to: FHA Loan Limits by County
When the housing market is hot, it is not uncommon to see potential home owners thinking about getting a 50-year mortgage to lower the cost of mortgage payments. Like any new style of doing something, there are those who swear by it and those who do not. However, when looking at mortgages, how long is too long? Generally, 25 years is the standard rate for a mortgage as it gives relatively low interest rates, while at the same time not cementing the homeowners into a long mortgage that they may not be able to get out of.
Looking at the 50-year mortgage, it is easy to see the appeal of having a lower mortgage payment. Looking at a $300,000 fixed rate mortgage of six percent interest, the monthly payments for the mortgage will be $500, before interest. This wonderfully low payment comes at a price, and it is committing to half a century of mortgage payments, twice as long as most people. If bought in the right time, you could end up paying much less than what your property is worth. However, getting a mortgage when the market is low does not often entail 50-year mortgages. Typically, this will be done when the market is high and mortgage prices are inflated. As a result, for 50-years you can be paying too much for your house, even as it dips in value due to extraneous circumstances.
Many potential homeowners will go with a 30- or 40-year mortgage instead of a 50 year mortgages. However, while they are shorter and have the benefits of low mortgage payments, they entail long mortgages for houses that may dip in value.
As a potential buyer, you never want to force yourself into a commitment that could last longer than you. Getting a 50 year mortgage may seem like a good idea because of the low mortgage payments, but you may think differently in 10, 20 or 30 years. You will be paying your mortgage twice as long as everyone else. If you are 30 years old when you get this mortgage, you are going to be paying it until you are 80 years old! That is 15 years longer than you will most likely be working, which puts a big strain on your finances when you are living off of your pension or retirement savings.
Getting a long mortgage, longer than 25 years, can seem appealing but there is a lot more to consider than just low mortgage payments. If you are planning on getting a house worth more than you can afford over 25 years, it may be a better idea to get something in your price range.
Never try to get a mortgage longer than 30 years, you may end up paying much more than you ever expected to. It is best to go around 20 years, giving yourself ample time to pay it off, without getting too deep into the length of the mortgage.
Home Mortgage Grants – Free Money For First Time Home Buyers (Never Pay Back)
There is a lot of help for those who have an existing mortgage or are looking to buy a new home and need a mortgage. First time home buyer grants are just one of the many forms of government financial aid that is available, which are often provided regardless of income or credit.
By obtaining a first time home buyer grant, individuals can receive as much as $20,000 to help them with a down payment or closing costs of a new home. In some cases government programs for new home owners can help individuals reduce their mortgage rate and provide instant equity in a new home.
Particularly now, after the mortgage crisis, banks and lenders have made it very difficult to get a mortgage. In most cases they will not accept anything less than a $20,000 down payment. For a first time buyer who wants to purchase an average priced home in the $200,000 range, it can be quite difficult to come up with $40,000 in cash. Even with those funds, more money is still needed for closing costs, attorney fees and taxes.
That’s where mortgage grants and new home owner grants can help by providing the cash needed to purchase that first home. Generally as long as the new buyer owns the home for at least 3 years, the money never has to be repaid. A grant is tax-free cash provided with no interest and no repayment required.
By searching a grant directory, individuals can quickly find funding programs that are currently available. All the information on how much money is available and how to successfully apply is provided, and can potentially help obtain an even greater deal on the purchase of a new home.
How to Get More Than The Asking Price For Your Property
When the number of real estate buyers is greater than the number of available homes, real estate property values usually go up. It’s an ideal environment for sellers because buyers are forced to compete, and properties usually sell quickly – often for even more than the asking price!
But as more properties go on the market, buyer competition subsides. Prices level out, and eventually drop. Most assume this is a bad time to sell a home. But in fact, it can be the best time for educated sellers to tap into a little-known market, using the creative power of seller financing.
A seller’s best strategy
With the help of a professional Note Finder, a seller can open the doors to buyers normally locked out by traditional financing. A so-called “down market” is the ideal time for resourceful sellers to target the millions of people who can’t get funding. These buyers are often willing to pay more in order to buy a home without traditional financing.
The seller sets the price, determines and accepts a down payment, and then finances the remaining balance. The buyer gets a home without having to fully-qualify for a traditional loan. It’s a favorable situation for both seller and buyer. And while this “outside of the box” form of financing can seem a bit daunting, it can happen very smoothly and easily with the knowledge, experience, and guidance of a professional Note Finder like me.
Here is an example: If the seller wants $100,000 for the property, and the buyer gives the seller $10,000 cash, the seller will finance the balance of $90,000. The buyer and seller would then agree to the terms, such as the interest rate and the total term, and use an attorney to create the mortgage document and close the deal. From that point on the buyer sends the seller monthly payments for the house he has just purchased.
A great opportunity for sellers
The whole process can really be that simple. But there are some substantial differences between a seller-financed deal and one that relies on traditional bank funding.
First of all, the seller will not receive a large one-time payment at the time of the sale. In fact, she will only receive the down payment. Since many home sellers are also looking to buy another property, the seller may need to get enough at closing to pay her down payment. Without this payment, the seller’s hands could be tied when she looks to purchase another house. There is a common solution to this issue that offers the potential for even MORE money to the seller!
Note Finders specialize in helping new mortgage holders sell newly-created notes for a lump sum of cash. In the end, seller financing could be used to sell property at a higher price than expected and the sellers could get the money they need. Essentially, sellers can “have their cake and eat it too.”
In summary
Step #1: Use the seller-finance option to find unique customers willing to purchase at a higher price than would have been possible otherwise.
Step #2: Decide on the terms of the deal and create the note to complete the real estate transaction quickly.
Step #3: If the property seller needs immediate cash, contact me to help locate a buyer for the new mortgage note. The person who buys the future payments from the seller will likely provide the funding to act as a down payment on a new house and every party involved in the deal comes out smiling.
Equity attracts Note Buyers
One key to liquidating a seller-financed mortgage is found in the property’s equity. The equity in the private note essentially acts as a “safety net” for the Note Buyer, in case there is a problem collecting the payments. So note buyers find deals with strong equity more attractive.
Remember, a Note Buyer is purchasing monthly payments secured by property. If the property is worth more than the remaining balance of the note, the buyer could seize the extra value in a foreclosure situation by reselling the property. This allows the new Note Holder to recoup his initial outlay and receive the additional equity.
Most Note Buyers will do a quick equity check before looking at any other information. By first determining the note’s Loan-To-Value (LTV), buyers can decide whether to dig deeper or move on. The LTV is calculated by comparing the balance of all of the loans to the value of the property.
Two equity examples
To illustrate, let’s consider two houses, each valued at $100,000. One home has loans of $95,000 and the second home has loans of $70,000.
The first home has an LTV of 95 percent (95k/100k = 95), indicating only 5 percent equity (100 – 95 = 5).
The second home has an LTV of 70 percent (70k/100k = 70), showing 30 percent equity in the property (100 – 70 = 30).
Clearly, most buyers will not be as interested in the note on the first home because there is virtually no protective equity. In this situation, the buyer of the note would want to discount the note purchase a fair amount to make up for the fact that there is little equity.
The second note with 70 percent LTV will require less discounting, and the Note Holder will receive a larger portion of their note as compared to the note balance. This is because the Note Buyer stands to benefit from holding a substantial amount of equity in the property (30 percent) if the Payor were to default on their obligation.
How Does Down Payment Affect Note Value?
For many Note Buyers the amount of the initial down payment at the time of sale can make or break a note deal. The down payment is applied directly toward principal, creating instant equity in the property. Accordingly, most Note Buyers want to confirm the amount of the down payment up front.
With no down payment, it would take many years to build a meaningful amount of equity in the property. Take a look at the following example that illustrates this point.
House #1: valued at $100,000, with a down payment of $20,000 made at the time of sale.
House #2: also valued at $100,000, but with zero down payment made at the time of sale.
The note on House #1 has $20,000 in equity. No down payment made on House #2 means that there is no equity in the property before the first monthly payment is made.
Consider how much “upfront” money there is
Assuming that House #2 was sold for $100,000 with a 30-year note amortized at 8 percent interest, it could take years to build $20,000 in equity.
Because the Note Holder’s purchase is protected by the equity in the property, the amount of the down payment is an important consideration. With the zero down note on House #2, the Note Buyer would need to apply a larger discount in order to make it a fair deal for him. On the other hand, while the note on House #1 is secured by a $20,000 down payment and has substantial protective equity even before the first monthly payment, it would cost the Note Buyer a lot more.
Almost any note deal can be a good deal… for everyone involved
A strong down payment lends a side benefit related to having protective equity. When a large down payment is made at the time of sale, that person is more likely to be committed to owning the house and keeping up with the note payments. Seller-financed deals with zero down payments are very attractive to first-time home buyers or others without a large nest egg saved – but it can be riskier for the Note Buyer. So the educated Note Buyers can offset this risk by increasing the discount on low or zero down payment notes.
Remember, even a note created without a down payment can be a sound purchase. The key is to look at each situation individually and to establish a fair price based on the specific note.
Even when liquidating private mortgages at a discount, Note Sellers still get to receive a lump sum of cash immediately instead of waiting years – decades, even – before the debt owed to them is paid.
The bottom line is that a qualified professional Note Finder can bring a benefit to both parties – the Note Holder and the buyer. In the end, when a deal is struck, everyone wins and ends up in a stronger financial position.
How Creative Home Sellers Have The Advantage
Creative home sellers offering seller financing can often sell their houses faster in a slow market – often at a higher price! In the process, these sellers act as the “bank,” and begin to receive monthly payments instead of a lump sum of cash.
So what happens when those offering seller financing need an immediate lump sum of cash instead of scheduled future payments? Locating a buyer for the newly-created cash flow could be the answer.
To get the money they need, sellers that offer financing could sell the future mortgage payments they are set to receive.
How sellers get quick cash for their notes
This process can be streamlined when the savvy home seller lines up a buyer for the payment stream before the note is even created. This way the property seller could have a buyer for the payment stream ready to make the purchase as soon as the new private mortgage is created. Once the closing and the note sale are complete the seller will have the money she needs for her next home.
Finding the buyer for the seller-financed mortgage is the tricky part. Buyers won’t line up at the door. In fact, they don’t often browse the newspaper or the web looking for people with notes to sell. This is where the professional Note finder comes in!
Note Finders are real estate professionals that specialize in connecting the people who create notes with those who buy them.
While I do not assist with the creation of a note, I can provide general recommendations about the types of terms that are attractive to Note Buyers. With my knowledge, experience, and connections within the secondary finance industry, I can save home sellers a lot of time and effort when liquidating a note. Most importantly, I can help locate a buyer for your note and make the process smooth and easy.
When working with a property seller who needs a lump sum of cash immediately after selling real estate, contacting a finder like me early in the process of creating the real estate note makes sense.
By involving a Note finder before a note is created, the property seller can receive valuable input about the payment characteristics that Note Buyers prefer.
And for any completed seller-financed deals, a qualified Note finder can help Note Holders obtain a large amount of cash in exchange for future payments.
Greetings,
My name is Sydney Griecci. As a professional note finder, I specialize in developing creative cash solutions; namely, I help note holders receive a lump sum of money in exchange for their secured real estate notes. I can also show home owners how to sell their property with seller finance.
Once a real estate note is created, it can be sold for cash shortly after the close of escrow. Existing notes can also be sold to achieve cash liquidity.
Additionally, if you are looking to purchase a paper asset for your own portfolio, I have the resources to show you many viable opportunities.
If you are an attorney, CPA, real estate agent, mortgage broker, title agent or escrow officer, I can assist you in helping your clients realize quick sales of hard-to-sell properties through the use of private financing.
If you would like to learn more about the creation and/or sale of secured private notes, please contact me directly.
Join my mailing list or subscribe to this publication by leaving me your contact information. I can be reached at email at sydney@smilingdogenterprises.com.
Sales of newly built homes plunged in May to their lowest level in more than four decades after a lucrative tax credit expired, draining demand for home purchases in all four regions of the country.
The Commerce Department reported Wednesday that sales of new single-family homes dropped 32.7 percent in May from the previous month, to a seasonally adjusted annual rate of 300,000. Analysts surveyed by Bloomberg had predicted a decline of 18.7 percent.
The percentage drop was the largest monthly decline since the government started tracking the numbers in 1963. The annual rate was also the lowest on record. New-home sales fell by double digits in every part of the country, led by a 53 percent drop in the West. Even compared with a year ago, new-home sales were down by 18.3 percent.
Although new-home sales are dwarfed by activity in the existing-homes market, they are closely watched because the construction industry contributes to job creation and economic growth.
The dismal May sales results add to disappointing housing data that suggest buyers are retrenching, possibly because fears about job security are trumping today’s tantalizingly low mortgage rates and home prices. Industry reports show that sales of previously built homes also fell in May as mortgage applications continued to sink.
Many economists say the expired tax credit is distorting the latest housing numbers. To qualify for the credit, buyers had to sign a contract by April 30 — complicating efforts to gauge the housing market’s health in May. The thinking is that the tax credit lured people into buying homes sooner than they had planned, thereby eating into May sales.
“The tax credit expired as the peak home-buying season kicked off,” said Mark Vitner, senior economist at Wells Fargo Securities. “Imagine what would happen to retail sales if they canceled Christmas.”
The sales numbers are adjusted to remove seasonal variations so economists can spot the underlying trend on a month-to-month basis. Sales would typically rise in May. But instead, they dropped and the seasonal adjustment exaggerated the declines in sales and prices, said Stuart Hoffman, chief economist at PNC Financial Services Group.
The government’s report shows that the median price of new houses sold in May was $200,900, down 1 percent. The average price fell 0.7 percent, to $263,400.
“It will not be until later this fall and winter that we will start to get a ‘clean read’ on the condition of the housing market,” Hoffman wrote in a note to clients.
Economists also said the number of new homes sold in any given month is so small that slight changes can register as big percentage differences, making the monthly data volatile.
The new-home sales figures capture only the number of contracts signed in May, not the number of contracts closed.
To take advantage of the tax credit, buyers who signed a contract by April 30 must close on it by June 30. Senators have proposed extending the closing deadline to Sept. 30 because of reported delays in the processing of mortgage applications, including problems with home appraisals.
The report’s only upbeat figures involve the supply of new homes, which fell slightly, from 214,00 in April to 213,000 in May, the lowest level since November 1970. Getting rid of excess supply is key to stabilizing prices. But new homes are taking a long time to sell, with more than half lingering on the market for at least 14 months, the report says. In a healthy market, 5 months would be the median time, according to IHS Global Insight.
Sometimes a private mortgage can be more hassle than it is worth. There are actually many good reasons to sell your mortgage, and all of them truly benefit the seller of the note.
1. The first good reason to sell a private mortgage is that you will receive the cash immediately upon settlement with the mortgage note broker. This means no more waiting for monthly payments to come through. Not to mention the hassle of late or missed monthly payments. All of that stress will be eliminated as it becomes someone else’s problem, not yours.
2. Maybe you would like to pay off your own mortgage? If the value of the mortgage is near to or equivalent, or even better, more than the value of your current mortgage, then one great thing you can do with the cash is pay off your own mortgage. Really, nothing feels better than paying a mortgage payment for the last time.
3. If you have some annoying small or large debts, or taxes, then the cash from selling your mortgage can go a long way to reducing these debts. It is so important to reduce those debts that have the highest interest rates first, and selling your private mortgage can help you do this.
4. With the extra cash from the sale, maybe it is time to look into some investment opportunities. Maybe you have had your eye on a solid investment opportunity, but have just never had the money to get started. Selling your mortgage note may just give you the leg up you need to kick off some quality, good incoming producing investments for your future needs.
5. If you have sold your mortgage note, cleared some debts and paid a few bills and there is some money left over, then nothing will be stopping you from taking a vacation. Maybe you have always had a dream holiday planned, well selling your mortgage note may just give you the chance to live that dream.
Do you want to sell your mortgage note and get your cash sooner?
There is a rising trend in home sale in this country, selling your home yourself. Many home owners have come to terms with the fact that with a bit or education and effort they can sell their homes without the aid of a realtor and save some money on commissions. Now, understand that selling your home yourself does take quite a bit more effort than sitting back and letting an agent do all the work, but the final outcome can be quite profitable if the situation is handled correctly. So let’s have a brief look at some of the tactics that the average owner can utilize to sell their home without using a real estate agent.
The first step in this process will be having a complete home evaluation done. In order to be competitive with other homes for sale you will need to know the selling value of your home. This is not what you think the home should sell for but what the market dictates that your home should be sold for. Pricing your home from an emotional standpoint almost never results in success. If you want further confirmation of the proper asking price, have a few agents do a CMA on your home. This is a free service that most agents will provide and will give you a good idea of what you should list the home for.
Now let’s consider the marketing of your home. Typically agents have quite the advertising budget for home they list but this can be easily remedied by finding a few good FSBO listing sites and perhaps considering a flat-fee MLS listing. The idea behind the MLS listing is that local agents will have access to your home and it’s particulars so it becomes a viable option for their clients and you would be remiss to eliminate ANY clients that may be interested in your home.
If you have thought about holding open houses then make sure you have planned ahead for this event. It will be quite different from an agent’s open house as you have the ability to impart much more info about the home, just be careful that you don’t get too caught up in the memories and make visitors uncomfortable. After all they will want to be able to form their own opinions on the home and their own memories there if they buy it without having to remember about events good or bad that you told them about.
Also, viewers may be hesitant to express their true opinions to you the owner so be open minded and don’t take it personally if someone has some negative feedback for you. Take it graciously and use it to improve the way your home shows.
FHA Home Loan Guidelines will be changing in the near future. They are a few changes that may cost you more to get a FHA Loan and may prevent you from qualifying for a mortgage.
Change To The Amount of Mortgage Insurance Premium Cost.
One of the biggest announced changes to the FHA Policy is to Mortgage Insurance Premium (MIP). Mortgage Insurance Premium will be increased to help build up the capital reserves and bring back private lending. The capital reserves have been depleted because all of the home foreclosures.
The first step of the change will raise the up-front MIP from 1.75% to 2.25% of the loan amount. They are also planning on asking Congress for legislative authority to increase the maximum annual amount of MIP they can charge.
If they get this authority from Congress then the next step will be to shift some of the premium increase to the annual MIP from the up-front MIP. The shift will help the capital reserves to increase without having much impact on the borrower because the annual Mortgage Insurance Premium is paid over the life of the loan instead at closing. This change should go into effect some time in the spring of 2010.
Change To Minimum FICO Credit Scores.
New borrowers with less than a 580 FICO score will now be required to have a 10% down payment. In reality most lenders are currently requiring at least 620 FICO score to quality for FHA’s 3.5% down payment. This will help FHA to balance its risk and to continue to provide funds to the borrowers that have performed well in the past. This change will be posted in the Federal Register this February and after a required notice and comment period it should go into effect some time in early summer.
Reduction Of The Amount Of Allowable Seller Concessions.
The current allowable a Seller can contribute to Buyer‘s closing costs is 6% of the purchase price. This will be changed to just 3% which is in more in line with industry standards on Seller concessions. This change also will be posted in the Federal Register in February and after a required notice and comment period it will probably go in effect in the early summer.
These changes in the FHA Home Loan Guidelines could cost you your chance of getting a low down payment FHA mortgage. But there is still time to beat these changes if you get find a home to purchase and get it under contract by early spring.
FHA Home Loan Program is a great way to finance your new home with a very low down payment of just 3.5% and low credit scores. But things are changing with the FHA Home Loan Guidelines, you need to take action now to find your dream home now!
If you’ve ever taken out a mortgage with a bank then maybe you’ve experienced this: about 6-8 weeks after closing you receive a letter from a totally different lender who now has control of your loan and you are to send the monthly payments to them.
Well the original bank sold your mortgage or real estate note for cash to another financial institution that wanted a long-term cash flow investment. If you have ”owner financed” the sale of your house with the buyer you can do the same thing. Sell your deed of trust or real estate note for cash to an investor who is looking for a long-term cash flow. There are lots of different names for a note: Deed of Trust, Contract For Deed, Mortgage, Loan, IOU, Promissory Note and others. For simplicity sake I’m going to use the term note.
Let’s say you have in one hand and 0 in the other and I said you could keep only one. Well you’d keep the 0 of course but what if I told you you could have that 0 but it will be paid out at a month over the next 8 years but you can have the right now. Well that changes everything.
If you looking to purchase something really special for your family or to pay off some high-interest, nagging debts; maybe you have another promising investment opportunity, or you simply prefer not having the responsibilities and risks of carrying a Note. I can help you sell that note for cash to a buyer looking for a long-term cash flow investment.
Due to the current economic crisis, the price an investor is willing to pay for your owner financed loan has never been higher! If you are interested in finding out how much an investor is willing to pay for your real estate note call or email me today for a free quote.
1. WHO BUYS NOTES?
There are various people and companies who like to invest in real estate notes instead of the stock market, commodities or apartment buildings. They could be a one-person operation, or an office of 4 or 5 people, or 20 people, or a big investment house of 100 people. I don’t put your note on a web site forum and hope somebody sees it or market to people right out of a ”How To Get Rich Investing In Real Estate Notes Seminar”. I work with only reputable, long-term investors.
2. WHAT KIND OF NOTES ARE YOU LOOKING FOR?
I can help you find an investor for various kinds of Real Estate Notes:
• Single or in portfolios.
• Single Family Residential
• Duplex, Triplex, Fourplex
• Apartments
• Income Property
• Improved Land Contracts
• Recreational & Resorts
• Commercial Land Contracts
• Farm & Ranches
• Condos
• Vacant Land
• Bulk REO (Real Estate Owned) and real estate property portfolios
• Bulk mortgage note portfolios
3. WHAT IF THE HOME BUYER IS BEHIND IN PAYMENTS?
If you have a delinquent mortgage note I can help you. There are investors who will purchase notes that are behind in payments. If you are frustrated and not getting your monthly payments and just want to be done with the whole thing, I can help you find an investor who will purchase that delinquent note. This includes semi-performing (buyers are over 30 days late with payment) and non-performing (buyers are over 3 months behind in payments) mortgage notes. Get rid of that headache note and let someone else deal with it.
4. HOW MUCH IS THIS GOING TO COST ME?
There is no charge to you, the note holder ever. Getting a quote from an investor is free with no obligation to sell your note and the entire process is completely confidential. The borrower until the transaction is complete. The investor pays all broker fees.
5. HOW MUCH WILL I GET FOR MY NOTE?
This unfortunately I can’t answer, as there are too many variables involved. Each transaction is unique so an investor looks at several key factors for pricing. These include the type of property and location, down payment, equity, the buyer’s credit, how long the buyer has been paying you, and the terms of your note like interest and monthly payment amount. All that goes into their risk assessment and they make their offer based on that. Having said that though an average note will demand anywhere from 80 to 93 cents on the dollar depending on those factors.
6. HOW LONG WILL IT TAKE BEFORE I GET MY MONEY?
All deals vary, but normal closing time is 2 to 4 weeks once the investor starts their due-diligence process (inspection, appraisal, credit check, etc).
7. I JUST NEED SOME CASH NOW BUT I LIKE HAVING THE MONTHLY CASH FLOW.
There are a couple of ways to get creative:
Partial Purchase
A great option for note sellers because of it’s extreme flexibility and because in many cases it is possible to receive MORE MONEY than the original selling price. If you need cash right now but want to keep your note for the cash flow investment you can structure a deal so that you sell just a portion of your monthly payments for a certain amount of cash.
Let’s say that you sold your house for 0,000, the buyer gave you ,000 as a down payment, and you now have a 5,000 note at 7% interest for the next 15 years. You want the monthly income but are in need of ,000 cash right away. An investor could give you that ,000 in exchange for buying ”x” number of monthly payments, after which the note reverts back to you for the remainder of the term.
Split Partial Balloon
If your note has a certain amount of payments then a balloon payment at a certain date you can sell the payments leading up to the balloon and a portion of the balloon when it comes due. You get a lump sum of cash at closing and then receive a portion of the balloon payment when it gets paid off.
8. I HEARD I SHOULD HOLD ONTO MY NOTE FOR A NUMBER OF YEARS TO GET A BETTER PRICE.
This is called ”seasoning” the note. The reason for waiting is that you are hoping to increase the equity in the house, which will help the note command a higher price. While this could happen other variables might decrease the price of the note the longer you wait.
It’s possible that maybe the property might devalue in price. What if the homeowners rack up a lot of credit card debt buying appliances, furniture, landscaping or remodeling and their credit score goes down? What if the homeowner loses their job and they stop making payments?
An investor looks at many things when assessing risk on a note and how old the note is is just one of them. A 3-year-old note with a bad credit score might be priced less than a 3-month-old note with a great credit score all other things being equal. Every note is different. Brand new notes and 20-year-old notes are sold everyday.
9. CAN I GET CASH AS SOON AS I CREATE THE NOTE?
Yes this is called a simultaneous closing, where a few days after the close of the house with the buyer you receive a check for the note. If you’re going to owner finance your home and you know you want to sell the note this is a great way of doing it because the investor is there for the initial process and you don’t have to start over again 6 months later with another appraisal, inspection, credit check, etc.
10. HOW MUCH DOES THE NOTE HAVE TO BE FOR?
The minimum is around 20,000 if it’s under that then it’s really not worth it for the investor. So a note could be for 20,000, 50,000,100,000,500,000, million and everything in between. There are all different kinds of investors looking for all different kinds of note amounts.
11. CAN I SELL MY 2ND LIEN NOTE?
If you have a 2nd lien, where there is a bank or another investor with a more senior lien
against the property, you may be able to sell the note, but the price that you receive won’t be nearly as high. You generally won’t be able to sell those types of notes at any sort of decent price unless the buyer has put in at least 30% of his own money as a down payment or in built-up equity and has fantastic credit. Unfortunately investors just aren’t interested in 2nd lien notes or mortgages right now.
12. IF I OWNER FINANCE WON’T I ACTIVATE THE DUE-ON-SALE CLAUSE IN MY MORTGAGE. AND IF I’M ONLY GETTING A SMALL DOWN PAYMENT HOW WILL I PAY THE BANK LOAN BACK?
The Due-on-Sale Clause is a provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home. It is probably the most talked about, feared and misunderstood topic in real estate.
The link below is to a great article by real estate lawyer William Bronchick and will dispel any misunderstandings you may have about the due-on-sale and suggest a simple, yet effective strategy to get around it.
There Is No Due-On-Sale Jail
If you’re thinking about owner financing your home you can also do a simultaneous closing, where a few days after the close of the house with the buyer you receive a check for the note. If you’re going to owner finance your home and you know you want to sell the note this is a great way of doing it because the investor is there for the process and you don’t have to start over again 6 months later with another appraisal, inspection, credit check, etc.
13. WILL THE HOME OWNERS HAVE TO REFINANCE?
When an investor purchases your note, all terms remain the same. The only thing that changes is where they send the payment. If fact the borrowers are not contacted until the transaction is complete.
14. HOW DOES THE NOTE SELLING PROCESS WORK?
You’re interested in finding out about to selling your note. Give me a call or email and I’ll get some information about the property and note from you. We can do it over the phone or I can email or fax you the form. It’s an easy 2-page worksheet you can fill out in about 10 minutes. It asks for the loan balance, interest rate, length of loan, and basic information about the property. Then with the information you gave me I look for an investor who is interested in buying your note.
If I find an investor who is interested they take 2 or 3 days to crunch the numbers, assess their risk and see if it’s a good investment for them. If they are interested they make what is called a soft quote, which is their best offer before having reviewed any supporting documentation, such as the payee’s credit report and property appraisal. The quote will state something to the effect: ”subject to review of credit – assumes good credit” but pricing should not change that much unless the property value comes in low or the homeowner has a low credit score or subsequent documentation does not support the information provided on the worksheet.
If you accept their offer you’ll draw up an option of purchase and sales agreement with the investor. The investor then starts their due-diligence on the property and the homeowners. Just like selling a house — home inspection, appraisal, credit checks, copies of legal documents, payment history and verification of current balance. This enables the note investor to verify the information provided, analyze the risk, and confirm their pricing of the note.
Once all the T’s are crossed and I’s dotted and contracts signed the investor takes control of the note and the title company sends you a check.
