I am a part of a growing group of note business professionals known as “note finders” who are making it easier than ever to sell real estate notes. We are simply individuals that help note sellers find a buyer. Also known as cash flow specialists or note liquidators, note finders collect and organize information about potential note sales so that people who buy notes can easily determine if the stream of income is right for their portfolio.

Note finders serve to inform note holders of their options. We also help to streamline the process of selling a cash flow by helping note holders to understand the process.

I can also be very helpful to someone looking to offer seller financing to expedite the sale of property. Note finders know what types of note terms, interest rates, down payments, and payment schedules note buyers prefer, and are familiar with what kinds of yield rates are typical.

Therefore, an experienced finder can give home owners pertinent information to structure a new note so that it sells quickly.

As a note finder, I have an in-depth understanding of the private note industry. Consequently, I am able to approximate the value of most secured cash flows and offer educated estimates of how much a note might sell for on the open market.

Keep in mind that note finders do not act on the behalf of either the note holder or the buyer; we represent ourselves, and do not provide counsel to either party. I can give you an idea of what makes a note attractive to buyers as well as present information about a note to potential buyers, but will not assist either party with the decision to finalize a note deal.

Please take a moment to look through our website and consider how we may help you with your private residential or commercial financing needs and mortgage notes.

It is our desire to help you make the correct choices when considering the creation or sale of your notes and to find the right buyer and resources with which you may realize the highest return on your notes.

Please contact us at anytime with questions or for a free, no-obligation quote.

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Regards,

The De Novo Notes Team

How term affects note pricing

When deciding to liquidate a seller-financed note, the first step is uncovering how much the note is worth. To do that, it’s best to get inside the head of the note buyer.

Note buyers always want a good deal, so most of them will usually begin by conducting a quantitative evaluation of the numbers on a cash flow. The two factors that buyers look at first are the note term and interest rate.

To illustrate, consider these two similar notes with different terms. Assume that both notes have a balance of $100,000 with a fixed interest rate of 8 percent.

The first note has payments of $733.76 per month over 30 years (360 months), while the second note will be paid off in 10 years (120 months) at $1,213.28 monthly – a term three times shorter. For this example, assume that the buyer is looking to yield 15 percent on the remaining payments.

If no payments had been made towards the $100,000 balance, the buyer’s offer at 15 percent would be $58,030.25 for the 30-year note and $75,202.55 for the 10-year note. Based on the figures alone, you can see that the second note with the shorter term will receive a much higher offer.

An “interesting” consideration

The interest rate is also an important point for buyers when they start their note evaluation process. Specifically, buyers look for interest rates that are “just right” – neither too high nor too low. Interest rates that are too high will make it difficult for the payer to meet her monthly payment obligations, making a foreclosure likely.

Conversely, when the interest rate is too low, many buyers find that the amount they can pay for the note typically won’t meet the seller’s needs. As a result, many buyers will avoid making offers on notes with extremely low interest rates because past history has shown that these deals can be difficult to close.

Yield vs. Interest = Discount

Here is the critical point: the amount of the discounted offer that a seller gets from a prospective buyer is usually a direct result of the difference be­tween the interest rate and the buyer’s yield. A note with a lower interest rate forces the buyer to make up his yield from the balance instead of the interest that accrues each month. So, as the difference between the note’s interest rate and the buyer’s desired yield grows, the offer to the seller decreases.

This effect can be illustrated using two notes, both written for $100,000 and amortized over 30 years. The first has an interest rate of 3 percent and payments of $421.60. The second note is amortized at an interest rate of 10 percent with monthly payments of $877.57.

If the buyer wants to yield 15 percent on the remaining payments (with no payments made yet), the offer for the first note would only be $33,343.04 on the 3 percent note, but $69,403.75 for the 10 percent note. Remember that the balance on each note was $100,000, so the discount is $66,656.96 and $30,596.25 respectively.

Any experienced buyer who runs these figures will realize that almost all note holders would find a discount of $66,000 or more on their $100,000 note very difficult to swallow. A few buyers might consider lowering their personal yield requirements in an attempt to reduce the discount – if the note has other compelling attributes. But generally speaking, when it comes to notes with extremely low interest rates, most buyers will have a “thanks but no thanks” attitude, not wanting to waste their time – or the seller’s.

Sell Fast Without Sacrificing The Asking Price

The problem

When it comes to selling real estate, one of the largest obstacles sellers face is a depressed market. When market conditions are poor, it is nearly impossible to sell at the seller’s desired price point, even if the property has attractive upgrades such as an updated kitchen or new flooring.

With traditional property sales methods, the only way to prevent the property from sitting on the market indefinitely is to drop the price. But in cases where the seller is unwilling to lower his asking price, this is not a practical solution. Without an alternative strategy, the seller is forced to keep the house on the market for an extended period of time with an unrealistic asking price, hoping for the right buyer to come along. And we all know that “perfect” buyer might NEVER materialize!

Privately financed real estate sales, however, can be the perfect solution for these “tough sell” situations.

 The seller finance solution

Many home sellers are turning to private financing to get rid of properties fast without dropping the price. It makes sense because a price reduction doesn’t always work – especially in a highly competitive or depressed marketplace. Private or seller financing is a powerful tool to remedy real estate situations that otherwise look grim.

What makes seller financing work in this type of environment is that it attracts an additional group of potential buyers – thereby opening up a unique, untapped market and increasing the chances of a successful sale. These potential home buyers who aren’t able to buy a house via traditional lending are the key to the seller finance solution.

A large percentage of people throughout the country cannot get approved for bank funding to buy real estate because of their credit situation. Many of these people are still in the market to buy a house, however.

The “credit-challenged” are often frustrated with the limitations of apartment living or being renters. These individuals view the seller finance option as a great opportunity to stop throwing away money on rent and start living the American dream of home ownership.

A savvy property seller who recognizes this opportunity can salvage an unfavorable situation and turn it into a bona fide seller’s market. By using this type of creative financing, real estate sellers could actually end up getting MORE than their original asking price, even in a depressed market.

The home buyer also comes out a winner because he can now purchase a home that would otherwise be out of reach. And if there is a real estate agent involved, she also benefits by collecting a commission from a successful property transaction that would not have taken place via traditional means.

It’s one of those rare situations where everyone at the negotiating table gets what they want.

Turning the sale into cash

So what happens if the buyer does not put down a substantial initial payment and the seller needs additional cash to purchase another property? That’s where the beauty of seller-financing comes into play. It’s possible for the seller – now the mortgage holder – to turn around and sell the mortgage note for a lump sum of cash.

Finding a potential buyer for a mortgage note is easier than most people would even imagine.

As a professional note finder, I specialize in helping holders of mortgage notes get immediate cash for their paper asset. Contact me if you hold a mortgage note, whether it’s a newly created seller-financed cash flow or a more mature note – I can help you get the cash you need.

Seller financing is a popular way to sell real estate without dropping the price. When the property owner is willing to “carry back” a note, many advantages can result:

• generate a steady payment stream for long-term income

• obtain a higher selling price

• reduce the time required to find a buyer

• increase the overall sales closing ratio

But the key to success with seller finance is recognizing the opportunities to use a note to sell a property… and knowing how to find eager private finance buyers.

The challenge: A different demographic

Home owners who are willing to offer a private loan to sell their property typically don’t have any experience in finding individuals ready to buy a “high ticket” item like a house directly from the owner. Just as in any other sales endeavor, finding the right customers is half the battle. Orchestrating a successful seller-financed real estate deal is no exception.

 In order to pursue private seller financing to sell a home, a property owner will need to attract home buyers who do not have adequate credit to buy real estate – a significantly different demographic than with bank-financed real estate sales.

So, in order to get motivated buyers interested, the seller will need to use a targeted marketing technique designed specifically for the “unconventional buyer’s market.” The most effective advertising methods to tap into this distinctly separate pool of buyers might surprise you.

Unconventional marketing

The seller’s best strategy for finding credit-challenged buyers would be to list the property in places that are frequented by individuals who do not have a real estate agent. The newspaper is one of the best places to start putting out the word.

The majority of home buyers looking for seller financing start by searching the “For Sale by Owner” ad listings in the local paper. Even in today’s Internet-dominated business world, newspaper advertising continues to be an effective means to reach those looking for seller-financed deals, so it makes sense to start here. A simple sale ad including the line “seller financing available” or “credit issues OK” should catch the attention of the right potential candidates.

Additional buyers for a seller finance real estate deal could respond to an advertisement on an online classified website like craigslist.org.

Craigslist.org is currently one of the most widely-used, low-cost online consumer sales websites, and provides a very powerful advertising network all across North America. By including the search terms “seller finance,” “seller carryback” or the acronym “FSBO” in the online ad text, a home seller could alert many potential buyers to this opportunity to buy property – even for individuals with bad credit history.

Orchestrating the deal

Once an interested buyer is located, and the details of the initial payment, payment term, interest rate, and any necessary clauses are established, the buyer and seller can move forward to create a seller-financed note. The details of the note creation are easily handled with standardized templates or the assistance of an attorney. Then the paperwork is recorded at the courthouse, and the note deal is cemented.

As a note finder, I specialize in the field of secondary finance. If you need to know more about selling real estate with private cash flows, I will be happy to help. I can also facilitate an immediate cash settlement for the property seller after the note is created.