Archive for June, 2008
With or Without Recourse? Clarifying the Endorsement When You Sell a Note
June 12th, 2008 categories: Selling Your Note
You should practice safe recourse, or at least be aware of the risks if you don’t. When I buy a note, I need to have the note properly endorsed to me, very much like a check is endorsed from one person to another:
“For value received, pay to the order of Little Johnny Cakes,” signed and dated by the note seller. This is written on the back of the note, or on a separate piece of paper that is then permanently attached to the note (an allonge). But there’s another aspect to the endorsement . . .
After identifying the new owner of the note, it should say “with recourse” or “without recourse.”
June 12, 2008
For value received, pay to the order of Dawn Rickabaugh, with recourse.
Sigmond Seller:_____________________________________
With Recourse:
If the endorsement includes the words “with recourse,” it means that the note seller is guaranteeing the note. If the Payor doesn’t make the payments, the note seller is agreeing to make the payments to the keep the note buyer whole.
If I’m the note buyer, then I would want the seller to agree to a recourse loan . . . that adds another layer of protection for me. If a seller is willing to endorse “with recourse” it probably means he is expecting the note payments to keep coming in, and is not hiding some known problem with the note.
Without Recourse:
A note sold “without recourse” means that the note seller doesn’t have to be on the hook for the money if the payments stop coming in.
If I’m the note seller, I would probably want to sign “without recourse.” I don’t want to take a big discount and then have to guarantee the note payments as well. It’s a point of negotiation between buyer and seller.
The silent endorsement: if nothing is mentioned about recourse either way, guess what? The note is sold with recourse . . . that’s the “default” setting. Sellers are often unaware of this, so it can become a point of contention if the note buyer all of a sudden starts demanding payments 2 years down the road when a problem arises.
It’s just better to discuss it and establish it clearly within the endorsement on the back of the note. As always, it’s best to consult with an attorney to understand the complexities and variations in your state.
Related Reading:
- How to Endanger the Sale of Your Seller Carry Back Note: Lose the Original
- Insist on Insurance When You Create a Seller Carry Back Note
| Discussion: 2 Comments »
The REO Conspiracy: What Happens When the Banks Own Everything?
June 11th, 2008 categories: Real Estate News
“Conspiracy” is a good word to use if you want to get some attention . . . did it get you to read this post? If what’s going on with all the foreclosures, failed short sales and mismanaged REO’s isn’t a conspiracy, well then . . .
Well, I guess I really hope it IS a big conspiracy because I don’t feel happy thinking that so many high-paid, Harvard-trained market makers are so stupid. It’s more fun to think that some Reptilian alien race has taken over in a
sinister plot to humble the US of A by creating a telepathic mind link to all those high-powered Wall Street types who were caught without their aluminum hats on.
OK . . . that was probably more than you wanted to know about the workings of my mind, but before you roll your eyes and click away to the next blog, let me tell you something about a market snapshot I just took.
I’ve been talking to a real estate broker over in the South Bay area who has been doing probate work for over 25 years. He’s very experienced, well-respected, and carries at least 20+ probate listings at any given time all over L.A. county. I noticed recently that he was sending out distressed email flyers to other real estate agents saying, “Freaking Bring Me a Buyer, Will You??? The probate attorney wants to get paid!”
In all seriousness, the properties that are fixers are really hard to sell at “market” because FHA won’t lend on fixers. He was begging me to submit something so he could move his process along, so I did – all cash offers on behalf of some investors that I know, but guess what? At half his listing price, or less. Why?
Case in point:
- 3 bedroom, 1 bath home, 1,080 sqft in Los Angeles 90002
- Listed currently at $224,900
- 265 Days on Market
- 4 comparable properties ACTIVE between $149,000 – $168,900
- 3 PENDING properties from $113,900 – $169,900
- 1 SOLD in the last 4 months at $160,500
- Everything else is EXPIRING unsold
When I ran a title search to see what was closing, I saw that out of 18 deed transfers, 13 were obviously trustees deeds. That means that 72% of the property transfers were from banks foreclosing and taking back property. So anyone trying to sell a house in that neighborhood was competing with REOs who really do have to sell at some point, whether on the open market, or at an auction (where they’ll get even less).
Umm, when Trustees Deeds represent almost 75% of property transfers, there’s a problem, and one that will continue to feed on itself in a negative fashion, with or without Reptilians.
So here’s where I’m saying to this probate attorney,
“Frank, (his name has been changed) you’ve got to get some of your clients to consider carrying paper on this stuff. They could use Seller Financing to get a decent price, and if we underwrite the deal properly, they can sell the note and still be better off than taking the low-ball cash offers an investor is going to make. Even taking .80 cents on the dollar on the note, they’re going to probably walk away with at least $25,000 more, bottom line.”
I think I got his attention, so we’ll see where that conversation goes. But I need to go . . . this post is already too long.
So, make a comment, will you? Or email me to explore this whole idea.
| Discussion: 3 Comments »
San Marino Real Estate Market Report- March 2008
June 7th, 2008 categories: Real Estate News
Can the housing market go down another 10% or 20%? “Sure,” grumbled Robert Toll, CEO of Toll Bros.
The head of the nation’s biggest homebuilder had reason to be grumpy . . . Toll Bros. just reported its third straight losing quarter. Revenue has fallen 30% from this time last year. Toll went on to say the housing market was in a “depression” and that recovery could be up to three years away.
“I believe the industry will continue to face rising pressures,” echoed D.R. Horton CEO Don Tomnitz, “for certainly the next 12-18 months. 2010 will be the earliest we get a more solid homebuilding environment.”
So how did San Marino do in March of 2008 compared to the national decline of 14% for the month of March, and the home builders’ stresses?
Well, any time you see such a dramatic reduction in inventory, you know changes are afoot. 14 homes sold in 91108 in March of 2007, only 6 in March 2008. That represents a 57% decline in the homes sold. Holy cow.
However . . .
The odd odd thing is that prices are going up, on all accounts. Median home price in San Marino for 2008 was $2,100,000, up 57% from March 2007. Weird, isn’t it? I don’t know, I guess for the short term I’d have to say that sellers are better off now than they were last year. But it’s kind of like a particular stock making a large leap in trading price on low volume . . . it may not have the support it needs overall.
So will the home prices last?
I mean, in what other city are sellers getting MORE than 2007 prices??? Crazy! Perhaps God loves San Marino . . .
I’d have to say I’m not so sure. It feels like that odd green air just before a tornado touches ground . . . things are just a little too quiet.
If you are going to need to sell within the next couple of years, SELL NOW!!! Or be prepared to wait at least another 3-5 years for things to turn around.
How can prices continue to rise when foreclosures (vacant properties) will represent 75% of the transfers recorded in L.A. County within the next 6-9 months??? Most people tend to think that some areas are divinely protected, and some really do seem to be. The thing is, there are national and even global influences yet to shake out, so don’t get lulled into a sense of security just yet.
If you need to sell within the next couple of years, sooner is better, and price it right out of the starting gate, for heaven’s sake. Chasing the market down isn’t nearly the wonderful exercise it sounds like it should be . . . Pilates is way better.
| Discussion: 2 Comments »
