Archive for October, 2008
Yea, Though I Walk Through the Valley of the Shadow of Debt . . .
October 17th, 2008 categories: Inspirational Notes
[Disclaimer: while a Note Queen often creates real estate notes, she apparently creates other notes from time to time . . . love notes, thank you notes, inspirational notes, mental notes, even musical notes. The administrators of this site take no responsibility for these creative aberrations, leaving the reader wholly responsible for deciding how much, if any, to discount this note.]
Doesn’t it seem like the whole world is going through a mid-life crisis?
My own personal mid-life crisis started five years ago. I quit my job as a nurse (with a comfortable 6-figure income), and just launched out into the wide wide world, wondering what I wanted to be when I grew up. The move was part genius, part retard . . .
I don’t recommend that you try this at home. It’s definitely not for sissies, which is why I really shouldn’t have done it that way. I tend to whine about minor headaches and hangnails, and use pain of any kind as an excuse to wine.
I fell flat on my face, forced to acknowledge what seemed like abject financial failure for the first time in my life. And I didn’t know how to separate my sense of self worth from my net worth, which sent me into a literal state of panic within the first year. Read the rest of this entry »
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If You’re Going to Carry Paper, Read Some Books on Seller Financing
October 16th, 2008 categories: Seller Financing, Selling Your Note
Unfortunately, too many people assume that if there is seller financing involved, there is no underwriting (qualifying) whatsoever . . . that it’s a “free-for-all.” That’s simply not true, unless, of course, you have no idea what you’re doing. <I know – a bit of a stinging remark>
Banks have whole departments dedicated to underwriting (i.e. “making sure this loan makes sense and the reward equals the risk”). Do you remember the stack of loan documents you had to sign when you got your last loan? Don’t you think there might be a reason for that?
When you’re the lender, don’t you want water tight documentation so you can sell for minimum discount 
on the secondary market? How will you feel when you find out that the boiler plate way escrow/title put your seller carry back note together equates into a loss of thousands of dollars when you go to sell your note?
When you’re a seller that is thinking about becoming the lender, then you’d better consider thinking like one. Better yet, hire your own underwriting department. And make sure that ‘department’ knows what’s going on in the secondary trust deed market (AKA the discounted note business).
At the very least, educate yourself by reading up on the subject. There’s a lot to it, especially if you’re thinking that you might want to sell all or part of your first deed of trust or mortgage on the property.
And if you’re an agent, pay attention!
Just in the last several days, I have talked to two separate sellers (both with homes over $1mil) who are planning to fire their real estate agent(s) because they are uncomfortable with, and unknowledgeable about, seller financing.
You’ll want to read: What You Don’t Know About Notes Can Cost You Listings, Sales and Closed Escrows.
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MarketWatch Interview: Sellers Provide Financing
October 14th, 2008 categories: Real Estate News, Seller Financing
Some home sellers are lenders too
With mortgage money harder to get, sellers provide financing
Here’s another interview that I really enjoyed. I absolutely love talking about owner financing and helping people explore their options. The above link will take you to the original article on MarketWatch.com (If it doesn’t work, read it on my site).
More and more people are wondering about creative exit strategies in today’s market, and more and more people are increasingly comfortable leaving their investment money in real estate, even at relatively low returns (6%, 7%, 8%).
News flash: The stock market and banks aren’t seen as safe havens any more <ridiculous understatement>
Some people have a hard time with seller financing, purporting that it’s “just too risky.” OK, fair enough, but what course of action doesn’t carry with it some risk?
- If you sell and carry paper, there’s the risk that you may have to foreclose on a defaulting buyer (to minimize the prospect of foreclosure, consider this land trust strategy)
- If you don’t sell, there’s the risk that your asset will depreciate, that you’re stuck in it over the next 12 years, and that any negative cash flow will eat you alive
- If you sell and put cash under your mattress, there a chance that bed bugs will gnaw it into oblivion (if they don’t, then inflation will)
- If you sit and read this post much longer, there’s the risk that you are missing the best soap opera of the year
Seller financing is a great strategy. You just need to make sure you’re informed and that you have a seller financing professional help you put your deal together. If you don’t, you are definitely risking thousands in losses and discounts down the road.
Ciao.
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