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Tip of the Week
Did you know....
You may be able to earn a higher
commission if you offer the note
holder a partial option (or two)
along with your full purchase
option. Not to mention you
just about guarantee yourself
another transaction with the
same note holder down the road
when they need to sell the rest
of the note!
Product Highlight
Negotiation starts from the
moment you first connect with a
note holder and to help with
that "Scripts and Tips - A Handbook for the Serious Note Broker"
is what you need.
Every month I am asked about what to say to note holders when they contact you
on that first phone call, when giving the price and how to negotiate. In
addition, the book lists for you more specific questions for certain situations and
property types including condo's, commercial properties and land. It also spells
out a few of what I call "magic" questions to help you determine that
all important motivation or need that the note holder must have if you are ever
going to get them to accept an offer on your note.
Click for more info and to order
TODAY!
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Quote
of the Week
"If you wish in this world to advance
Your merits you're bound to enhance;
You must stir it and stump it,
And blow your own trumpet,
Or, trust me, you haven't a chance."
~ W. S. Gilbert
 President's
Corner
Value is something we all want.
Value is somewhat subjective and
defined as relative worth or a
fair return in goods, services
or money for something
exchanged. We all want the most
“bang for our buck” so we drive
two miles to save $3.00 at the
grocery store that we perceive
as giving better value for our
money.
When you started driving how
much do you remember paying for
gas per gallon? The latest
increase in gas prices
reinforced the meaning of value
as we reeled from the $4.00+ per
gallon gas prices. When I
started driving I can remember
paying .49 cents per gallon.
Now 25 years later I am paying
up to eight times mote than
that. In the next 25 years will
I be paying $32 per gallon
(eight times the present value
for a gallon of gas)? I hope
not but we can’t predict the
future for certain. We can only
guess by using past statistics
and current evaluation models
but no one really knows for sure
what the value of anything will
be in the future.
With an increase or decrease in
real estate values how does that
affect the value of the notes
secured by that real estate?
With an increase or decrease in
interest rates how does that
affect the value of the notes
secured by that same real
estate? Typically, as interest
rates rise fewer individuals can
qualify for traditional
financing. Because fewer people
can qualify for traditional
financing that decreases the
number of potential buyers of
real estate. By using our
knowledge of Economics 101 we
know that when the demand goes
down so does the value of its
product. So as demand goes down
with fewer potential buyers out
there the value of the product
(real estate) will then go down
as well. As real estate values
go down and lending requirements
tighten the sellers of real
estate will begin to resort to
seller financing to sell their
properties (because terms sell)
thus creating more “product”
(notes) for us to go after. As
interest rates go up, the value
of the real estate goes down and
the value of the notes secured
by the properties will also go
down.
The combination of today's low
interest rates AND low property
values is something that note
buyers definitely take into
consideration when valuing
(giving prices and options) on a
note. Our goal as note
buyers is for the cash flow to
keep coming in, not to get to
the underlying property.
For us to do that and keep our
risk at a tolerable level a lot
of the transactions that will
actually get to the closing and
funding table will be partial
purchases. Read the feature
article to learn more about
partials and let me know if I
can help!
Remember, Success Demands Action! Keep
on marketing, it’s going to work! TWITA!
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Feature Article
Do More Business With
Partials
Most note holders initially ask
for a full purchase. Many of
them have just discovered the
fact that they have the ability
to sell their note and have no
idea that alternate purchase
options are possible or are even
available. As a result, many
note brokers only focus on full
purchases the majority of the
time and fall back on a partial
purchase option only on inferior
quality notes where ITV
limitations are in order.
But in a tight and competitive
market, as we are experiencing
now, creativity and flexibility
are a note broker’s best assets.
I have always believed, and have
the statistics for my business
to prove it, that utilizing a
variety of purchase options
helps note brokers to better
meet the needs of a wide array
of note holders. It may seem
that in this tough economy
getting the seller as much money
as possible by utilizing a full
purchase option is the best way
to go, but it may not always be
the best option. Offering only
full purchase quotes is like
having a...
Read more...
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Question of
the Week
Q - Hello Jeff! Do you of anyone doing Simultaneous
Closing these days? What are note investors looking for these days as far as
mortgage notes are concerned? Please advise.
- Marcus M.
A - Hi, thanks for the question! Unfortunately, with the real estate market the
way it is I do not know of anyone that is doing simultaneous closings at this
time. Sorry I couldn't be of more help on that. In answer to the
second part of your question I will try to keep it short. Note investors
today are looking for performing (buyer is current on payments) first position
seller financed notes secured by residential, commercial and land types of
properties. (Although there are very few note investors for land notes
and they are the toughest to do but they can still be done.) As long as the
seller of the property owned the property for at least a year before it was sold
and the note was carried back investors will have an interest in the note. For
example, if mom and pop owned a property for 10 years and sold it with a seller
carry back note we could buy the note after only one month of seasoning.
However, as a general rule the
Rehabber/Flipper/Real Estate Investor/Wholesaler notes (that we all did so much
of in the past) now must have been owned OR seasoned for 12 months before note
investors are willing to buy the note. What does that mean? That means if the
seller of the property bought the property in January and sold it in March with
a Seller Financed note the seller will have to collect 12 payments before the
note could be sold. Some of the exceptions might be a property that was
inherited, gifted or any extenuating circumstance came up that made them
sell the property before they held it for a year. Hope this helps! TWITA!
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