Posted by Michael Morrongiello on August 11, 2008 at 14:23:19:
In Reply to: Re: New Seller Financed Deals.... posted by Dustin on August 11, 2008 at 06:17:11:
Dustin;
The appetitie for unseaseond (read UNPROVEN) seller financed "paper" has waned in light of the current credit crisis we are ALL affected by.The KEY to gettting a deal to fly is in the Structuring of the deal.
Example # 1 EG. You have a home for sale for $100K and a good credit buyer (680+ middle credit scores) with 10% cash to put down. They buyer wishes to LIVE IN THE HOME (not an investor) The seller is willing to finance the $90K balance by taking back a seller financed Note (terms of repayment to be 360 month amortization with a 84 month balloon payment @ 10%
Even though there are seome decent positives here (credit, interest rate, some cash down, etc.) In todays marketplace this Note would NOT be very appealing to buy as a new unproven seller financed note. The reasoning; High LTV, no payment history, new sale.
Example # 2 E.G- you have the same type buyer as above, but you have a builder, seller willing to take back (2) two seller held notes. A 1st lien for $70,000.00 (70% LTV) and subordinate seller held $20,000.00 seller retained 2nd lien.
Now this lower LTV 1st lien of $70,000.00 (70% LTV) has more marketability than example # 1 above. While this note still may not be readily sellable at the time of closing and may still require some payment history to be established the structure of the deal makes it more attractive.
So, the lower the LTV, or the more conservative the funding amount can be by the Note funder or said another way the more flexible the note seller is willing to be in selling off their "paper" - the possibilities of creating quick cash liquidity for their seller financed note becomes easier.
Best to your success;
Michael Morrongiello
Paper Practioner
www.sunvestinc.com
Author of the following home study courses;Paper Into Cash - The Convertible Currency - How to Effectively Create Marketable Real Estate Notes
&
The Unity of Real Estate & "Paper" - Advanced techniques for both the acquisition and disposition of properties using Real Estate "paper"