Pasadena Note Queen

Many Agents Repositioning With Non-Performing Notes & Owner Financing

Fri, 24 May 2013 13:28:00 -0700

There is a lot of interest in non-performing notes right now, and while that is not my niche, there were several on the call who are working in NPNs. Additionally, there were at least 3 full time real estate agents on the call that talked about how they're incorporating owner financing and notes into their businesses.

We created a "Virtual Coffee List" for all those that wanted to network with each other.

Here's the link to the call: http://ownerfinancingclub.com/?p=2295

If you want to be added to the Virtual Coffee email group, please click the link above and follow the instructions, and after the next Virtual Coffee Q&A (that happens once a month) you will see that you are added to the list of parties interested in owner financing and notes.

Real Estate Professionals Make Extra $20,000 With Owner Financing

Thu, 28 Mar 2013 17:08:17 -0700

Just thought I’d invite you to join me for drinks and appetizers if you’re in the Southern California area. I’ve been running theOwner Financing Club community on a virtual basis since May of 2011, and this year, I’ve added 3 face-to-face meetings. This will be the 2nd ever ‘meet n’ greet’ for community members (it’s free for you!) and non-members who are interested in the conversation ($20 at the door).

McCormick & Schmick’s
2000 Main St., Irvine, CA
6:30 – 9:00pm

At our first event in San Gabriel in January, I was pleasantly surprised by the turnout. People had a chance to introduce themselves, and to have real estate and/or note transactions they’re working on (or considering investing in) reviewed on the white board. It was a lot of fun, and we all came away feeling like it had been a good use of time.

[although I'm still mad at Northwood's Inn for clearing my dinner away before I got to eat it! Grrr... I was so busy with the event that I only got two bites of my scallops and medium rare NY steak ]

One gal and her husband told me that after they had read my book, Seller Financing on Steroids, they immediately went out and put $20,000 in their pockets by helping their buyer client close on an owner-financed commercial building… a deal few real estate professionals would understand, unfortunately.

Anyhow, hope to see you there if you’re in town. I will have special guests, Randy Hughes (land trust guy) and Cliff Gager (wholesaler), and maybe even Gordon Moss (non-performing junior liens). Come add your brain juice into the mix

My best,

Dawn

Buyers of REOs and NPNs Making Money and Hiring Realtors

Tue, 18 Dec 2012 15:03:18 -0800

A lot of the inventory is going the way of the bulk REO and NPN (non-performing note) bulk sales, but that certainly doesn't mean Realtors lose out. In this short example, an agent who thought she lost the sale actually made out pretty well. The guy who bought the REO vacant lot paid her a $1,500 commission on a $10,000 sale. Not bad. I'd love to be investing like this, too... the 190% + return caught my eye!!

Owner Financing Club

Learn to Navigate Owner Financing: Leave your Client with a Good Note

Tue, 23 Oct 2012 18:32:57 -0700

Just letting you know that I’m teaching my first one-day class on owner financing and discounted notes this weekend in LA. Many real estate professionals are increasingly recognizing the need to be proficient in these areas... it brings the possibility for more commissions.

I recently assisted an agent in closing on a transaction that was threatening to fall apart over a $30,000 gap... too small for a hard money loan. Owner financing, with the subsequent sale of the note, kept the deal together.

Sunday will be spent covering the three best ways to make safe and solid returns investing in notes (paper/mortgages/trust deeds) whether you’re offering owner financing and carrying back paper on property you already own, lending money, or buying discounted private notes. All forms for creating and/or buying notes will be included.

Discover and Demystify Discounted Notes

SUPERCHARGE your Retirement Portfolio

Fix & Flip Paper (Notes) or Buy & Hold for Passive Income

(even if you have little or none of your own money!)

Property Owners: Carry Paper & Walk with Cash

Buyers Wanting Owner Financing: Notes Help you Get a “Yes”

Join me for a day of empowering education and fun as we add several tools to our toolbox that will allow us to close more deals and make more money. We do not have to be at the mercy of “the market”.

Understanding the discounted note business will change your life whether you buy and sell Property or Paper or both.

Click the header image up above to be taken to the page where you can sign up.

How a Seller Offering Owner Financing Avoided Foreclosure

Sat, 22 Sep 2012 09:07:26 -0700

Many sellers (and their agents) are concerned about the potential risks associated with carrying back paper on their properties. This anecdotal story describes how useful a land trust was in achieving the highest benefits, but avoiding the scariest "what if" scenarios of potential default. Randy was trying to give someone a shot at home ownership, but didn't suffer when he disappeared in the middle of the night.

iTunes podcast: Note Queen: Owner Financing / Investing in Notes

YouTube: NoteQueen

Land Trusts for Privacy and Owner Financed Transactions

Fri, 31 Aug 2012 16:58:10 -0700

I'm finding more reasons to use Land Trusts, especially when owner financing is involved... even private lending. Deals that would not otherwise make sense from a risk tolerance perspective can be turned into win-win transactions. Randy Huges, ("Mr. Land Trust") has been helping quite a bit with these things.

What Discount Will my Client Take if They Sell Their Note?

Thu, 05 Jan 2012 16:52:12 -0800

Real estate professionals can get support around structuring owner carry transactions, and help their clients maximize the value of the notes created. This recent email represents fairly common questions that people have when they discover that owner carry notes can be sold, just the way banks sell notes/loans back and forth to each other:

Dear Purchasers of Notes/Mtgs.,

1. Does it have to be seasoned? If yes, for how long or how many payments?

Usually some, but not always. It greatly depends on the other factors in the transaction, and whether you’re trying to sell a full, or simply a partial. I occasionally buy notes without any seasoning, while on the other extreme I may need to see 24+ months of seasoning before considering any type of purchase.

2. Do you have minimums and maximums on the dollar value of the note/mtg.?

No.

3. What type of discounts are required and how do they work?

Once in a very rare while, I can pay as much as .90 cents on the dollar, most are in the .60 - .75 range, with some I wouldn’t pay a penny for. There is no standard discount. It all depends on the variety of unique circumstances attending each transaction. The overall discount will be minimized if you choose to only sell a partial, and keep the tail end of the note for yourself.

4. What is the process if I have a note to sell?

Send me the note and security instrument (mortgage or deed of trust) and let’s have a brief phone chat. A brief overview of the transaction is also extremely relevant:

Type of property securing the note

Location of the property securing the note

How long you owned the property before selling it

Sale date

Sale price

Amount of down payment

Credit score of buyer/payor

I’m guessing you’re asking about this because in your real estate investing business, you may need or want to use owner financing (with the subsequent sale of the real estate note) for either acquisition or disposition strategies, or both? I can usually help structure these types of transactions for maximum financial benefit when I am brought in as a consultant before negotiations are finalized.

For professionals… real estate agents, new note brokers, or investor/rehabbers in the business of doing multiple deals, I provide limited email and phone support to members of Owner Financing Club. People who want in-depth coaching or consulting can arrange that as well.

At Owner Financing Club there are many training videos and some downloadable documents that will help you understand notes and more deeply answer many of the questions you have posed above. You may want to avail yourself of this affordable education (and support) as a way to increase the number of tools at your disposal for investing in real estate.

There is also a fairly new (and free) one-hour video that will help simplify much of this conversation for you: Why Notes, Why Now?

To your success,

Dawn

The Truth About Investing in Discounted Real Estate Notes

Mon, 31 Oct 2011 20:49:12 -0700

REGISTER FOR THE WEBINAR

Lease Options vs. Installment Sale - Interviewing Wendy Patton

Wed, 12 Oct 2011 18:07:17 -0700

I really haven't been a fan of lease options for a variety of reasons, evidenced by the fact that I practically ignore them entirely in my book, "Seller Financing on Steroids".

In my mind, there are more ways to be unpleasantly blindsided with lease options, than with regular 'ol installment sales. But the odd thing is, lease options seem to be more accepted, and appear to be much more familiar to main street buyers and sellers, and the real estate professionals who serve them.

I am really looking forward to having Wendy Patton as the guest for the next monthly meeting of Owner Financing Club (Thursday, October 13, 2011). Besides the other things that will come up, I'm going to make sure we do lots of playing around with various scenarios... to ferret out why lease options might just be the best answer in certain situations, and how to minimize the inherent risks and liabilities.

Like me, Wendy is a licensed real estate broker, which means she is very concerned with doing things the right way... legally, ethically and intelligently. I am really looking forward to our chat, and plan to learn A LOT from her.

Also, click that picture right above...

If you are reading this post in your email inbox, please sign up for my new e-zine "Property and Paper" to receive weekly (every Wednesday) updates, articles and special offers that will help you understand how to navigate OWNER FINANCING AND NOTES to achieve a sense of Power and Possibility, whether you're buying or selling property or paper.

The article in this morning's Issue #1was about Simultaneous Closings (simo's, simultaneous note sales, table funding, etc.) I also have a Calculator Corner section that will help you learn to use a financial calculator. And, I introduced two new classes that I am starting later this month:

Owner Financing for Realtors

Why Notes, Why Now... and How?

The best way to participate in these classes is to be a member of the community at Owner Financing Club, but if you just want to participate in the classes without joining the club, you have that option.

Waking Up from the Illusion of How Money Works - Adding a Shout to the Twist

Fri, 23 Sep 2011 16:32:55 -0700

Are we ready to wake up and use our big “outside” voices? If you aren’t already on the track of understanding how our wealth, individually and collectively, has been intentionally and systematically highjacked, perhaps it’s time… it’s not that fun, but shining a light on the truth of what is happening is the first step towards healing.

Watch “The Money Masters“, and/or sign up for “The Solari Report“. There are a lot of other sources of similar information, but this is a place to start.

I’ve been pretty quiet lately on this blog… doing a lot of studying, thinking, and emotionally and spiritually processing what all of this means to me… deciding what I believe in, what I want to stand for, how I’ll navigate my business and how I’ll counsel others that count on me for advice for maximizing and protecting both their real and paper assets in these uncertain times.

Money is about to get even tighter with the Fed’s latest move. Private lenders and buyers of owner-financed paper are going to be increasingly necessary to provide liquidity in the real estate market.

When you start to realize what has happened to us over the last 98 years since the creation of the Federal Reserve in 1913, and you realize how money really works (hint: it’s not what we were taught in school) you’ll go through disbelief, denial, anger, bargaining and then probably spend some time in despair… until you’re ready for acceptance.

Out of acceptance, the clarity of the next step will have a chance to emerge.

Speaking of Operation Twist announced by our friend, Benny Boy (over at the Fed), Chris Mayer writes…

“It’s a plan so dumb you have to have to Ph.D. to believe it will do any good…” (at least this made me laugh)

Markets haven’t exactly liked it, have they? The DOW is down a few hundred points, most of the big players are selling more than they’re buying, and I hear that trades betting against the S&P 5oo are at an all-time high… and congress is going on vacation without knowing how the government is going to continue to operate next month. Good times, good times.

Most people should not have direct exposure to the stock market right now. If you’ve still got regular equities, consider selling them… soon, yesterday or last year.

How is the average saver/investor supposed to protect what is left of their wealth, their money, their assets?

Doing nothing (hiding money under your mattress or in a 1% CD) has become even more risky than investing. If you aren’t making at least 9% on your money (the current rate of inflation), then it’s disappearing while you sleep.

I happen to believe that investing in notes with lots of protective equity, secured by generously cash-flowing properties in strong, non-bubble, job-supporting markets, is one of the last bastions of growth and preservation of the wealth of the average investor.

Yes, many people want to own those cash-flowing properties and have them professionally managed. But I’d rather hold the note secured by those assets at half the value of the property or less. It’s simpler, easier, and I am hedged against further fluctuations in the prices of real estate and rents.

I want to be happy if the note performs, and happy if it doesn’t.

And… there are blended products that give you both…

You can have hassle-free, safe, note-investment returns, plus a piece of the upside of the real asset that secures it.

For the record, here are my other sentiments…

Have some basic preparedness items on hand… food, water, etc. You never know when even a random power outage could create craziness around you. Plus, buying commodities (the things you need and use every day) at today’s prices is a hedge against future inflation

Start growing some of your own food, even if you’re only sprouting alfalfa and garbanzos. Here in suburbia, our food markets and warehouses only have a 3-day supply of food.

Get backyard chickens (this could actually just be a reaction to “empty nest syndrome”… as the children left, I bought poultry. You feed these goofy little birds for a few months, and they start laying eggs for your breakfast. I fed four kids for 20 years, and never once did they lay me an egg… just sayin’)

Hold some physical gold and silver

Stay grounded in things that make you feel good and help you stay aware of how much abundance is around you right now… the gratitude game

Look into alternative and complimentary local economic systems that will support our communities. The California Federation of Time Banks is holding their annual convention in Pasadena on Oct. 1st & 2nd. We need to create a safety net for all the people who are falling through the cracks

OK, so that’s quite enough for one day…

Find more of my brilliant philosophizing and training segments over at Owner Financing Club (members’ only protected content), and if you want to invest in notes with me, please fill out this Note Investor’s form.

Ciao.

Why Notes, Why Now… and How? (self-directed IRA)

Sun, 11 Sep 2011 21:54:47 -0700

Just a quick post to let you know that tomorrow’s Owner Financing Club meeting will be a webinar. I wanted to have a better training format than the telephone conference call could provide, as I’ll be going over a recent note transaction… exactly how I closed it, so the process is demystified for people who think that buying a note is woowoo.

If you want to participate, REGISTER HERE.

I think that notes are one of the few ways for the average passive investor to get solid and reasonably safe returns in a volatile, uncertain market where inflation is probably sitting at around 9%.

If you’re not making at least 9% on your money, it’s disappearing a little more every day. You just want to make sure you’re not risking a lot to get your 9%+… personally, I like to sleep at night.

Kaaren Hall, president of uDirect IRA Services will be my guest, and will help us understand how to use SDIRAs to buy notes, buy property, lend money, etc.

0% Owner Financing Making Ownership Cheaper Than Renting

Fri, 08 Jul 2011 18:53:21 -0700

Private investors like you and I can make a profound difference in how the real estate market functions. Many of us tend to hold our breath to see what the government, or the banking sector will do... we can do a lot without them. The principals and professionals who understand, or are willing to explore this, have the opportunity of a lifetime in front of them.

In my world, banks are only one small part of the market.... not THE market.

Last night I had the privilege of interviewing a long time investor and professional, Walter Wofford, and he was explaining how and why he will NEVER PAY CASH or hard money rates ever again to buy and hold, or buy and flip real estate.

He's buying with 0% financing (NOT $0 down... big distinction) and then flipping to either a qualified home owner or a motivated investor, and giving them 5% financing, so that for owner occupants, owning is cheaper than renting, and investors can get favorable terms so they have instant positive cash flow.

My two favorite quotes from my call with Walter last night:

“As investors, we can make back everything we’ve lost in the last 5 years”

"Owner financing is a partnership between the lender and the borrower"

CLICK HERE to listen to the recording of this perspective-changing interview.

Walter explains that many sellers of investment properties have 4 options:

let a property sit vacant
rent or lease it out
sell with owner financing
sell for cash at highly discounted rates (if at all)

Sellers (and the professionals who serve them) will greatly maximize their financial results when they understand how to offer intelligent seller-financed terms to a prospective buyer. And done especially well, sellers-become-note-holders will even be able to sell all or part of the note they create through the transaction.

We need to be able to think outside the box, but with an intelligent approach to risk/reward, and a soulful determination to create value for others, and act ethically and morally in the marketplace.

Why I Created Owner Financing Club - Help Realtors Help Their Clients

Thu, 07 Jul 2011 19:30:13 -0700

Owner Financing can Create Notes Worth Buying with your Self-Directed IRA

Thu, 30 Jun 2011 19:42:31 -0700

I’m not sure how many investments these days can offer the safety, return and low risk profile of discounted notes when purchased properly. Buying properties with below market terms from sellers and then reselling with higher and better terms is also a way to create positive and almost effortless cash flow.

Next Thursday, July 7th, I will be interviewing Walter for the next meeting of Owner Financing Club (a virtual investment club focused on owner financing and notes).

Walter has done a lot of investing in his time, and right now, he is really “crushing it” buying and selling real estate with seller financing. Sometimes he subsequently sells the note(s) created to really top off his profits.

He also happens to be an expert at investing with and through self-directed IRAs, which is a strategy that I believe more and more people will see is the only chance at preserving any measure of their wealth as the economy collapses around us.

If you’d like to listen in on the call and have a chance to ask questions and brainstorm over your deals (or listen to the recording afterwards) be sure to…

FYI, I also added the videos of the live owner financing class I taught last month to the arsenal of information available to club members.

And I’m always looking for investing partners for both property and paper deals that come across my desk, so if you’ve got some capital, and you’re tired of making 0-1%, and watching inflation blow it away, then let’s have a chat.

My best,

Dawn

Even Trump Offered Seller Financing...

Wed, 08 Jun 2011 17:48:06 -0700

When I ask high-end Realtors if they ever see owner financing used in putting their transactions together, often I’ll get some sort of offended scoff, because no… of course not… their clientele has all cash and can easily get financing if they need it.

Well, Inman News recently reported:

“Trump ended up taking $95 million for his Palm Beach home in 2008, but the Wall Street Journal reported that half of the price was seller financed.”

Even if the buyer could have come up with all cash, it’s likely that they preferred to leverage to keep cash available for other investments. And I’m sure it helped get Trump his reduced price of $95 mil. (I think he started at $125 mil).

I recently spoke with an agent who had a listing in the $4 mil range, and the seller, who owned free and clear, was offering to carry at 3% to a buyer who came in with a 50% down payment.

3%…???

That’s not even keeping up with inflation. If you were a savvy buyer, and you could make better than 3% on your money in other investments, it would be foolish to pay all cash for that property.

Owner financing helps sellers get a price that’s stuck in their heads… that makes them feel like they did OK in the market… got their price, made a good deal and “didn’t just give the property away”.

Buyers who understand this can often pay top dollar for a piece of property, but get it with such powerful below-market terms that it becomes an even a better deal than getting the property at a reduced price.

This won’t often leave the seller with a note they can sell without a steep discount, but getting a certain dollar amount on the sale is, many times, the most important thing for sellers in this market, and they’ll never sell the note… unless they get desperate for cash for some reason.

The Note Guy, the Note Queen and Non-Performing Notes at Owner Financing Club

Wed, 01 Jun 2011 05:36:35 -0700

I’m really pleased to have Ellis San Jose as the guest speaker on my next club call on June 2nd, 2011. Ellis, like myself, is a California real estate broker, a real estate investor, note buyer, and co-founder of The Note Guys with Gerald Lemoine.

While he has done and can do just about every step in “The Dance Between Property and Paper”, he recently told me that he’s mainly focused on buying non-performing 2nd TD’s. And I think he mainly focuses on bank paper, whereas I never touch anything related to the banks at all, but we’ll find out together just what he’s up to this Thursday.

If you’re already a member of Owner Financing Club, then you’ll be emailed the details for the call. Hopefully, you were able to enjoy the call with Henry Dvorken last month, on May 3rd. (P.S. Some people told me they had trouble getting the free contract that Henry has to share with people… if that describes you, PLEASE let me know and I’ll make sure you get taken care of).

My web designer/developer says that the online support site for the club will be live before the call, so let’s keep our fingers crossed… this is where the past recordings of club calls will be, along with the video of that owner financing class I taught on May 10th, and a few other bonuses and blog posts that I have in mind to put up for all those who have been so patient with my technical issues and learning curve.

My goal is to make you feel, beyond a shadow of a doubt, that your returns have far exceeded your investment in our community of like-minded individuals.

Hope you can be with me to enjoy Ellis and ask him anything you can think of related to investing in non-performing bank notes. He and Gerald are people that I can wholeheartedly recommend as investors with as much or more reputation equity than real estate equity, which is saying a lot.

And don’t forget to come to the call with any deals that you’re working on right now, so Ellis and I and others on the call can help you brainstorm and figure out how to work things to your best advantage.

Take care,

Dawn

LA Area Class: Owner Financing - Help Your Clients Buy Without Banks

Mon, 09 May 2011 16:34:49 -0700

A month ago, I was at Robert Hall & Associates teaching a class on PAPER… well, next Tuesday, May 10th is the other half of the story… PROPERTY.

It’s that “Dance Between Property and Paper” that I seem to perseverate about (yes… it really is a word that I just barely learned)… it basically means to obsess over in a redundant, slightly OCD sort of way.

per·sev·er·ate

–verb (used without object), -at·ed, -at·ing.

to repeat something insistently or redundantly: to perseverate in reminding children of their responsibilities.

If you’re interested in learning how to (and want to hear stories about) buying property without qualifying for a bank loan or looking for hard money, and you’re in the LA area, please RSVP to Jennifer Nelson to reserve your space, as there is limited seating. Real estate professionals could really help some of their clients out by knowing a little about owner financing. There are more options than most people are accustomed to thinking about.

Tuesday, May 10th, 2011
Check-in/Networking: 6:30 pm
Seminar: 7:00 - 8:30 pm
300 West Glenoaks Blvd., 3rd floor
Glendale, CA

There is no charge to attend.

FYI, here is a little clip from my chat with Henry Dvorken at our first meeting of Owner Financing Club this week. Would love to have you join us for the next call. If you sign up before June 1st, you’ll get the recording to the last meeting as a bonus :) Henry was absolutely amazing.

To your success,

Dawn

Owner Financing Club - a Virtual Community

Fri, 29 Apr 2011 18:40:05 -0700

It’s been been quite an evolution over the last year. There’s more to be added, but for now, I’m excited just to get started with what I feel is going to be a very educational and supportive community. Click on the image below to check out what I’ve got in mind and the benefits and opportunities you can expect…

So… here’s what Owner Financing Club is about so far:

Monthly training, transaction review, & FAQ phone meetings — look over my shoulder once a month as we discuss real life owner financing transactions and/or note deals. [Henry Dvorken, an icon in the note business, will be my guest on Tuesday May 3rd, and he’ll be giving away free contracts to everyone on the call.]

Market updates & bulletins– stay up to date with what’s happening in the note buying world, trends in real estate, and issues that affect owner financing.

Privileged, members-only blog posts– there’s a lot you can learn from searching my Note Queen blog, AND… the blog posts available to members of Owner Financing Club will provide even more in-depth material.

Discounts on training modules & special classes

Links to trusted resources that will help you along the way as you learn to navigate the world of alternative financing and notes

Realtors, you’ll be on my list to receive referrals for listings and sales when I have buyers or sellers in your area that want to work with professionals who understand owner financing.

See you around the Queendom!

Dawn

Real Estate Transactions Gone South - Are They Worth Your Life?

Mon, 25 Apr 2011 19:39:55 -0700

I have known people who have died over the stress of dealing with real estate transactions gone south. Our real estate transactions, our credit scores and our other financial dealings represent so much to us… sometimes it can cost us our lives.

I think this represents a fundamental issue with who we perceive ourselves to be. I totally understand relating to my bank account like it was the only measure of my personal worth… or the equity in my real estate portfolio.

If things went well, I felt smart. If things went sideways, I felt like a failure.

This Wednesday, April 27th at 7:30pm Pacific/10pm Eastern, I’ll be on Blog Talk Radio: The Attitude Shift discussing a different angle on real estate… a more up-close and personal one:

Yes, I’m into empowering buyers, sellers and real estate professionals with the knowledge they need to maximize results in this crazy economy without asking banks for permission…

This time, I’m going to be talking more about how we frame these things into the fabric of our personal lives from a psychological (and spiritual) perspective.

If you can join in the conversation, please do. I think there’s a number you can call to ask questions or make comments during the live show.

To your success always,

Dawn

NAR Starting to Talk More About the Benefits Owner Financing

Fri, 15 Apr 2011 20:24:33 -0700

It was a fabulous opportunity to get to speak with Gil Gross, the host of the National Association of Realtors’ radio show, Real Estate Today Radio, about the benefits of owner financing.

For months and years I’ve been trying to get the attention of the retail real estate community, and it seems that the tide is finally swinging to greater awareness of strategies other than cash or CTNL. I’m SO happy to be getting the word out to more people.

Owner financing is a great tool to help sellers sell quickly for top dollar, and I’d like to make sure they can get top dollar for their paper, too.

Thanks, NAR, thanks Real Estate Today. The show will air locally here in Los Angeles on Talk Radio 790 KABC on Saturday, April 16th at some ungodly hour… like 7 in the morning or so.

Check out the Note Queen Store!

I'd Like to Sell My Note, But is This a Bad Time?

Thu, 24 Mar 2011 00:47:17 -0700

Don’t we all wish we had a crystal ball? When to buy, when to sell properties, paper, stocks, bonds, Potassium Iodide… the list goes on. And the answer is… it depends. What is your personal situation?

What are your highest priorities and financial objectives? What are the particulars of your property or paper (note)? What helps you sleep best at night?

I believe that further depreciation in real estate prices is likely in most areas, and I believe that interest rates and inflation could climb rapidly, potentially changing the market overnight. It just might be a bit of a wild ride yet, so what’s most important to you?

Here’s a recent email conversation talking about this very topic…

Hi Dawn,

How are you and thanks in advance for your website!

I am presently carrying a note on a townhouse. It’s not a huge note - $65K original loan amount - and it is performing. I was hoping to run a few questions by you, before I send you a huge lump o’ papers via FAX:

1) I appreciate your candor. Would I do better using a local note buyer?

Maybe and maybe not. If you know someone personally that would be comfortable with this type of investment and its inherent risks at less than a 12% return, then you should strike up a conversation. However, I have seen some of the national players pay more (require smaller discounts) than many private local investors that I know. Many private note buyers are looking to make at least 12% on their money… usually more.

2) While the note itself is only 4 months old, the payor was previously my tenant and she had a perfect rent payment history (12 mos) as well. Can this improve the value of the note?

The tenant’s rental history will not help you, and 4 months is not a lot of seasoning. How much of a down payment did she come up with? Her credit score and the amount of her down payment (as well as the true value of the property) will be the most important factors in determining the value of your note.

3) I’d like to get an assessment of the note’s value without the payor knowing. Since you request the payor’s social security number, will she know that something is up by the presence of a new inquiry on her credit report?

I usually quote notes without running credit, but any offer to purchase would be ’subject to’ the credit coming in at, or above, a certain number. If you purport that the payor’s credit is higher than it turns out to be, then we’ll have to renegotiate the contract. Credit will definitely be run after we have a signed purchase agreement in place. If you just want to know the ballpark of what your note is worth, and don’t want a lot of digging around by a lot of potential note buyers, just pay for an appraisal.

4) Last item… generally speaking, with the real estate market in its’ current state, is right now a “really bad time” to sell a note?

Well, it depends. In general, we will probably see more depreciation, and once a buyer/payor is upside down (the note balance is higher than the value of the property) it is very difficult to sell a note at all (at least at a price you can stomach). Additionally, most of us expect inflation to kick in some time in the next few years, and when it does, that will make discounts much steeper/higher than they are now.

For both property and paper… if you want or need to sell, then sooner is probably better. You may want to let your note season a few more months and take your chances that market conditions won’t change significantly in the meantime. A lot depends on your payor and how you put your deal together.

I am in the middle of helping a woman from Louisiana coordinate the sale of her free and clear rental to a tenant… helping engineer the transaction to give her the best possible chances of liquidity if she ever wants to sell all or part of the note in the future.

My hunch is that the best you’ll be able to do is sell a partial, but if you want to discuss your overall needs in the context of all that is going on to make a sensible plan, I do offer a 15-minute session with every purchase of my online book.

Best wishes,

Dawn

Check out the Note Queen Store!

Another 15-25% Drop in California Home Prices Expected in Coming Years

Wed, 16 Mar 2011 15:56:21 -0700

Not exactly sparkly news to start off your day, but it’s even unhappier not to have a clue it might be coming whether you’re buying property or the paper secured by it. Check out this post:

The financial psychology of negative equity – 1,880,000 California mortgage holders have no equity in their homes. California home prices will fall 15 to 25 percent in the coming years. 1 out of 3 California mortgage holders at risk of walking away or defaulting.

A special thank you to Jeremy Roll, co-founder of FIBI (For Investors By Investors) for turning me onto this blog. You can find FIBI meetings in Southern California by searching on the term “FIBI” on Meetup.com. I highly recommend Jeremy and Ellis San Jose and their other partners. Great information, real opportunities, no pitching or selling.

Here is my free association stream of thought, Freudian style…

If I wanted or needed to sell one of my properties any time in the next 10-15 years, then I’d better get on the market ASAP. Sure, the Fed is determined to keep interest rates low, but when they’ve pulled out their last impotent card to play and it no longer stimulates anything (we’re pretty much there), it will probably mean much higher interest rates, putting more downward pressure on the price of homes.

If I’m buying a property, I need to go in with my eyes wide open and not depend on appreciation to save me from a marginal purchase. Either it’s got to be a home I know I’m going to love living in for the next several years and can easily afford, or it’s got to have positive cash flow and carry itself as an investment. If I’m getting conventional financing, then I’d want low long-term fixed rates. I’d try to find free and clear properties where the owner might carry for me for even better terms than I could get from the bank.

If I’m brokering hard money to real estate investors involved in buying and flipping property, then I’m going to be especially conservative (keep LTVs low) in order to protect my private lenders. In some areas, the profit margins are disappearing on rehabbers almost over night.

Given all this, I know that in some local pockets there are still multiple offers on homes priced from $500,000 - $3,000,000, with many of the offers all cash, or CTNL with 50% down or more. Will this last? I don’t know.

If I’m buying seller financed paper, then I’m going to want my ITV (investment to value) to stay at or below 60%… more like 50% if it’s in CA, AZ, FL or NV. In fact, I’d attempt to buy partials to keep my ITVs under 40%, and minimize my exposure to inflation.

I would counsel my seller consulting clients to take the largest down payment they can possibly get, and create paper that amortizes as quickly as possible to preserve protective equity (even in depreciating markets) which will help the value of their note in the private secondary mortgage market.

Does my thinking make sense? Please leave a comment below to share your thoughts and describe what are you seeing in your neck of the woods.

When I Offer Owner Financing, Should I Pay my Agent a Full Commission?

Thu, 03 Mar 2011 13:51:59 -0800

Whether or not real estate professionals should be paid their full commission at the close of a transaction where the seller extended terms (seller financing) to the buyer, is often a topic of some confusion. While there is always room for negotiation for almost everything related to real estate transactions, it’s good to be clear about the fact that regardless of who provides the financing, (a bank, a hard money lender or the seller) a sale is a sale is a sale, and the agent/broker has indeed earned their commission according to the terms of the listing agreement.

Here is a recent email that I received, as well as my response:

Subject: Owner Finance commission pay out

Hi Dawn, I’ve been doing some reading on your site to try and figure out several things. I’m a cash investor and all of my said properties have an owner financing option. I’ve closed one owner finance without a Realtor involved - and just closed another where I had it listed through a Realtor, and paid full commission at closing. Which after the buyers down payment it still meant I came out of pocket around $3k just to sell the house.

I began thinking - what happens if this deal doesn’t turn into a regular mortgage within 3 years like its supposed to, or the guy defaults, or bankrupts. I not only will be out a sale but also around $7k that was paid in commission. Therefore I wouldn’t be able to make up the cost through another sale and would take a loss on the house b/c of commission paid.

The risk is extreme for the investor, seller, owner financier - yet only time for the listing agent. Is it not usual to pay a Realtor half commission upon the owner finance “sale”, and then the remainder once its turned into a “regular” mortgage?

I know this is a little long and scatter brained, just trying to make sense of the matter, I’m fairly new to all this.

Dear Investor,

I can totally feel you on this. The short answer on commissions is…. it depends. There are many ways to structure deals, including how commissions are paid.

The bigger question is your overall underwriting in general. The out of pocket commissions will only be a small percentage of your potential losses if you are not putting these deals together a little more aggressively. It doesn’t sound like your buyers so far have much “skin in the game,” which means it won’t be that hard for them to walk away if things get a little bit sideways, so you are potentially setting yourself up for bigger headaches than just being a landlord.

Not to mention, the notes you are holding are probably not marketable, but they could be with a little strategic planning, which would give you greater liquidity… the ability to sell all or part of the note for cash.

I offer a book on my site that I don’t know if you’ve seen: http://notequeen.com/free-book-offer/. If you buy the full ebook version it comes with a complimentary 15 minute consultation, and we could get on the phone and cut to the chase on some of your most pressing questions.

Best wishes,

Dawn

So, back to the conversation…

When the buyer doesn’t have enough of a down payment to cover all of the closing costs, and the seller understands the risks and is willing to do the deal anyway, is it reasonable to ask the real estate professionals involved to delay part of their commissions?

I believe it’s always reasonable to ask questions to see how we can help transactions close for the benefit of all concerned.

Like I said in the beginning, the broker is not obligated to take less than the full commission at closing, but may be willing to if that’s what it takes to get the deal done. Something is better than nothing. Sometimes agents take their commissions in the form of a note that is payable in installments out of the buyer’s mortgage payment to the seller each month.

And… I don’t believe that seller’s should relate to their agents like Private Mortgage Insurance.

An agent’s job is to extract the best possible offer from the marketplace for you… it is not their job to be your underwriting department, or to guarantee that the buyer will continue making their payments as agreed and be able to refinance when that 3 year balloon comes due. Just like it’s not an agent’s job to guarantee that your real estate acquisition will only go up in value after you buy it, and only down in value after you sell it.

They’ve done their job… they helped get you the best possible buyer for your property. That’s what you hired them for.

You, the seller, are the bank… you need to hire your own underwriting department, and be responsible for the risk and reward potentials inherent in the way you put your transaction together. This is your investment.

Some agents understand financing, many don’t… it’s beyond the scope of their expertise to know how the secondary market will view the seller carry back note you are creating, or to help you accurately assess the risks and steps you might take to mitigate them. Do I think agents need to learn more about these things?

Absolutely!

Agents need to get a feel for the basics, and know when it’s time to bring in other experts to help protect and support their clients. I have agents that bring me in as a consultant before they close on their owner carry transactions, because they understand that I possess a level of expertise they lack when it comes to engineering seller carry transactions in a way that preserves the value of the note/paper in the secondary market.

I’ve had sellers-become-note-holders bring me notes a few months after they’ve created them, and be shocked when I couldn’t offer anything at all, or could only buy a small partial, or required a MASSIVE discount in order to cash them out.

After the shock wore off, they were angry at the professionals involved in helping them put together their owner-financed transaction in the first place. One note holder was so exasperated:

“I asked my agent if they knew anyone who could help us structure the seller carry back note, and they said they didn’t. Now I’m finding I can’t sell my note at all, and I am REALLY upset.”

Even attorneys, while they usually know how to put the mechanics of a note together (sorry, but I’ve seen basic math errors on notes put together by attorneys), they don’t know how to structure a note for minimum discount in the secondary trust deed market unless they regularly buy and sell notes themselves, because the market is changing all the time.

When I’m involved in helping owner financing transactions come together, I help sellers create the kind of paper that I’d be willing to buy at a price that makes sense for the seller.

It’s my “Bake It and Buy It” program.

I will make an offer to purchase the notes that I help to create, in whole or in part, depending upon the unique aspects of each transaction. And I’m often bringing techniques to the table that are generally only understood by savvy investors that have been studying creative real estate for years… strategies that are simple, but beyond what the retail market seems to think about for some reason.

But yes… those commissions… if there’s enough cash from the buyer’s down payment to cover them, then I believe it’s your responsibility as a seller to pay them in full, even if it means you are only netting $15.98 at closing, with the rest of your equity coming in monthly installments.

If the buyer’s down payment is small, and you really don’t have the cash to bring to the table to close, then I think it makes sense for everyone concerned to be flexible. If I had a listing and I had the option of taking a partial commission up front with the rest of it in monthly installments (plus interest), or nothing… I think I’d probably choose the former… unless I was low on my girl scout credits for the month. Then I’d just do it all for free.

To the Chopping Block for Fannie & Freddie - Private Money & Owner Financing Expected to Increase

Fri, 11 Feb 2011 15:41:25 -0800

Fannie and Freddie may be on their way out, like Mubarak out of Egypt. I’m all for it, and… just like there will inevitably be some positive chaos as the Egyptian people take their next steps into democracy, the privatizing of the mortgage market will undoubtedly lead to a temporary disruption in lending and higher interest rates.

Funny concept… for some reason, private investors actually need to make a return on their money. Here’s an article about the proposed changes on CNN Money.

Even if they weren’t on the chopping block, according to Fannie Mae’s memo to lenders in late December, the government-controlled GSE will impose higher add-on fees in 2011. So, even if interest rates stayed artificially low, loans will still cost thousands more in some cases – even if the borrower boasts high credit scores and a substantial down payment.

I guess what this means to me is that:

Traditional financing will likely become harder and more expensive to obtain
Private money will be in higher demand
There will be increased downward pressure on real estate prices in many areas
Owner financing will increasingly become an important tool in closing transactions and supporting prices
So, there will probably be a lot more private seller carry back notes created…
Some of them will be worth something in the secondary market, some of them will unfortunately be worthless

I’m hoping that real estate and note professionals will be increasingly successful in getting the word out to sellers about how they can preserve both their real and paper assets.

Owner Financing Club is a membership/training site where we’ll answer questions about owner financing and notes, and regularly review live transactions so we can all get clearer about what it takes to put successful deals together, and help sellers create notes worth holding or selling.

Uh... Sorry Mr. Note Seller - I Need to be First

Fri, 14 Jan 2011 16:10:00 -0800

I guess I’m no different than anyone else… I want to be first. I hope I’m the first person you’ll call when you’re putting an owner financed deal together or you have a note to sell, but I definitely need to be in 1st lien position when I buy a note.

The situation I’m going to describe kinda blindsided me. It was so unexpected that I didn’t get to the bottom of it until after both note seller and myself had already put some effort into putting a deal together. We could have saved ourselves some time if I’d simply thought to ask one more tiny question in the interview process.

Here’s how I thought the deal was shaping up with a note holder that sold a property 4 months ago:

Sales price: $47,500
Down payment: $1,000
Credit score of payor: 600
Note amount: $46,500
Interest rate: 8%
Amortized over: 120
Due in 60 (some pluses, some minuses)
Monthly payment: $564.17

Because of the low down payment & credit score, there was no way that I could buy the whole note, so I offered to buy a partial.

I would buy the next 55 payments for $19,500 and leave the balloon to the note holder.

$19,500 (proceeds from sale of 55 payments)
$28,200 (balloon amount left for the note seller)
$47,700 total to seller (for a note with a $45,473 balance)

He thought that sounded great and we were off to the races. Then, I get all of his documents. He had failed to mention that there was a $22,000 bank loan against the property that he had wrapped with his seller carry back transaction.

When I called to verify that he would be bringing in funds to close ($22,000 less the $19,500 = $2,500 to pay off the first) he said,

“Whoa, now wait a minute! Why would I sell a note just to have money go out of my pocket at closing? The point is that I need some cash right now.”

Somehow he thought that I would pay him $19,500 and stay behind the $22,000 first, which he would, of course, continue make payments on.

Uh… I don’t think so.

That would put my combined investment-to-value (ITV) at 87%! No way!!! Where’s the equity to protect me in the case of default? And statistically speaking, there’s a fairly good chance of default from a buyer with less-than-average credit and who doesn’t have much skin in the game (low down payment).

“Well,” I told him, “you could save yourself the negative cash flow for now (his mortgage payment to the bank was $1,071 each month, and he was only collecting $564 from his buyer/payor) and then have a nice $28,200 coming to you in 4 1/2 years”.

That just wasn’t going to work for him, so our deal fell apart.

To all you note sellers out there… us note buyers have to manage risk well in order to buy your note, and a big part of that is limiting ITV: Investment To Value. I usually don’t want my investment in the deal to represent more than 50-60% of the value of the underlying collateral, and I’m a prima donna… I HAVE to be in 1st position!

Pasadena Note Queen

Many Agents Repositioning With Non-Performing Notes & Owner Financing

Here's the link to the call: http://ownerfinancingclub.com/?p=2295

Real Estate Professionals Make Extra $20,000 With Owner Financing

Buyers of REOs and NPNs Making Money and Hiring Realtors

Learn to Navigate Owner Financing: Leave your Client with a Good Note

Discover and Demystify Discounted Notes

SUPERCHARGE your Retirement Portfolio

Fix & Flip Paper (Notes) or Buy & Hold for Passive Income

Property Owners: Carry Paper & Walk with Cash

Buyers Wanting Owner Financing: Notes Help you Get a “Yes”

How a Seller Offering Owner Financing Avoided Foreclosure

Land Trusts for Privacy and Owner Financed Transactions

What Discount Will my Client Take if They Sell Their Note?

The Truth About Investing in Discounted Real Estate Notes

REGISTER FOR THE WEBINAR

Lease Options vs. Installment Sale - Interviewing Wendy Patton

Owner Financing for Realtors

Why Notes, Why Now... and How?

Waking Up from the Illusion of How Money Works - Adding a Shout to the Twist

I want to be happy if the note performs, and happy if it doesn’t.

Why Notes, Why Now… and How? (self-directed IRA)

If you want to participate, REGISTER HERE.

0% Owner Financing Making Ownership Cheaper Than Renting

CLICK HERE to listen to the recording of this perspective-changing interview.

Why I Created Owner Financing Club - Help Realtors Help Their Clients

Owner Financing can Create Notes Worth Buying with your Self-Directed IRA

Next Thursday, July 7th, I will be interviewing Walter for the next meeting of Owner Financing Club (a virtual investment club focused on owner financing and notes).

Even Trump Offered Seller Financing...

Well, Inman News recently reported:

The Note Guy, the Note Queen and Non-Performing Notes at Owner Financing Club

LA Area Class: Owner Financing - Help Your Clients Buy Without Banks

per·sev·er·ate

Owner Financing Club - a Virtual Community

So… here’s what Owner Financing Club is about so far:

Real Estate Transactions Gone South - Are They Worth Your Life?

NAR Starting to Talk More About the Benefits Owner Financing

Check out the Note Queen Store!

I'd Like to Sell My Note, But is This a Bad Time?

Check out the Note Queen Store!

Another 15-25% Drop in California Home Prices Expected in Coming Years

Not exactly sparkly news to start off your day, but it’s even unhappier not to have a clue it might be coming whether you’re buying property or the paper secured by it. Check out this post:

Here is my free association stream of thought, Freudian style…

Related Reading:

When I Offer Owner Financing, Should I Pay my Agent a Full Commission?

So, back to the conversation…

Absolutely!

It’s my “Bake It and Buy It” program.

To the Chopping Block for Fannie & Freddie - Private Money & Owner Financing Expected to Increase

I guess what this means to me is that:

Uh... Sorry Mr. Note Seller - I Need to be First

Here’s how I thought the deal was shaping up with a note holder that sold a property 4 months ago:

Uh… I don’t think so.

Check out the Note Queen Store!