Posted by David Butler ANN on November 14, 2000 at 24:00:29:
Hello Shad,
Yes, both seasoned, and “green” 2nds are bought and sold all the time… but, they do present their own set of challenges, as they are obviously a riskier note.
You should find it very helpful to become familiar with our FREE Note Grading/Guidelines report at:
Some other factors to be aware of with regard to your plan to try and sell 2nds… generally, experienced note buyers are going to require a lower combined ITV than they would in buying a first. Usually, they’ll want the combined ITV to be at a maximum 70% for both loans. This is due to the higher risk a 2nd has in relation to a first. They’ll also want to see stronger credit and income history.
Another rule of thumb is ratio of 2nd note balance in relation to first note balance - the preferred ratio is 3 to 1, or less. So, if you are carrying back a note for $9,300, a prudent investor is going to want to see the first with a balance of $28,000 or less, unless there are other compelling attractions, such as stiff down payment, deep equity, or very soft terms on the existing first.
Hope this helps, and good luck!
David P. Butler VP Broker Relations
America’s Note Network