CREATE YOUR OWN NOTES - Posted by Terry Vaughan

Posted by Terry Vaughan on July 14, 2002 at 22:53:06:

Hello Terry!
It was my GREAT PLEASURE to meet you (and Ed) in Atlanta. I must apologize that I did not realize you responded to questions on this forum. (I am busy working @ REI and spend little of my time on the net)
This evening, I noticed your response to another post. I would like to pose a question to you. This same question was posted earlier to Jon Richards. Had I known you answered these posts, I would have directed it to you.
Please understand, that I am interested in Mr. Richards?s response also. But, I was simply taken aback by yourself and Ed Garcia. You are both serious and knowledgeable businessmen, but you?re real people, honest, sincere, likable, approachable, and possessing a wonderful sense of humor. I trust both of you, and value and respect your judgment & opinion.
You are the one that inspired me (in Atlanta) to again try “WORKING WITH REALTORS”/creating mortgage notes and selling them.
I do look forward to your opinions on the following, and I thank you again (and Ed also) for the most enjoyable, educational, and rewarding workshop in Atlanta. (Knowledge more valuable than I gained in 4 years @ Cornell University, and costing $80,000.00 less!!!)
Anyway, here?s the situation Terry. Maybe you can point me in the right direction?
In the description of Jon Richards “WORKING WITH REALTORS”, he give the following example:
[A typical sale might look like this using Working With Realtors:
A $100,000 property is offered with 10% cash down and a $90,000 note at 10% with a balloon in 5 years. You, as the note broker, sell part of the note to an institutional note buyer at a 12.5% yield. They buy all the payments and $40,000 of the $90,000 balloon for $54,816. You give $44,816 to the seller of the note and keep $10,000 for commissions. The seller ends up with $104,816 in the following manner:
Cash Down Payment To Seller: $10,000
Cash From Sale of Note: $44,816
Cash in 60 Months From Balloon: $50,000
You, the note seller, get a $10,000 commission. You might give the real estate broker a 6%, $6,000 commission and keep $4,000 for yourself as your commission. ]
Terry, recently, a “national note buying company” told me that none of the “big guys” are interested in buying these notes.
He said that to be successful at Working with Realtors, or having notes purchased at the closing table, I need to have my notes conform to the more traditional mortgage note; ie, a 30 year note, minimum 575 FICO, no balloons etc.
I am interested in the Working with Realtors concept.
I am also more than willing to work with the note buyers in advance on structuring the notes to help meet their needs.
Until about 3 years ago I worked with “local” & “regional” mortgage companies & note buyers who would actually have the money (to buy the notes) wired to the closing attorney in advance of the closing.
We then started having problems with these ‘guys’ where we did a “Dry Closing” & prayed and waited for funding for 8, 10, even 14 days.
Needless to say, sellers, their attorney’s, Realtors, everyone got bent out of shape and quite a few good deals fell apart.
Now Terry, you have inspired me to revive the concept
Is there anyone out there who will fund notes like in Jon?s example?
Is there anyone out there that is dependable & interested in buying “Owner Financed Notes” at the closing table on a regular basis?
Is it common practice now to fund the notes (buy the notes) at the closing, or must we have everyone prepared to wait & receive the funds days/weeks after the closing.
Another problem is that many of the buyers of notes intend to immediately flip them, and thus demand ridiculous yields leaving little profit in there for the guy that did all the work! {ME!}
I have been buying & selling RE for 25 years. I believe I can overcome the “bad taste” the local RE professionals have in their mouth about “table-funded owner-financed mortgages”.
If I can find a reputable & timely note-buyer I’m sure we can crank up the business & provide a good mortgage note every week.
What are your opinions on this?
Thank you,