Pat:
Most often when an existing Note holder / seller wishes as the Assignor to Sell (assign) their interest in the Note & Mortgage (or Trust Deed) they are holding to another party (the Assignee), there is no recourse required on behalf of the Note seller (assignor).
However in some instances because the Note itself might have serious flaws associated with it- such as; it might be viewed as high risk, the collateral is weak or lacking, the payor credit is very blemished or damaged, etc.- then a purchaser of such a Note under these cirucmstances might require the the Note seller (again the Assignor) to agree to sell and assign their interest in the Note to the purchaser (the Assignee) and to also provide a “guarantee” of the future performance of the Note (this is the recourse back to the Note seller).
Thus when recourse is given - the Note seller is agreeing to back up the performance of the Note that is being sold in the event it does not perform. This might placate a Note investor who otherwise might not purchase a Note with a lot of flaws associated with it.
Best to your success;
Michael Morrongiello 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”
Posted by Brian,WI on February 27, 2008 at 02:54:55:
In order to get a property sold, it looks like I’ll have to take back a 2nd mortgage. I have a strong buyer, but the lenders these says are asking too much for him to get his financing.
Right now the numbers are this…$290,000 purchase price, $20,000 down payment, $200,000 financing from a lender, $70,000 2nd I take back.
If I accept this, is there anything I should do to make this note more sellable if I want to get rid of it as soon as I can? What are some good terms to use (it may only be set up as a 2 year note)? Any other advice?
Brian:
The $70K 2nd lien you are being asked to take back and finance for this buyer is essentially going to be a VERY high risk, unmarketable Note.
Consider what I call the Multi Purpose Financing Vehicle gaining a lot of renewed popularity these days; the WRAP AROUND
Far better to use a form of a wrap around instrument to sell to a buyer who presumably has good credit and some cash to put down than to be relegated to taking back a good portion of your equity in the form of a “throw away” 2nd lien.
You might use the search feature here and get some additional input on wrap arounds, wrap around mortgages, wrapping, etc.
I would like to see YOU become the bank and finance this buyer by carrying back a $270,000.00 WRAP AROUND Note which will wrap and encircle your existing debts and liens against the property.
Best to your success;
Michael Morrongiello 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”
Hi Michael,
This question does’nt have anything to do with this topic, but I was just on your website, and I had a question regarding note buying and selling.
Are SFH owner-financed notes typically sold to a note buyer WITH recourse, or WITHOUT recourse, or both? If both, then what is the typical difference in discounts demanded by note buyers?