what's in it for them - Posted by Reg

Posted by John Behle on January 01, 1999 at 16:26:40:

Be the “Paper Pro”
(By John D. Behle, EMS)

Earlier I shared the first five of the techniques I teach agents to help them see the potential uses and options when it comes to seller financing. One of the most important tools when it comes to paper are the various options available for avoiding balloon payments. Balloons have been called “foreclosures in embryo”. I shared some techniques about 14 years ago in a Creative Real Estate Magazine article I titled “Balloons are For Clowns”. Here are a few more.

All four of these techniques relate to ways to avoid or minimize the impact of balloon payments. This is just a sampling, there are many more options we’ll talk more about later.

Technique #6

Instead of a balloon payment, an increase in the interest rate could take place at a certain time period. For example, at 60 months, the 10% interest rate may jump to 15% or some other rate that the seller might be happy with. What would the seller do with the cash if he or she were paid off? Plug into the note a rate that might make the seller happy with their rate of return. A higher rate may encourage the buyer to refinance, which would accomplish the same purpose.

Technique #7


Five years into the note, the note may be well seasoned with a good payment history. At that time, the note could be sold for cash to a note investor. If there were originally a balloon, it could be structured that with a good payment history and an acceptable “Loan to value” ratio (based on current property values), the note could be extended for another 5 years. This seasoned, short term note with a good payment history could be sold for little discount.

Technique #8


A small balloon payment for less than the full amount of the note is sometimes referred to as a bubble. What are the seller’s needs? Could smaller lump sum payments over a few years actually meet their needs? Do they have kids in college or other special needs? As a note broker, it is sad to see sellers sell a large note and take a big discount just to get a small amount of cash. At other times, sellers receive their balloon payments and then turn around and put it in the bank at half the rate they were receiving on the note. Be sensitive to the seller’s needs.

Technique #9


One way for a seller to receive cash at a particular time period is to arrange to sell the next few years worth of payments to a note investor at that time. For example, instead of a balloon payment in 60 months, a few years worth of payments are sold at that time.

Agents find these techniques valuable and note investors find that they are a good addition to teach in a sales meeting to agents.

what’s in it for them - Posted by Reg

Posted by Reg on December 31, 1998 at 16:31:59:

I understand how a Real Estate broker can help me but I can not see my benifit to them. When if call a RE broker I am having a hard time figuring out why they would want to aid me. If not a referal fee then WHATS IN IT FOR THE RE BROKER? If a broker asked me whats in it for them, what can I tell them? How do they benifit? Can I get 5 benifits for a broker to deal with me? I know the answer is probably simple but I am on information overload.:slight_smile:

Their most Valuable Resource - Posted by John Behle

Posted by John Behle on January 01, 1999 at 11:36:21:

Agents don’t receive fees from mortgage companies or title companies - yet they would be lost without them. They know that, they just don’t know how much they need you yet.

When they see that, they are stunned. One top selling agent attended a 45 minute presentation I gave at an exchange group a few years back. When it was done, Cathy came up to me and said "John, this is fabulous - If agents knew this - they could close 90% more transactions.

I had shared a few of the techniques that are found in the two articles “Paper Your Most Valuable Tool” (posted in the articles section of this forum) and “Be the Paper Pro”.

Agents don’t know about paper, but once they learn, it can be their most valuable tool. From a marketing perspective, I hit the concept of “Full Spectrum Funding”. Agents know that from our company they can get one stop shopping for financing. We can meet any financing need - from Conventional to Hard Money to private. We buy or place it all. A-ZZZ funding.

Re: what’s in it for them - Posted by Stacy (AZ)

Posted by Stacy (AZ) on December 31, 1998 at 19:04:04:

Hi Reg-

The main benifit, as I see it, is to be able to close more deals. Plain and simple. For example, the seller wants to sell, and is not willing to carry a mortgage because they need their equity in cash. But, if approached right, they would be willing to carry a small second if the first could be sold for the cash they need at the closing table (for a discount to you). This is just one example. Anything that can improve the broker’s close-rate will interest him/her. You will be a valuable resource to an agent or broker, if they can call you and ask how to structure notes, and occasionally sell some to you.


Re: Where is the article located? - Posted by Reg

Posted by Reg on January 01, 1999 at 13:41:06:

Where is the article you mentioned located"Be The Paper Pro"?

Re: what’s in it for them - Posted by Reg(TX)

Posted by Reg(TX) on December 31, 1998 at 20:12:41:

I understand those. Those should interest all RE brokers. I can call them and set up a short session and explain what I can do. I LIKE IT!

Re: what’s in it for them - Posted by Stacy (AZ)

Posted by Stacy (AZ) on December 31, 1998 at 19:09:04:

Oh, and another benefit is to be able to convert any commissions they have taken in the form of notes to cash by selling to you.