When any of us owns something, we have some idea in our head as to its value. When we decide to sell, however, oftentimes the marketplace shocks us into a new reality - what a  buyer is willing to pay may be quite different than what we expected to receive.

In the seller financed note business, notebrokers and notebuyers learn from experience that most notes ARE NOT saleable. Industry estimates are as high as 70%. That means that as many as 7 out of every 10 notes in the marketplace WILL NOT attract a buyer. This may seem shocking to a noteholder, but again, it is a reality of the marketplace.

Why is this so? Sometimes it is simply market conditions. In the current  market, most notebuyers will not buy a 2nd trust deed that is behind a large 1st trust deed, where the property is declining in value and there may be little or no equity. The risk is too great, the potential reward too small. The notebuyer will look eslewhere to invest his dollars.

Many notes are constructed poorly. Perhaps the downpayment was too small. Perhaps no credit check was done. Perhaps the interest rate is too low. Perhaps the term of the note is too long. Perhaps the seller sold his property to the wrong person, and in his haste to get a deal done, created a problem situation in waiting - late payments, no payments, foreclosure.

The urgency to sell a property and close a transaction is understandable. But another reality for noteholders is if they are not willing to take a more business like approach in creating their note transactions, they will be sorely disappointed
when they decide to sell. The goal for all noteholders who may want to sell their notes is to be in the 30% group - not the 70%.
The way to ensure that is to adopt a lender mentality that will make that note attractive to a 3rd party.


Denny Stanz