Step up the payments!

I have mentioned many times in this Newsletter that sellers carry back notes in order to sell their property; then, they give preferential terms to the buyer providing little or no protection for themselves. It appears that the motivation is to get a sale and get someone in that property. This is dangerous and bad business.

If you as a seller are considering carrying back a note, and your buyer is not giving you a good downpayment, here is one simple idea for you to consider.

Assume your note is for $100,000 with 30 years amortization at 8%. The monthly payment is $733.76. Your buyer can handle this payment.

If beginning year 2, your buyer starts paying you $50 more, the monthly payment becomes $783.76. Every year thereafter the monthly payment increases $50. Instead of making 360 payments, your buyer will make 168 payments.

If he can handle a $100 monthly increase beginning year 2 and each year thereafter, he will make 131 payments. If he can only handle a 5% increase, he will make 174 payments.

The point is sellers must take steps to protect themselves in this vulnerable market. You should expect commitment from your buyer. Your buyer should desire increasing equity for himself. This is one way to satisfy both of you. Think about stepping up the payments. Play with the numbers. Everything is negotiable in a real estate transaction.

I have software to run these numbers - call me if you need help.

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Larry Ellison, CEO of Oracle, owns eight houses on Carbon Beach in Malibu, California, known to locals as the Billionaire Beach Club. He just bought another for $39.9 million!

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Bank of America keeps making headlines. The Wall Street Journal reported that B of A plans to slash 16,000 jobs by year's end, and close 200 branches. It also reportedley intends to "shrink its mortgage operation."

B of A has agreed to pay billions in various settlements. These include $11.8B for the botched handling of troubled mortgage borrowers; $8.5B to buy back bad mortgage bonds from its Countrywide purchase; $2.4B to settle with Merrill Lynch investors; and $10B in a lawsuit filed by AIG.

Remember, B of A paid $50B for Merrill in September 2008, and took $45B from the government bailout. B of A's stock value was around $240 B 6 years ago, around $95B today. It's only fair that employees should lose their jobs because of bad decisions made by management, don't you think?

By the way, B of A charged me $30 to place a stop payment on a check. The check was mailed to a a long time customer who never received it. The post office never returned the mail to me. It disappeared into thin air. I have been a customer for 30 years, and obviously neither B of A nor the Post Office did anything wrong. It's my fault, and the $30 will go a long way to getting B of A back on its feet!

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"Puppets are happy to be puppets if the puppeteer is a good puppeteer."  Federico Fellini, Film Director.

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2011 was the lowest level of home mortgage lending since 1995 as reported by the Federal Reserve. 6.2 million home loans were made in 1995, 7.1 million last year.

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The CoreLogic Home Price Index showed that home prices nationwide increased 4.6% from August 2011 to August 2012. This includes distressed sales. The five states with the highest home appreciation were all in the West:

Arizona  +18.2%

Idaho     +10.4%

Nevada  + 9.0%

Utah      + 8.9%

Hawaii   + 8.0%

Good news for us who live out here.

If you know someone in the real estate or financial industry who might enjoy this Newsletter, please pass it on to them.

Sincerely,

Denny Stanz

CA Broker # 01915404

760-245-5366
760-245-5367 fax
dennystanz@verizon.net
www.CaliforniaNoteBuyerLLC.com