According to Advanced Seller Data Services, 85% of all owner financed transactions in 2015 were Mom and Pop

transactions. What does that mean? It means that people like you and me sold a property that we owned and agreed to carry back the note. And, we did it one time - and may never do it again. In other words, we were not in the business of creating owner financed notes in order to sell a property. We did it because our buyer could not obtain conventional financing - for whatever reason -  we wanted to sell and we allowed the sale to happen by acting as the bank.

I have never done a statistical study to determine what percentage of note holders calling me fit this Mom and Pop definition. But my experience tells me the overwhelming number fall into this category.

This leads me to my central point I want to share with you today. These folks will almost always ask me 1 of 2 questions:

1. How does this work?

2. What is the process?

Many noteholders have no idea they can sell their promissory note and cash out until they have contact with someone like me who is in the note business. So, it is only natural when they finally have a conversation with a real person that they almost immediately ask one of the questions I posed above. So, here is what I tell them:

" This is how it works. If you decide to sell your note to anyone in our business, your note will be discounted. You will get something less than the current principal balance. Are you aware of this?( It's 50/50 he knows.) The reason is very simple - risk. There is a big risk in carrying back a note like you did or in buying a note like we might. The biggest risk you and we face is that your buyer stops paying. And, when that happens, the possible nightmare begins. So we have to measure that risk, and based on that evaluation decide how much we are willing to pay.

To give you an idea of where the market is today on pricing, note prices fall into a very broad range. Roughly, most noteholders get somewhere between 60%-85% of their current principal balance. Some people may get less because of all the risk factors associated with their transaction. Some people may get more than the high point because of the strong note terms, great property, big down payment, etc.

The specific price for your note depends on a lot of factors - type and condition of the property you sold, size of the down payment, credit worthiness of your buyer, favorable or unfavorable terms for you, documents are in order, etc. When things look great, the pricing will be near the top range. If you have a little glitch or two, the pricing should be in the mid range, and if your situation looks pretty risky, the pricing will be towards the bottom range. Typically, nothing changes for your buyer - the note terms stay the same - he just sends his monthly payment elsewhere."

At this point, the note holder has a basic understanding of our process. I will then ask a few basic questions to determine whether he has a note that is marketable. If he does, I will probably tell him in which of the 3 price ranges he falls. I will ask if he wants a specific price so he can make a decision. If he says yes, I will ask for a copy of the signed note and closing statement so I can confirm all the numbers, then ask some detailed questions. Lastly, I do a little research, put all the info together and get the noteholder some pricing. If he accepts the offer, we do our formal due diligence - run credit, order a property evaluation, collect all the documents, do a Title search/update, and hopefully close in about 30 days. We typically close the transaction using the same Title Company that handled the owner financed transaction or we will send the closing documents directly to the seller with a cover letter if he is comfortable closing that way. Funds are released via a wire transfer to the seller's bank account.

This is how it works!

      SOME GREAT QUOTES FROM WILL ROGERS

1. Never kick a cow chip on a hot day.

2. There are two theories to arguing with a woman. Neither works.

3. Never miss a good chance to shut up.

4. The quickest way to double your money is to fold it and put it back into your pocket.

5. Good judgment comes from experience, and a lot of that comes from bad judgment.

6. If you're riding ahead of the herd, take a look back every now and then to make sure it's still there.

WESTERN HOME VALUES HIGHER THAN OWNERS       REALIZE

"The hot housing markets along the West Coast are growing quicker than owners realize, giving way to higher than expected prices for buyers and more home equity for existing owners. On the other hand, the housing markets are more balanced in the East and Midwest, leading owners to be slightly overenthusiastic about their home's appreciation."

In May, Denver appraisals showed home values there averaged 3.28 per cent higher that what home owners thought their home was worth.

Source: Bob Walters, Quicken Loans Chief Economist

See the 27 city table at: http://realtormag.org/daily-news/2016/06/15western-home-values-higher-owners-realize.

Roto-Rooter, the plumbing and drain service company, conducts an annual survey of its technicians to find out what sorts of things are being found in customers' pipes. Among the more interesting items over the years have been Barbies, false teeth, TV remotes, alligators and six-packs of beer.

Source: Strange But True, Samantha Weaver

          Homeownership Rate just 62.9%

The proportion of U.S. households that own homes has matched its lowest level in 51 years - evidence that rising property prices, high rents and stagnant pay have made it harder to buy.

Just 62.9% of households owned a home in the April through June quarter this year, down from 63.4% a year earlier. The share of homeownership now equals the rate in 1965, when the census began tracking data.

Homeownership peaked at 69.2% at the end of 2004.

Source: U.S. Census Bureau.

You do not need a parachute to skydive. You only need a parachute to skydive twice.  PonderBits.

August 13 is National Garage Sale Day.

If you enjoyed this Newsletter, tell a friend.

If you know how I can make it better, tell me.

Thanks for reading.

Denny Stanz

CA Broker # 01915404

760-245-5366 

760-245-5367 fax 

dennystanz@verizon.net

www.CaliforniaNoteCompany.com