After 11 years in the note business, I have learned that the simple answer to this question is: better use of the cash.

For business people, they will usually examine their options when looking for cash to make another investment or take advantage of a business opportunity. If the price for the note meets their expectation, they will sell. Otherwise, they will choose another option.

For non business people, the process may be the same, but the reason for selling will usually be different. Maybe the need is a big medical bill, buy a new car, buy a new home, etc. Usually, more personal.

My job is to provide an option and for you to decide if it fills your needs.

Lending for condo purchases has held relatively steady over the last few years at about 8% of total mortgage originations. Hotspots with a particularly high share of condo sales include Washington D.C. at 37% and Hawaii at 42%. With the delinquency rate of condo loans sitting about 2% lower than that of single-family homes, there could be room to loosen condo lending guidelines.

CoreLogic Insights Blog, May 6, 2019

CoreLogic is predicting 4.8% home appreciation nationwide in 2019. There are 10 Metro areas expected to have 10%+ appreciation, all in California. They are: #1 Chico – #2 Salinas- #3 Santa Maria-Santa Barbara – #4 Modesto- #5- Bakersfield – #6 Oxnard-Thousand Oaks- Ventura – #7 Sacramento-Roseville- Arden Arcade- #8 Vallejo-Fairfield – #9 San Francisco-Redwood City-South San Francisco- #10 San Luis Obispo-Paso Robles-Arroyo Grande.

CoreLogic Insights Blog, April 26, 2019

Home prices were up 3.7% year over year in March 2019

Prices will increase by 4.8% by March 2020

Home price growth is still trending upward, but at a slower pace than a year ago.

SOURCE: CoreLogic Insights Blog May 7 , 2019

If you have a note that meets particular parameters, you could get as much as 90% of your principal balance should you sell it. Your note should look like this:

• Property is a Single Family or Condo Residence
• Principal balance is at least $100,000
• You have at least 20% equity
• Your buyer’s credit score is 680+
• Payments have been for the note amount and on time

This is very aggressive pricing. Contact me should you be interested in selling your note.

Let’s pretend you recently sold a property. Time has passed. You now look at what you did and begin to ask questions you should have asked yourself when you were negotiating. Here are the terms:

You sold the property for $100,000, with a $10,000 down payment, an interest rate of 4%, interest only payments of $300.00 due for 24 months. A balloon payment of $90,000 is due in month 24.

1. Your buyer committed 10% – you committed 90%. Is this good or bad for you?
2. The interest rate is lower than the prime mortgage lending rate, which your buyer did not qualify for. Is this good or bad for you?
3. The monthly payment is small and does not reduce the principal. is this good or bad for you?
4. You did not ask – or require – your buyer’s credit score/history. Is this good or bad for you?
5. You are not sure if or how your buyer will be able to pay you $90,000 when it comes due? Is this good or bad for you?

Every year I speak with several note holders who have agreed to similar terms, then realize what they have done when they speak to someone like me. You must ask the question “Are these terms good for me”? If the answer is “NO”, keep negotiating or walk away.

According to the Small Business Administration, over 200,000 small businesses are created or sold each year. Financing can be difficult, because the collateral is essentially the business assets – whatever they may be – and the acumen/credit worthiness of the new business owner. If a lending institution is not comfortable with the circumstance and declines to provide the financing necessary, the buyer may ask the seller to help finance the purchase. They will agree to all the terms and the buyer will start making payments to the seller, usually over a 5-7-10 year period of time. The parties have just created a BUSINESS NOTE.

Typically, the seller would have preferred to cash out and move on, but now finds himself tied to his old business and depending on his buyer’s business skills to ensure receipt of the monthly payments. Here is a way out. In the small niche of seller financing and note buying exists an even smaller niche – purchasing seller financed, 1st position, business notes secured by the business collateral. If you or anyone you know is interested in selling a business note, I can help provide some options and allow you to make a decision that best fits your needs.

If you are agreeing to carry a note in order to sell your property, you should be determined to know your buyer as well as you know your spouse. You may not be married to your borrower for the rest of your life, but 5-10-20 years is a pretty long time! After 11 years in the note business and having talked to thousands of note holders, the biggest mistake they make – by far – is not knowing their buyer. What do I mean? Here is a short list:

1. You have no idea of your buyer’s credit score or history.
2. You have not established that your buyer can comfortably afford the monthly note payment.
3. You are not sure what your buyer does for a living or where he works.
4. You are not sure about your buyer’s connection to his new neighborhood.
5. You aren’t sure how many people will be living in the home.
6. You aren’t sure if other people – not on the note – will be contributing to the note payments.

Sometimes we have to ask questions that may make us uncomfortable, but, are necessary. Being open and honest with your buyer should strengthen your relationship with him and help establish trust and good communication. Do your best to Know Your Buyer.

Income tax time is right around the corner. Thanks to the Tax Reduction bill passed last year, millions of Americans will be receiving a tax refund this year.

But, if you are one of the unfortunate few whose Form 1040, Line 22, will have a dollar figure typed into AMOUNT YOU OWE, you now have to deal with finding the money to pay that bill.

Where will it come from? Maybe you already have the source of that cash. If you hold a promissory note and are considering your options, maybe selling this note is the best choice for you. Maybe not. You need to explore the alternatives available to you. Contact me and I will get you a price for your note. Then you can decide IF you should sell or IF you should hold on.

The average rate on a 30 year fixed mortgage was down nearly a quarter point this week( March 25, 2019) from a week earlier, its biggest drop in over a decade. Freddie Mac says the average rate fell to 4.06%.

Lower rates are also boosting refinancing applications, which jumped 12%. As of last week, 3.3 million homeowners stood to save money by refinancing their mortgages.

A renewed boom in the mortgage market would be a benefit to lenders that were hard hit last year as rates rose. Roughly half of mortgages these days are originated by nonbank firms, which, unlike banks, don’ t have other lines of business or large balance sheets to fall back on when business dries up. Many depended disproportionately on refinancings and had to slim down or merge as rates rose.

Source: Ben Eisen, Wall Street Journal, March 28, 2019