2015 is coming to a close. For note sellers and note buyers, it was the best year since the housing crash. Note buyers got a little more aggressive in their pricing and note sellers benefited by getting more money for their notes.

Generally speaking, folks who are selling a property and carrying the note are being a little more cautious in who they sell to and the terms they agree to. This is good news for potential note sellers and for the real estate market as a whole, because it brings more stability to the market.

Thank you if I did business with you this past year, I appreciate your support.

Merry Christmas and Best Wishes for a Healthy and Successful 2016!

A lot of note holders are curious about the process of selling a note. Here are a few key questions I get from time to time:

Question: I live in a different city and state than you. How do you handle the closing when I am so far away?

Answer: We will close at the same Title Company office you used when you sold your property. Or, we can overnight the closing documents with an instruction letter directly to you. You sign the documents in front of a notary and overnight to us.

Question: How do I receive my funds?

Answer: The funds will be wired to the Title Company we are closing with or sent directly to your account.

Question: How is my buyer affected when I sell my note?

Answer: He is not. Remember, you are selling the note terms agreed to. The only change is where your buyer sends his monthly payment.

Question: I like my buyer and the monthly income, but I have a cash crunch. How can I use my note to get the cash I need?

Answer: You need options to consider, and one option is to sell part of your note. Let’s say your note term is 240 months, you have received 10 payments. You could sell, for example, 50 or 100 of the remaining 230 payments, then retain the right to receive the balance of 180 or 130 payments. You would compare this option to other cash sources you have, then make the best decision for you.

Question: I really don’t need the cash. Why should I sell my note?

Answer: You shouldn’t. Don’t sell until you have better use of the cash. In the meantime, read my Newsletter and call me when you are ready.

Across the country, financial institutions holding foreclosed homes are ordering them to be sold. If you would like to bid on these homes in your area, here is an opportunity.

Auction.com has established a calendar of events and you can find an auction near you. To see the dates and homes available go to http://bit.ly/SBXY2n.

States that must approve foreclosures in court before they become final are dealing with huge backlogs that can drag on for up to 5 years – with the homeowner living “free” in the home. See RealtorMag, Foreclosed Owners Find Way to “Free” Home?

If you are in California, Nevada or Arizona and you have an interest in buying foreclosures, you can get foreclosure lists in these states at www.CountyRecordsResearch.com.

Let’s say a note holder is carrying a $100,000 note. The term is for 30 years at 6% interest. The monthly payment is $598.27. The typical language in this Promissory Note will begin as follows: “For value received, the undersigned hereby agrees and Promises to Pay to (seller) the principal sum of ONE HUNDRED THOUSAND AND 00/100 DOLLARS( $100,000.00) with interest at the rate of six percent(6%) per annum on the unpaid principal balance. Payments of FIVE HUNDRED NINETY EIGHT DOLLARS AND TWENTY SEVEN CENTS( $598.27) to be payable in monthly installments commencing (date) and continuing until paid in full.”

Question: What does this note holder have?

Answer: A Promise to Pay $598.27 monthly for 360 months. Nothing more, nothing less.

This may be obvious to you, but it is not obvious to all note holders. Some believe they are holding a cash account or CD equal to $100,000 earning 6%. One of the most difficult concepts for these folks to grasp is that their note is not worth $100,000 in the open marketplace, should they decide to sell. Carrying a note is fraught with risk, the biggest being that the buyer does not pay the $598.27 due next month. Any potential note buyer must assess the risk inherent in the seller’s transaction and then offer a price based upon that assessment. The risk elements include the type and condition of the property sold; the amount of down payment; whether the note terms show a strong commitment on the buyer’s part; the credit worthiness of the buyer, etc. The stronger the transaction is, the better the pricing. The weaker the overall transaction appears, the more the pricing will drift downward from the principal balance.

Price is always a result of risk assessment.

Most note buyers have learned from bitter experience what the result can be if the risk assessment is faulty. When a buyer reneges on his promise to pay, a painful series of events follow if he just cannot continue to pay the $598.27 required. How long will he stay in the property, without paying, before the seller can get him to vacate? What will the condition of the property be when the seller inspects it? What costs will be incurred to bring the home back to marketability status? How long will it take to find a new buyer? What will be the cumulative emotional pain and financial strain?

I speak to hundreds of note holders annually, and I know that some of them have not given serious consideration to the down side of carrying a note. And, unfortunately, some of them sell their property without knowing much about their buyer. Their need to sell overcomes their need to assess risk. With note buyers, the need to assess risk is always stronger than the need to buy.

This past July, the Dodd-Frank Act “celebrated” its 5th birthday. A lot of critics did not attend the party!

The pages and pages devoted to cleaning up the abuses in the financial and mortgage markets also included provisions affecting totally innocent bystanders – namely, folks like you and me selling a property, using an installment sale, and carrying a note. The Act established rules of conduct for us, and limited how many transactions we can do before the Act says we have to become licensed Mortgage Originators.

If you read an article posted by Core Logic – CoreLogic.com, Insights Blog, Entry for August 13, 2105 – the very first paragraph lists all the new offices created by the Act. If you like strong, central government with a lot of bureaucracy, you will like what you read. If not, you’ll get frustrated, as I did.

Regardless, I suggest you visit savesellerfinancing.org. This is a group essentially formed to protect our right to engage in seller carry transactions, and try to educate the Consumer Financial Protection Bureau about our business, how we operate, the role we play in the housing market, and most importantly, how we did not cause the mortgage meltdown. Go to the site, read, sign the petition, and contribute if you can.

By the way. I have spoken to an attorney at the CFPB on 2 occasions with questions about transactions and whether they were in violation of the rules. The answer was No in both cases, and they were very helpful.

If you hold a note and need or want cash, you need to know this: September just ended and my phone rang more than any other month this year. Who was calling? People like you – note holders. People who were looking for cash to make an investment. People who needed cash to pay for a big medical bill. People who needed to infuse some cash into their business. People who were building a new home. And on and on it went.

The common thread? Each of them felt their note was the best source for the cash they needed, and if the price was right, they were selling. Pricing for notes is strong, and if you hold a good note you will be paid a fair – sometimes more than fair – price for it.

My job is to give you options. If you need or want cash, your note may or may not be the best source of that cash. Call me and let’s see what options we can give you to consider.

In a country of more than 300 million people, the United States has more than 40 million of us paying more than 30% of our monthly income for housing( Bloomberg.com.) Yikes! This is not news to those of living in California, New York and other high cost cities and states.

If you live in Ohio, though, it’s a different story. A recent study found 4 Ohio cities among the 10 most affordable places to live in the United States. And, Ohio is typically in the top 10 every year in owner financed transactions as well.

Take a look at the story right here:

money.cnn.com/gallery/real_estate/2015/09/16/most-affordable-places-to-live/8.html.

If you are selling a property and can’t find a “qualified” buyer, your real estate broker may suggest you consider owner financing. At this point, your immediate reaction may be to respond with a loud “No way.” Why? Two primary reasons: You want to cash out now and you don’t want to feel like a landlord.

But suppose you knew that you could cash out shortly after closing – say, 1-6 months. And, as a consequence, you will not be a landlord forever – you just will receive a few monthly payments from the new owner, then cash out and move on with your life. Would this make a difference?

Maybe it would – maybe it would not. But a little information and a little knowledge can sometimes change the thinking of the most reluctant seller. Let’s take a quick look at why you might get the idea of being a landlord forever out of your mind and sell your home to a qualified buyer at your price. Being willing to owner finance could accomplish the following:

1. More Potential Buyers. In a tight credit market, there will be more “qualified” potential buyers for your home. Why? Because a little glitch on a credit report may negate a bank loan but still make your buyer a very attractive prospect to purchase your home.

2. Attract 1st Time Buyers. 1st time buyers have been on the sidelines the past few years, waiting to get into the game. The real estate market needs them. Offering owner financing helps the overall real estate market.

3. Neighbors Are Happy. We all want friendly, caring and invested neighbors. Your neighbors will be happy knowing their new neighbor was vetted by you and is as committed to the neighborhood as they are.

4. Note Buyers Will Want to Buy The Note. If you structure your note properly – good down payment, good interest rate, shortest term possible, etc., you will attract buyers who will be willing to pay the highest price possible. Your broker can check credit scores and history and someone like me can assist in suggesting note terms.

5. You Can Move On. You should be able to sell your note as soon as receiving one monthly payment( though we prefer at least six). You don’t need to be a landlord forever. You don’t need to hold the note forever. You can move on!

True, your note will be discounted – you will receive less than your principal balance. Why? Risk. Risk is inherent in owner financing. But, you are getting cash today. You don’t have to receive payments over the next 20 or 30 years. And, perhaps most importantly, you can have peace of mind.

Think about it!

I write this on the Friday before Labor Day weekend. On July 28 I wrote about the Dog Days of Summer, and how activity is low for us in the note business. Only natural when kids are out of school and folks are on vacation.

What a difference 1 month can make. When the Labor Day holiday ends, we will have 4 months left in the year and our business will kick into high gear. Typically these 4 months will be the best for  most note brokers and buyers. If you are a note holder, you may get a little more focused on your cash needs for the remainder of 2015 and look to your note as a possible source of that cash. As a consequence, note buyers will be more alert to giving you options to consider in the sale of your note – options that may just solve that cash need you have. That’s our job – find out what you need, why you need it, and hopefully present a solution for you to consider that makes sense.

One of the most satisfying things to me about this business is that almost every seller I talk to is easy and pleasant to work with. There is an occasional exception, of course, but invariably you and other sellers are honest, business like, friendly and co-operative. It makes my business so much fun to be able to help you solve some of your problems.

Whether you are sure or unsure about selling your note, does not matter. Give me a call and let’s talk about your situation. Maybe I can help and maybe I can’t. You won’t know until we talk.

Happy Labor Day!