Archive for April, 2013


Wednesday, April 17th, 2013

The foreclosure rate in So. Calif. is at a 6 year low. The real estate market is really heating up again, even to the point where people are talking about another ‘bubble’ in the market. Some areas are appreciating more rapidly than others. Here’s what we look for when we buy a note:

1) How much cash down payment did the buyer of your property put through escrow when you carried back your trust deed?
2) What interest rate did you agree to when you carried the loan?
3) How many years did you agree to carry the loan?
4) Did you arrange fully amortized or partially amortized monthly payments with the borrower?

Those are the most important factors to determine how much discount your note will take. If you accepted less than 20% cash down payment and the sale was recent, either your note will take a larger discount, or not be salable at this time. Equity is the most important factor in loan safety. If there is little or no equity, the best you can hope for is a partial sale of your note.

Interest rate or ‘face coupon rate’ that your note was arranged for it the next most important factor to determine how much it is worth. If you carried back a note at 3%, it is going to take a hit, unless it is for a very short time.

Time (length of time) is just as important as the interest rate, if you carry a note for 3-5 years, then the discount will be modest, even small (depending on the interest rate you carried as well). If you made your note for 15, 20 or 30 years, be prepared for a larger discount to make up for that long length of time.

Amortizing your loan with fully amortized payments or at least partially amortizing payments helps keep the discount down. Don’t even consider accepting interest only payments on your seller carryback loan for any period of time more than a year or two. It makes your loan much less desirable and affects the discount.

Our average purchase price is between 88-92 cents on the dollar for the last 2 years. The notes we have purchased have been ones with favorable terms, so they didn’t take much of a discount. Some notes that were carefully written were purchased by us for up to 97 cents on the dollar!

If you would like a quote on how much your loan is worth, please call, click or fax over the information on the Note and I’ll be happy to get back to you ASAP.