While you see the Dow Jones index swing wildly, gold hit new record highs, financial institutions like Bank of America loose 1/2 of their value this year and other events happening around you, how does it affect the Real Estate and Loan markets? In general the economy effects the real estate market the most. If the economy is weak in general, real estate values are weak as well. Buyers are not out there making the market stronger. Most of us are used to the bad economy, it has been going on for a few years now and it looks like it is not going to change much for the forseeable future.

Getting used to volitility in the stock market and perhaps another drop in real estate prices to the tune of 10% looks like more and more the way things are headed. Banks in Europe are under pressure, Greece, Ireland, Spain and now Italy are the 4 most troubled countries with financial problems that may not be able to be fixed. As worries about banks in europe being able to stay solvent, our own Bank of America took on all the problem loans from Countrywide Mortgage and is paying to the tune of $20Billion to make things right. The credit downgrade of Fanne Mae and Freddie Mac also prompted more problems for the financial market, contributing to the huge down swing of the Dow. Financial institutions have much trouble and still no end in sight with mortgage foreclosures still at very high volume, although down from the record numbers in 2009-2010.

The loan market for Trust Deeds is all about quality. Having a “cherry” loan to sell is where you want to be. A large cash down payment of at least 20-25% is a must, the loan you carry needs to have principal in it, preferably fully amortized, so that the loan balance comes down as time goes on, which will give the holder of that loan a hedge against any drop in real estate value. Certainly a late charge if more than 10 or 15 days late, also a due on sale / due on transfer clause is also desirable. Some sellers are placing an anti-junior encumberance clause in thier loans, so that the borrower can’t pull out more equity out of their property, making it easier to walk away from in case of another downturn in prices. The last thing to think about is to impound the real estate tax payments with the mortgage payment, remember taxes come before any mortgages, often the loan holder is one of the last to know that the taxes are delinquent, if you don’t impound the tax payments, at least buy tax service, that way you can be on top of the situation in case the borrower misses their installments.

If you would like to know how much your seller carryback loan is worth, please feel free to call or click for a quote.

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