First, I want to emphasize that quality Notes, where the payors have very good credit and at least 20% equity in the property, are still selling for 88% to 95% of face value. (If you have a quality Note like this and are thinking of selling it, I strongly suggest you sell it now, while there are Note Buyers with the available liquidity to buy quality Notes.)

With this being said, I am now hearing the following cry. "But my Note is good, and they always pay on time". This is the common and sad reply I am receiving when I have to give Note Sellers a quote that has a heavy discount due to their payors subprime credit, with little or no down payment. To us Note Buyers, this means the payor who has little or nothing at risk, can easily walk, leaving the Note Buyer with the liability of a deteriorated property along with declining real estate values.

In today's market, Note Buyers are looking more at LTV (loan to value) and credit worthiness of the payors, than for yield. What do I mean by this? In a nutshell, if a person has a low credit score (below 650), Note Buyers are looking for at least 65% cushion on the Notes they buy regardless of the interest rate. For example, a $100K house selling for $3,000 down, with the seller carrying a $97,000 Note, with a low credit score can expect to be quoted in the $63,000 range. YES, THIS IS A HEAFTY DISCOUNT!!!

However, there is a reason. Since Note Buyers have no PMI (private mortgage insurance) the only security we have is the equity in the property. Combine a high credit risk, with no equity, and it becomes clear why the discount is so high. This is not to mention in many areas real estate prices are declining, especially in areas where sub prime lenders defined property values.

The theme of this newsletter is to inform you "the cheese have moved" since the sub prime melt down.

The reality is if you have Notes with subprime payors, in today's market you have three options.
1. Keep the Note
2. Sell at a steep discount
3. Sell part of the Note and keep part. ( This option is becoming more and more favorable)

I wish I could offer 85% for sub prime Notes as I did a few months ago. This was profitable for all concerned. But those days are gone. To survive and profit, we are going to have to change with the market, because I guarantee the market is not going to change for us.

I will be teaching a course in Owner Financing on January 19th and 20th. In this class I will be emphasizing how to not only buy and SELL Notes in today's turmoil, but how to buy and sell real estate in a chaotic market. Sign up now. I limit my class size to 20, so be sure to sign up early to assure a seat, as well as get a discount.

If you have questions or have a Note to sell, or know of someone who wants to sell a Note let me know.

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How to Use Owner Financing in a Chaotic Market

I will be teaching a course in notes on January 19th and 20th. In this class I will be emphasizing how to not only buy and SELL notes in today's turmoil, but how to buy and sell real estate in a chaotic market. Sign up now.

I limit my class size to 20, so be sure to sign up early to assure a seat, as well as get a discount

A TALE of Two NOTE Quotes

The following two contrasting Note stories represent a summary of the Note market at this time.

Last summer two Note sellers brought me Notes to determine their value.

One Note was less than a year old with a high LTV and low credit score. I offered the Note seller in the 80% range for this Note. She declined the offer and said, "I will wait".

A couple of weeks ago, she brought the same Note to me again for pricing. Reality hit her like a brick wall. No longer did this Note command 80%, but now only 65% of the face value. While she was "waiting", the market changed and changed drastically.

Around the same time last summer, another seller brought me a Note that had 4 years of seasoning, a large down payment, tons of equity, as well as his payor had a 700+ credit score. He was offered in the 90% range. Like the other Note seller, he thought he would just wait.

Then this week, thinking the real estate market might deteriorate further, and his Note might start to loose value, he decided now was the time to sell his Note, he asked me to reprice his Note. Because of the equity, and high credit score, his Note was still commanded in the 90% bracket. He was a happy camper to be able to convert his Note to cash.

Both of these stories have a couple of morals and rules.
1. Waiting for a "better price" in today's market can be detrimental
2. Quality Notes are still valuable.

If you have a quality Note, remember Moral #1. If you have Notes to sell, NOW is the time to sell them. If things start deteriorating any more, the declining value of property is going to make your Note worth less. It is that simple.

Contact me if you have a Note, or Notes you want to consider selling. We can discuss your goals and your specific situation. But whatever you do, DO NOT HESITATE. Thinking things will go back to where they were before, or you want a "better price" and will wait, may not be in your best interest, especially if you need cash now.

If you have not attended a Note Professor "How To Get Rich with Notes" class, be sure and purchase the Note Professor Note Book manual to enhance your knowledge of creative real estate financing and note buying and selling.

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