Note Broker Fees In The Cash Flow Business

How much can a note broker make on a deal?

That’s the short summary of a cash flow business question we received last week from a Note Broker. It was an earnest inquiry and we wanted to share our answer in this edition of Real Deals!

I was just visiting your site and wanted to know what a fair % of cash flow a broker can expect from a performing package deal?

There are buyers wanting a performing MHP package I have available with only 2-3 yrs. to maturity and the smaller lender wants to cash out.

I understand from other brokers that 25% of net is reasonable as well as a smaller finder’s fee.

What are your thoughts? I appreciate your response.

Note Broker in Arizona Read more

Real Deal #153 – Split Payment Partial Rescues Note Purchase

Welcome to Real Deals! It’s always easier to learn from real life so here we share information from actual owner financed transactions.

When the mortgage balance is greater than the property value a partial purchase can rescue the purchase of a seller financed note similar to this real deal in Texas.

Read more

Real Deal #150 – Repeat Business with Partial Purchases

Welcome to Real Deals!  It’s always easier to learn from real life so here we share information from actual owner financed transactions. 

When a note holder sells a portion of the note they will often consider selling the remaining payments at a later date. A partial purchase can provide repeat business to both note brokers and investors similar to the experience on this vacation lot. Read more

Real Deal #147 – Estate Note in Arizona

Welcome to Real Deals!  It’s always easier to learn from real life so here we share information from actual owner financed transactions. A seller-financed note is an asset. The seller can elect to hold the asset collecting payments, sell the note, or leave to heirs as part of their estate.  Many heirs would prefer cash now rather than payments over time.  A large number of notes are purchased through estate distribution similar to this Arizona note. Read more

The State of the Note Industry

Around the country real estate markets have softened leaving a glut of inventory, decreasing values, and extended marketing times.  The result? More sellers are offering to finance a portion of the purchase price for the buyer in an effort to “Move that House”!

While sellers are motivated, lenders on the other hand are hunkering down or running scared.   In the face of the credit crunch and increasing foreclosures, lenders have tightened underwriting requirements.  Fewer loans are being originated and this also contributes to an increase of seller-financed private mortgages.

While the upside is increased private note inventory, the downside is fewer notes can be sold to investors.  While seller financing is an alternative to bank financing, note investors are not Read more

What is a Partial Note Purchase?

When a seller allows a buyer to purchase property on installment the terms of repayment are usually spelled out in a Promissory Note or Real Estate Contact. Sellers may also elect to sell and assign their rights to future payments.

When an investor purchases all the remaining payments it is considered a full purchase.

When an investor purchases just a portion of the remaining payments it is considered a partial purchase.

For example, a note has a balance of  $90,000 at 9.0% interest payable in monthly installments of $1,140.08 with 120 months (or ten years) of payments remaining.  When the seller sells all 120 remaining payments of $1,140.48 to an investor it would be considered a full purchase.

If the investor only purchased the next 48 monthly payments of $1,140.48 each then it would be considered a straight partial purchase.  Once the investor received the next 4 years of payments, the note would be reassigned to the seller and the seller would collect the remaining 72 payments (120 total payments less investors partial purchase of 48 payments leaves 72 payments remaining to the seller).

A partial purchase can also involve splitting the monthly payments received from the buyer between the investor and the seller, also known as a split partial.  Using the same example of 120 payments of $1,140.08 each, an investor might agree to purchase $600 of each remaining payment leaving a remaining residual of $540.08 to the seller for the next 120 months.

The terms of a partial purchase are spelled out in the Partial Purchase Agreement.  This important document outlines the servicing arrangement along with what happens in the event of an early payoff or default by the buyer.  Competent legal counsel should review the partial purchase agreement to protect the rights of all parties.

Real Deal #138 – Partial on Oregon Home

Welcome to Real Deals!  It’s always easier to learn from real life so here we share information from actual owner financed transactions. 

A husband and wife decided to sell a rental home to their tenant using seller financing. Read more