What is a Good ITV?

Sellers and investors often ask what ITV (Investment to Value) they should target when buying or selling a private real estate note.

You may have seen that some note investors claim they will go 85, 90, even 95 percent ITV. Frankly, I have yet to really meet them when it comes down to funding a deal in the current market.

As a refresher, the ITV represents how much is invested or paid for the note in comparison to the property value.  It is a different ratio then the buyer’s LTV (Loan to Value) or the discount percentage.

The lower an ITV the safer the investment, but you still want to stay competitive. Personally, I don’t like much over 80% ITV and prefer to be around 70% or lower depending on credit. You want some room in the event of a foreclosure or a down market (either of those sound familiar around now?).

A word of caution; don’t let a higher return push you above your ITV comfort zone. If you decide you want a 75% ITV and 10% yield then don’t be tempted with an 85% ITV and 13% yield. Someone once told me yield is irrelevant if you don’t get paid – they were right.

For more information on buying or selling notes for profit please visit the bookstore for Personal Profit Series: Notes – Your Complete Money Making System to Buying, Referring, Creating and Holding Real Estate Notes!

Firm Offer or Soft Quote?

Wonder whether you are receiving reliable pricing when submitting a qoute request worksheet to a note investor? Here’s how to know if it’s a firm offer or just a soft quote when going to sell a note. Read more

What is a Payer Estoppel?

Prior to purchasing a seller financed note, the investor might ask for a payer estoppel.  This simple one page letter or document is sent to the person making payments on the note, mortgage, deed of trust, or real estate contract.

The estoppel explains the investor is contemplating the purchase of the note, reassuring the payer that all terms and conditions will remain the same.  It then summarizes the information on the note including current balance, interest rate, terms of repayment, and contact information for the payer.

In addition to confirming information, it also provides the payer an opportunity to validate or dispute the details provided by the seller.  This can be particularly important when there is no third party outside servicing company collecting payments and keeping track of the balance.

The estoppel, also known as the vendee verification, is usually sent to the payer by certified mail or some other method of delivery confirmation.  Most investors mail once the title and property value have been reviewed and the transaction is near closing.  It might also be performed with a payer interview or verbal debt verification.

What the Federal Bailout Means to Seller Financing

Worried about the effect of toxic mortgages on the overall economy, the Federal government is pulling out the checkbook to help bailout failing mortgage companies.  It started with Fannie Mae and Freddie Mac and now includes a proposal for another $700 billion infusion of funds.  Why is the government involved and what does it mean for seller financing? 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

Note Investor Registry Changes

Bayview First Funding, a subsidiary of Bayview Financial, will no longer be accepting new submissions for seller financed mortgage purchases through its Texas based note buying division, effective Friday August 1, 2008.   

Formerly known as Interbay Funding, this company was introduced to the note buying community in 2001.  With competitive pricing and access to securitization funds, Bayview quickly became a preferred national institutional note buyer for full private mortgage purchases.

Unfortunately, the seller financed private mortgage business has not been immune to the effects of the credit crunch resulting from the sub prime mortgage crisis.  We are seeing a move towards private investors, portfolio lenders, and pension funds.  These types of companies tend to hold their notes for long-term interest income rather than relying on a quick resale to the secondary securitization markets.