What is Note Seasoning?

“Seasoning” is the term used to describe the amount of time the payer has been making payments. The general rule of thumb is the longer the better, with 12 months or more optimal. That is not to say that a note won’t be sold unless there is a lot of seasoning. It just means the investor will be looking at other variables of the deal that minimize risk. … [Read more...]

What Changes for the Payer?

"So if I sell my private mortgage note, what changes for the Payer?" This is a common question with a simple answer.  Nothing changes for the payer except where they mail the payment. When a note is sold, the terms of the note remain the same.  The payment amount, interest rate, and due dates remain the same. If there is a balloon payment or “bump” payments, they also remain the same.  An investor purchases the note “subject to” the terms and conditions of the note signed by the payer.   The … [Read more...]

The Fair Credit Act

One question that is continually posed in this business is whether a cash flow investor has the legal right to access a person's credit file prior to purchasing a debt instrument.  The rights of consumers are protected under The Federal Fair Credit Reporting Act ("Act"). Originally passed by Congress in 1970 and substantially overhauled in 1997, the Act regulates acceptable practices with respect to credit information, which is gathered and sold by Consumer Reporting Agencies. The Act is … [Read more...]

Broker Fees – Too Much or Not Enough?

Negotiating the purchase of a cash flow is about providing a service to sellers desiring cash rather than payments over time. While providing an essential service, the cash flow industry is also a for profit business. Cash flow brokers earn their profit through fees or spreads resulting from the difference between the price the seller agrees to accept and the amount an investor will pay. But how are these fees determined? … [Read more...]

What is “Face Rate” of a Note?

“Face rate” simply refers to the interest rate that is being charged on the note. Typically seller-financed notes are written between 8 percent - 12 percent.  The higher the interest rate, the more valuable the note to an investor. … [Read more...]

What is Seller Financing?

When a seller allows a buyer to make payments over time for the purchase of property, it is known as owner financing or seller financing. … [Read more...]

Owner Financing? The Top 5 Things to Consider

When sellers provide owner financing, their primary concern is usually, “How do I make sure the buyer will pay me?” … [Read more...]

What is a Note Discount?

This is usually the first question on everyone’s list. “Discount” is essentially the difference between how much is currently owed on the note versus how much the investor is willing to pay for it. … [Read more...]

What is LTV and ITV?

You have probably heard a lot of acronyms thrown around in the note industry. Some of the more common ones are LTV and ITV.  LTV stands for Loan to Value. This is shown as a percentage. It is often used to determine “what is the likelihood the payor will continue to make payments” based on equity. … [Read more...]

How to Determine “Value”…

One of the considerations when purchasing a note will be the appraised value of the home. Although there are some great programs on the internet that aid the average consumer in getting an idea of a value, they are not always accurate and thereby credible when you are talking about investing money in a seller financed note. … [Read more...]