The annual statistics for owner financing are hot off the press providing an overview of 2012 and insights on note buying in 2013.
“2012 saw a 15% increase in the total number of seller financed transactions, the greatest number of notes created in any year since 2006,” reported Scott Arpan, President of Advanced Seller Data Services.
The analysis was based on 1702 counties reporting across the U.S. for a count of 103,313. Click here to download the full report in PDF format.
Seller Financing By State – Texas Wins Again
When thinking of marketing, it’s always interesting to see what states have a higher percentage of owner financed notes. Here’s how the top 10 stacked up this year:
| State | Count | Percentage |
| Texas | 23,780 | 23.0% |
| California | 10,517 | 10.2% |
| Florida | 9,372 | 9.1% |
| Arizona | 4,646 | 4.5% |
| North Carolina | 4,165 | 4.0% |
| Georgia | 3,877 | 3.8% |
| Washington | 3,460 | 3.3% |
| Ohio | 3,300 | 3.2% |
| Oregon | 2,185 | 2.1% |
| Tennessee | 2,183 | 2.1% |
| Top 10 | 65.3% |
So ten states contributed to 65% of the volume while residential properties (SFR, 1-4 plex, Condos, and Mobile Homes) made up 69% of the seller financed market with an average note size of $134,380. Other property types like apartments, commercial properties, and tracks of land had considerably higher averages as reflected in the report detail.
Seller Cary Back Projections
Here are a few projections as shared by Scott Arpan at notesellerlist.com:
“In the past three years the creation of seller carried notes by individuals who create one note grew 85%. I anticipate continued 10% to 15% growth of notes created by individual sellers holding one note.
Creditors will continue to make access to credit difficult to impossible for half of the potential buyers in the US. However, a lack of seller’s equity in most markets will keep a ceiling on the number of properties available for seller financing until property values appreciate.
The new Regulation Z rules may curtail some note creation by builders and rehabbers. I expect many may create one note per entity to comply with the rules.
According to many of my customers, response rates and the interest of note holders to liquidate their note has increased fairly sharply since the election last November. January through April should see higher than average response rates as note sellers need cash to consolidate debt, pay taxes bills or invest in the resurgent stock and real estate markets.”
So what are your projections for the coming year? Will this impact your marketing plan for the note business? Please share your comments below!
If I have a deal that is owner financing what are your seasoning requirements? Can you do simultaneous closing? What are your parameters and guide lines?
I want to. Know. about cash flow notes and were. can get in this business. Do. I have a broke. license. To do this business in the state. of Portland. Oregon.
Great information surprised at the % in Texas! I know it was a hot market, but not to that extent. Sounds like the best time to be in the business. Thanks for the information.
Thank you for this most insightful information. I just completed my mailing campaign for January 2013 and I was happy to realized I’ve managed to locate Owner Financed Notes in some of the states that made the list. I would like to know more about RegulationZ. I think it is so important to stay on top of all of the regulations and changes in our industry in order to help my potential customers and to educate other professionals who refer business to me. I will definitely be putting more focus on the top ten states for my next mailing campaign.
Thank you again for this excellent post.
Hello Thomasina,
Glad you enjoyed the article. The challenge with the Reg Z updates is that even the attorneys are not in agreement. We plan to provide resource information with updates to the last article posted here: Seller Financing Regulation Proposals On Dodd Frank and TILA. Most will follow the lead of the larger institutional investors and any changes they make in underwriting requirements.
Thanks for this info. You’re right about Don’s question. It’s a “million dollar question” alright. I receive your updates via eMail. My husband and I run a note buying (exchange) business and try to stay abreast of the industry news. I am not all surprised by the statistics. All of the states are great for note investors. I currently reside in Texas. California doesn’t exactly make it easy for note investing. But who would pass an opportunity to invest in a piece of prime California real estate? I’ll be sharing the link to this post on my Facebook page.
Hello Teathyl! Thanks for the feedback and your regular comments. You are in a great state for notes (but you are also right in they all have notes for sale)! We encourage people to start local and branch out from there. Very true on California but for those willing to jump through the hoops there is opportunity.
All the best,
Tracy Z
Tracy:
Thanks for the up date. I’m wondering, do you think there is a number (%), of notes that have been created in 2012 that are safe and saleable, notes that could be purchased without down payment, appraisal, and/or low interest snags?
Don Mayer
Hello Don!
Now that is the “million dollar” question. To give a factual answer it would require knowing things that are not always of public record and often revealed during the due diligence process (credit, note terms, current value, settlement statement, payment history, etc.). So we can talk in averages or generalities based on past experience.
Scott Arpan provides a great spreadsheet that is a Direct Mail Budgeting Calculator (you can download in the member’s area of Finding Cash Flow Notes Training or over at notesellerlist.com). It reflects the average response rates, percentage of note holders needing to sell, and close ratios. It is chock full of data and great explanations on the averages.
Over the years I have found similar results but averages can certainly be improved by marketing to note holders with greater equity or noteholders living in different states than the property. One way to tell equity is by looking at the sales price versus the mortgage note amount. Fortunately this is part of the public record. Starting with notes that have 20% equity would greatly improve the “saleable” ratio you mentioned.
Thanks for reading and commenting at Note Investor!
Tracy Z