Posted by Dr. Werner on January 06, 2003 at 13:32:27:
In Reply to: Re: Is this 2nd structure marketable? posted by Bobby White on November 11, 2002 at 20:54:15:
Greetings
We purchase simultaneous closing mortgage notes that are seller created from either a flip deal or a FSBO home sell. With that said lets look at a typical deal using your numbers given earlier;
With using our system we always offer the property at full appraised value sice we are offering the preception of value; which in all cases is true as we offer easy financing to purchase a home so we should receive full appraised value for our risks.
Here are the numbers: 250K full appraised value
Buyer has a 560 to 599 credit score
Based on these scores the buyer can receive a 75/20/5 financing structure
It breaks down this way;
1st lien = 250K x 75% = $187,500 cashed out by my company at 90% of face value = $168,750 cash at close
Seller held 2nd lien = 250K x 20% = $50K
Cash down from buyer = 250K x 5% = $12,500
Bottom net at close = $181,250 in cash + 50K note =
$231,250 or 93% of appraised value! An excellent net! Best of all we allow flips with no title seasoning issues, no PMI, most are lite or no doc type deals! the idea is to keep the transaction simple, because if the financing terms are too complicated, either party to the deal may get cold feet and simply nix the deal.
The interesting thing about mortgage notes is simply that many investors dictate their own terms and conditions that they look for when considering a note purchase. Most do want some seasoning such as 1 month of payments before they will buy the note, or they want a very low investment to value to protect their equity interests. What all this means is that you have to find a good note purchaser that has the best cash out discounts in the industry and offers to mentor the note broker in the process until they get the "hang" of it!
Peace
Dr. Werner