Note Selling
Most Sellers I speak with are aware that the note is bought at a discount. What they don’t realize are all the factors involved when pricing a note. They tend to think that because the borrower put 5% down and has made the payments on time for a year or so should totally override the fact the borrower’s FICO is in the 400-500’s.
They also tend to believe a buyer of a note should be very happy with a 10% yield, not realizing that investors want/need to make minimum 14-18% yields or else it’s not worth the risk. Of course the Sellers are emotionally attached to the property therefore believe their note is the best, especially if the interest rate is 9-10%. The Sellers don’t understand the investors also work off an Investment-to-value (ITV) ratio which increases the discount. Most feel an offer price should be in the 90’s.
Selling My Note: What Happens To My Payor
