- Note Course Bonus: 5 Critical Note Requirements
Published: Wed, 07/09/08
Welcome to another Note Course Bonus Lesson: "5 Critical Factors
You Must Know When Considering A Note To Buy Or Broker,"
by Eddie Speed. Eddie is the president of Colonial Finding
Group, LLC. He has purchased seller-financed notes for more than
25 years, exceeding $500 million in sales. I doubt if there is
anyone who has purchased more notes than Eddie Speed.
His article follows the announcement below.
Cheers,
Bill
W. J. Mencarow
President, The Paper Source, Inc.
www.PaperSourceOnline.com
www.cashflows.org
As you know, the real estate market is in a major upheaval, and
the mortgage industry is undergoing a meltdown.
But the flip side of every "crisis" is opportunity -- for those who
recognize it.
As a result of the conditions in the real estate market, seller
financing is rapidly emerging as an attractive solution. It's now
filling the void created by the collapse of conventional lending.
This means that you're in a unique position to capitalize on these
new opportunities. For one, you can pursue the growing inventory of
notes and close deals as never before. In addition, you can
establish a lucrative business through the creation of notes, a
specialty that's in growing demand. With seller-financing
expertise, you can also attract insider real estate opportunities
that are real bargains. You can invest in your own note portfolio,
taking advantage of today's market conditions and securing your
long-term future.
I'm pleased to invite you to attend a two-day workshop PERSONALLY
TAUGHT BY EDDIE SPEED that explores these options and shows
you how you can profit from them. "Seller-Financed Notes:
Phenomenal Growth, Incredible Opportunity!" presents the wealth
of opportunities for today's note specialist:
* Creating seller-financed notes
* Running a successful note business in today's real estate
environment
* Investing in notes for your own portfolio
* Finding hidden real estate gems through your expertise as a
seller-financing professional
This workshop is a must for anyone who wants to explore all the
facets of seller financing--and learn how to profit from them.
And it's coming to:
- Orlando July 19-20
- Houston Aug. 16-17
As a PAPER SOURCE NOTE COURSE student, you're welcome to attend
this unique educational event at a deeply reduced cost. Although the
registration fee is normally $899, you're invited to participate
in the workshop for only $199!
To get your Paper Source discount, e-mail Alison at:
orders@PaperSourceOnline.com
You'll save $700 on what can prove to be your path for a more
profitable future!
With some additional education and guidance, you can thrive during
the current crisis in the real estate market. Seller financing's
time has come. I hope you'll be at this timely event!
5 CRITICAL FACTORS YOU MUST KNOW WHEN CONSIDERING
A NOTE TO BUY OR BROKER
by Eddie Speed
Its been said that the underwriting required to buy notes is part
science and part art. Indeed, all notes fall somewhere along a
spectrum ranging from science to art. Perfect notes are at
one end, requiring a more "scientific" underwriting approach.
The most challenging notes are at the other end, with the
underwriting requirements resembling abstract art.
Learning how to buy the "perfect" note calls for some judgment,
but not much discernment. In other words, learning the proper
techniques for reviewing credit bureau reports, borrower's ratios,
appraisals, etc., requires some time, but it's mostly "cookie
cutter" science.
However, when you're dealing with seller-carried notes, you rarely
find the perfect deal. Instead, you discover that the unusual is
the usual. Underwriting the imperfect note is more of an art form.
There are five key factors to consider when analyzing a note to
determine whether or not to buy.
CREDIT
The buyer's credit history represents his track record in the
repayment of his debts. If it's solid, then you're starting out
with the best of all scenarios. In reality, most all of us in the
note buying business know that you aren't going to find
prospects with perfect credit histories.
The good news is that you can still buy good notes despite some
fairly large imperfections in this area. However, weak or poor
credit must be mitigated by some other redeeming factor(s).
A person with less than great credit, for example, may still have
a strong sense of character and responsibility. He may have had
some misfortunes or have even learned a tough lesson that he
won't repeat.
CAPACITY
The capacity -- or buyer's income -- is another factor to
evaluate. Is his income adequate to repay the note while supporting
his living expenses? You should consider both the debt-to-
income ratio and disposable income per house member. Of course,
assumptions must be made when analyzing actual and potential
earning power. In addition to the actual income, for example,
there's the question of job stability. The longer someone
has worked at the same place and/or in the same line of work,
the more stable is his ability to generate income.
EQUITY
Next is a "biggie": the buyer's equity, whether it's money paid
at closing or the principal paid down over time. There's a strong,
inverse relationship between the person's equity in a property
and the likelihood of foreclosure. Equity represents the
buyer's personal investment in the property; it thus motivates
him to remain committed to the transaction. It also affords him
the option of selling the property quickly at a discount, if
necessary, to avoid foreclosure.
SEASONING
The seasoning of a note simply represents how long the buyer has
been making payments. A seasoned note presents an established
payment history plus considerable equity. Although seasoned notes
can become delinquent and may even go into default, they're safer
investments than similar notes that are not seasoned.
COLLATERAL
When is a buyer's equity position one that won't result in
foreclosure? The answer lies in the collateral itself; the type of
property involved. A buyer who has 10% hard equity in a brick
single-family residence, for example, may hold sufficient equity to
sell the property should he get into a bind. On the other hand, the
buyer with 30% hard equity in a single-wide mobile home on land
may not realize sufficient market equity to sell the property and
get out from the debt.
Often, the reason a property is seller-financed is due to its
uniqueness, e.g., a rehabbed house, mobile home with land, land
only, or even mixed-use commercial property. These types
of properties are often better sold privately rather than through
an agent. Conventional financing may not even be available.
A note buyer's underwriting challenge is to pick notes that will
pay. That's the art of identifying enough truly redeeming factors
that will outweigh the disadvantages of any given note. The
performance of notes bought in the note industry
generally proves that this can be accomplished successfully.
Use common sense. Above all, this requires judgment that can only
be developed through proper training and experience.
W. Eddie Speed is the president of Colonial Finding Group, LLC. He
has purchased seller-financed notes for more than 25 years,
exceeding $500 million in sales. Recipient of the 2006 Industry
Achievement Award, Eddie is an acclaimed speaker, mentor,
instructor, and author of the book "Streetwise Seller Financing."
You're invited to attend a two-day workshop PERSONALLY
TAUGHT BY EDDIE SPEED that explores these options and shows
you how you can profit from them. "Seller-Financed Notes:
Phenomenal Growth, Incredible Opportunity!" presents the wealth
of opportunities for today's note specialist:
* Creating seller-financed notes
* Running a successful note business in today's real estate
environment
* Investing in notes for your own portfolio
* Finding hidden real estate gems through your expertise as a
seller-financing professional
This workshop is a must for anyone who wants to explore all the
facets of seller financing--and learn how to profit from them.
And it's coming to:
- Orlando July 19-20
- Houston Aug. 16-17
As a PAPER SOURCE NOTE COURSE student, you're welcome to attend
this unique educational event at a deeply reduced cost. Although the
registration fee is normally $899, you're invited to participate
in the workshop for only $199!
To get your Paper Source discount, e-mail Alison at:
orders@PaperSourceOnline.com
You'll save $700 on what can prove to be your path for a more
profitable future!
With some additional education and guidance, you can thrive during
the current crisis in the real estate market. Seller financing's
time has come. I hope you'll be at this timely event!