“Knowing is not enough; we must apply. Willing is not enough; we must do.”
– Johann Wolfgang von Goethe
It’s no secret that Seller Financing (also called Seller Carry Back and Owner Financing) is on the rise once again. As traditional financing becomes more and more difficult, in spite of the overhaul of the Banking Industry and the Government Bail out; the financial crunch continues to plague buyers. This has resulted in a virtual shut down of home sales in many parts of the country for sellers; to say nothing about Brokers watching their listing files burgeon with unsold listings. One of the solutions to get real estate moving again is Seller Financing. It is a highly flexible arrangement and a win/win transaction for Buyers, Sellers and Brokers. It costs less, the property sells quicker and the escrow will close faster.
Many of the stumbling blocks to even getting seller financing “off the ground” can be easily solved with the understand that the services of a licensed note servicing company exists and is capable of taking the worry out. The worries plaguing sellers with this type of financing begins right from the get go. It begins at the brokers counseling appointment with the seller. This is when the owner introduces concerns such as:
1.What happens if the buyer stops making the payments?
The questions never stop. Unless the broker is knowledgeable in how seller financing works, they can’t help the seller nor can they help themselves or the housing crisis that is stuck in a rut. It hard to believe, but true, that some brokers around the country actually believe that seller financing is illegal? Yep, in my 35 years I have heard this often even at real estate conferences attended by reasonably intelligent agents in the trade.
Recently, we have been letting you know about workshops where seller financing is being taught. We wouldn’t recommend one unless we knew the credentials of the instructor first hand, of course. From time to time in the future we may feature those we have confidence in again, but we won’t bug you, I promise!
A positive fall out from the increase in seller financing is it typically boosts the business of note investors which has not been the case for many years. Think about it, even with a reduction in equity due to the decrease in real estate valuation, there remains a unique opportunity for higher yields with partial purchase which enables investors to buy an “income stream” from purchasing a specific number of payments and thereby reducing exposure and risk. Yes, as I announced in our January Newsletter, it is possible to emerge from this real estate crisis stronger than ever and purchasing private notes including seller financed notes is one of those ways.
One of the subjects covered at the Pensco Trust Workshop held in September in San Francisco, will be purchasing secured notes with your retirement funds. Thomas Standen IV, plans to attend this event by the way. It will give you a chance to meet him and also congratulate him on earning his MBA earlier this year. We are proud to announce the appointment of Thomas IV to the Board of Directors and as the new Operations Officer of both the Note Servicing Center Inc., and Equity Holding Corporation. He is bright and intelligent and has a “passion for the business”.
Not such “hot” news was first introduced to us by Tracy Z. Rewey a couple months and we appreciate her diligence on keeping up with these kinds of situations on her “blog” where she familiarized us with HR 1728. Her blog is found at http://noteinvestor.com. There she announced in a well written article entitled “How Congress Wants to Change Seller Financing”. Since then the subject has been the source and subject of many articles, debates and teleconferences. We have placed on our website an excellent article by Clint Hinman, Editor of NoteWorthy Newsletter (www.noteworthyusa.com) Clint not only gives an explanation of the Bill, but let’s us know in no uncertain terms, why this Bill will hurt business and further provides information of who to contact in Washington with comments and concerns. Although, Congress has announced they plan to postpone action on this Bill until later next year…..you just never know when the politicians in Washington will slide this Bill in as a “rider” along with another piece of legislation. We encourage you to read and digest this article in its entirety and take whatever action you feel appropriate to protect your business and keep the government out of the “note business”. It seems they screw up almost every free enterprise effort they get involved in these days. Click Here to read the article.
LOOK BEFORE YOU LEAP
With the expectation of a proliferation of private notes, no doubt will be an increase in book publishing, articles and seminars on how to buy and “broker” notes. We encourage you to “look before you leap” into signing up for any “get rich quick” business opportunities involving going into the “note business” before you examine just what you can and cannot legally do in accordance with the state laws in which you reside. There are note buyers, note sellers, note finders, note consultants and note brokers. To quote my good friend and business associate, David Butler, “take a good look at whose shoes you are wearing”. If you are going to “Broker Notes”, you just might need a license!? You will find an excellent article on www.sellerloans.com written by Jeff Armstrong, President of Armstrong Capital ([email protected]). It’s a good read with several citations and an interesting telephone discussion with a Deputy Commission with the CA Department of Real Estate. I am sure we will receive responses and opinions from our readers on this subject, which we will review and publish in our next newsletter. Click Here to read the article.
“IF YOU DON’T ANTICIPATE WHAT IS GOING TO HAPPEN, YOU ARE GOING TO END UP REACTING TO WHAT IS HAPPENING”, so…
Please don’t miss the next NSC Newsletter. It includes a reminder of a legislative change affecting the way you do business as a real estate broker in CA. The publication will also provide important Information on Title V – The Secure and Fair Enforcement Mortgage Licensing Act (SAFE Act) of the Housing and Economic Recovery Act of 2008 which was signed into law on July 30, 2008. This legislation requires all 50 states and 5 territories to put into place a licensing system for mortgage loan originators that meets the minimum requirements of the SAFE Act. If you are a real estate licensee and/or Mortgage Broker, you need to bone up on this piece of work.
Early in my sales career, I met a man who gave me the following advice in the form of a hand scripted poem attached and mailed with my monthly sales report: “There is a destiny that makes us brothers; no one goes too far alone. Whatever you put into the lives of others comes back to your very own”. I’m fairly confident this was not original, as I know I have read it since with proper credit given to the author.
Although this incident took place about 40 years ago, I have successfully etched this saying into my brain and woven it into the fabric of my life. Now, you may be thinking, “what in the world has this got to do with marketing?” Let me tell you a story:
About three years ago I began receiving e-mails intended to be written to a Corporation with an e-mail and web address similar to mine. In fact, the only difference was a hyphen. At first it was an occasional e-mail which I forwarded to the proper address. Then, the messages came at least one each day. Although slightly annoyed, I continued to conscientiously forward to the proper address. Then one day, this company received more inquiries for business than I did, and I was tempted to delete the messages as fast as they came in.
It was at this point my wife reminded me of the old saying and also one of her favorite principals, “There was no right way, to do a wrong thing”. So, I sent my own personal message to this guy, which basically said, “what in the world do you do – perhaps two companies with similar web addresses could be in similar businesses?” Shortly thereafter, he called to thank me for being kind enough to forward his messages and we talked about what sort of business we were in.
Here’s the “rest of the story”. Today, this company is one of our largest and most financially rewarding servicing clients. Recently we teamed up for an investment seminar and we are now providing a diversity of related services for him as well as others as a result of our association.
Bottom line here is, although you don’t do something for others as a ploy to get something in return, when you honestly and sincerely put something of value into the lives of someone else, it will come back to you. The timing, kind and amount are not always what you expected (or did not expect) but this universal principal still works in very interesting and sometimes very strange, unexpected and mysterious ways. Think about it!
Go to www.sellerloans.com for more great ideas and information.