You have to love a nation that celebrates its independence every July 4, not with a parade of guns, tanks, and soldiers who file by the White House in a show of strength and muscle, but with family picnics where kids throw Frisbees, the potato salad gets iffy, and the flies die from happiness. You may think you have overeaten, but it is patriotism. – Erma Bombeck
Last Saturday as we hugged our Grandson, Justin leaving to join his company for deployment to Afghanistan, the impact of the words FREEDOM IS NOT FREE was once again driven home in a very personal way. As with years past, the Fourth of July Celebration has never been, for us up here at on Standen Mountain, just another day off – we have an all out Celebration. My husband, Tom, remembers waiving goodbye to his Dad in 1942 as he left for the South Pacific in WWII. Likewise, I remember vividly standing on the dock as my Tom left for 6 months during the Korean War. Twenty years later in the 1970’s, two of our sons, Wesley and Tom III left to serve in the Vietnam War…and now Grandson, Justin. But, we Celebrate Today recognizing that it is worth it for future generations.
Just as you will, we will celebrate Independence Day with our family, watch a football game, cry as we see the flag unfurled in the local parade, drag out the ice cream maker and I might even make an apple pie (but the hot dogs are out). Whatever and wherever you choose to Celebrate today, hopefully this will remind you once again that our Freedom is not Free. Oh yes, Remember to Support our Troops.
We present in this newsletter a well written article entitled “The Hair of the Dog” written by David Butler in his own inimitable style – yet chuck full of timely and applicable information directed primarily to our Investors, Brokers and Exchange Associates. David’s article could very well change the paradigm of the way we do business or at least in the way we think about doing business in this market. Don’t miss it. In the last few weeks we have been hounded (pardon the pun) by readers asking for information on seller financing – seems like it has become the “wave of today”…and for good reason, I might add. This article was written as an introduction primarily for those unfamiliar with the methodology of owner carry back financing.
Several new features have been added to our web site at www.sellerloans.com including our “On-Line” Store and several new articles of interest. We are in the process of implementing several new features as well, including a complete Seller Financing Package…so book mark us and/or keep us in your “Favorites”. Tom Sr. will be the guest for the Pensco Webinar on August 6, when he will be giving a presentation on investing in private notes using your IRA. We will keep you updated as to the exact time and information on how you can dial in to listen. It’s Free.
All of us here at the Note Servicing Center wish you all a safe, enjoyable and blessed summer on the grandest scale. Our next newsletter is scheduled for October 1, 2008.
This morning I received a call from George, the Coldwell Banker Broker now managing the office I sold ten years ago. In our discussion he said, “Thank you for the time and effort you made to open our minds and teach us about seller and private financing and exchanging”. He went on to say, “the application of these transactional and negotiation methods and on counseling with our sellers, is putting us light years ahead of our competition – allowing us to not just survive, but thrive in this difficult real estate market”.
For many years now – thirty five to be exact, I have noticed that a few homeowners, real estate brokers, investors and buyers have been almost secretly, but certainly quietly using this real estate financing technique that saves time and money. For sellers it moves property quickly or at least quicker than with any other method. Additionally, wise brokers have been emptying drawers of expired listings and turning them into closed transaction while earning commissions using the plan and investors have been cashing in on purchasing private notes as a result of this methodology. For buyers, it works perfectly. It’s cheaper with savings of a variety of fees typically charged by banks and mortgage companies such as application fees, points, lender fees and appraisal costs.
We were introduced to Owner Finance decades ago as a survival mechanism while owner/brokering a real estate company in California. Interest rates exceeded 20% in those days; anxious and often relocating buyers couldn’t qualify, disappointed frustrated sellers were left with no sale and one by one our office escrows were cancelled. We were desperate and started looking into and attending classes and workshops on seller financing. Boy, what a lean two or three years accompanied by a long and steep learning curve.
It wasn’t only sellers needing to move there property and agreeing to a seller financing proposition; but also real estate investors needing to move their commercial properties were in a bind also. Motivated to survive we also learned the art of real estate exchanging, not primarily for the Section 1031 tax benefits, but simply as a solution for our investor clients. Inasmuch as these exchange transactions almost always involved the principals to execute a private note….we were in our glory with our new found ability to put together transactions using private financing. Though the years, we, along with thousands of others have quietly, consistently and without pomp and circumstance regardless of interest rates, credit crunches, liquidity challenges and/or changes in the economy, been using seller financing often as the method of choice.
Win/Win for all Seasons
Seller financing, the win/win situation for all seasons whether it is the best of times or the worst of times….but whoa, let’s back up here and answer the question many may be asking: What is seller financing – exactly?
Seller financing is sometimes called “owner financing” or “owner carry back”. It is a type of transaction where the seller acts as the bank and agrees to receive regular payments from the buyer instead of one lump sum. The seller transfer the deed to the property to the buyer and in return receives a mortgage or note and trust deed (depending upon the state) which places a lien on the property and obligates the buyer to make regular payments. Although this kind of deal offers high flexibility with the arrangement negotiated privately, it is important the seller and buyer seek professional help in setting it up to ensure the validity.
For sellers, carry back notes are negotiated at greater than market interest rates and therefore receive top value if and when the seller decides to sell the note to a note investor. Recognizing the benefit of the transactional and closing savings as well as other benefits, buyers typically have no problem with paying a little more in interest over the life of the loan. However, a word to the wise here to sellers is appropriate. Hedge your bets and minimize risk by requiring a respectable down payment. If the buyer has nothing or little to loose, what’s to stop them from simply walking away. Insist on a credit report and references and by all means have the documents professionally prepared and professionally serviced. Hmmmmmm, “Professional Service”, well that’s where we enter – “stage left” with our two cents worth.
The Servicer – Enter Stage Left
The Note Servicing Center has been servicing seller carry back notes since 1984. We set up an impound trust account to make sure the taxes and insurance are paid in a timely manner by the buyer and also provide the buyer with payment coupons, collect the monthly payments and disburse to the sellers bank account or wherever directed. We take care of the statutory year end reporting as well as the 1098 and 1099 required by the IRS and offer other benefits – many absolutely free, such as, On-Line password protected viewing of client accounts are available 24/7. Check us out at www.sellerloans.com . Whether you’re a buyer, seller, broker or just plain curious about Seller Financing, contact us to find out how we can help you successfully put together your seller financing transaction.
I had a tough decision to make two weeks ago. A client wanted me to send a FedEx package over to him so he could take it along to review on his 2-week vacation. Upon checking, we saw that it would cost $75 to ship the package overnight!!! Good Lord that’s a lot of money! How ‘bout we send it 3-Day ground to my client’s vacation destination, for only $8 bux?
The dilemma… FedEx, a bellwether of the American economy, is in a real profit squeeze right now, driven in large part by the horrendous increase in fuel prices (hmmm… seems like I am having the same problem!). So… should I go ahead and pay $75 to ship overnight, in an effort to help keep FedEx in a better position with their expenses – or should I just spend $8, and use the more practical, and cost-effective, 3-Day solution? What would you do?
In a world gone mad with “irrational exuberance”, The Hair of The Dog That Bit You probably seems like a logical cure for the “Night out on the town” we spent the past seven years imbibing on in the real estate markets! If the party was that good, perhaps more is better.
The thing is, sooner or later, if the headaches don’t get you – the dehydration will!
Incredibly, despite the massive dehydration we now face in the credit markets as a result of all the carousing during the World’s Longest Cocktail Party, many folks (including the Feds, and self-serving Wall Street and real estate industry “bartenders”) seem to think all we need to do is keep swilling those “Hairy Dogs”… until the market “recovers”. But here’s the deal – the market is recovering right now… and it has been for the past year.
The country went on a seven-year binge, painting the town red. Now the market is dehydrated, and going through the pain of a massive hangover. By definition, once the hangover (recovery) is over, we anticipate that the country can get back to normal. But normal is NOT waking up tomorrow and finding ourselves drunk out of our minds all over again?!
How is it that the real estate industry, the government, the Robber Barons, and the misguided souls who are looking to invest solely on lower prices, all think that a real estate recovery means propping up prices all over again??? Sure… and let’s all subsidize FedEx too!
Noise Is Not News…
Many investors have formed opinions about the real estate market, the capital markets, and the economy, based entirely on what they have read and heard from the media. Unfortunately, too many investors have let this misinformation crystallize their views to the point that they believe they can get rich simply by purchasing distressed real estate, because they fail to recognize the extent of the risks still inherent in the marketplace.
In the past month, we’ve seen headlines touting “Fire Sale Driving Sales”, and “Multiple Offers Indicate Possible Bottom”, and similar nonsensical stories appearing in the press. No such thing has truly happened, but … To finish the article click here
David Butler of Hotspur Investment Group is an acclaimed author, educator and investor in the real estate and private cash flow industries. He is a regular presenter at NoteWorthy’s annual conventions. He recently became CEO for National Equity Solutions, a real estate investment company and provider of Land Trust advisory services for investors and dealmakers.
A long time business client of Note Servicing Center, David will be a guest presenter at John Behle’s 5-Day PaperGame Boot Camp at the Marriott Hotel in Provo, Utah, July 21-25th 2008