Why Sell A Note

People always wonder why someone would sell their notes at a discount. One of the reasons is having a purpose you can use the money for where you’ll make even more than what you were making on the note.

It’s a very popular reason for investors. They create a lot of notes and they sell them because their model and their team is built on fixing and repairing and selling houses, not carrying back paper. They do that because they have a buyer who can’t qualify through traditional means (banks or institutions). The bank has the luxury of picking and choosing who they want to lend money to. They pick and choose based on a person’s financial ability and whether or not they can qualify for what’s typically known as full doc loans.

Up to 80% of the general public can’t qualify for a bank loan. Maybe they just started a new job, or a new career, or they just graduated college or they’re self-employed and haven’t filed their taxes for a couple of years. There’s a lot of different ‘real world’ aspects to everybody’s life. The banks understand that but they don’t really care about that. They want to know ‘can you fit in our box, and if you can we’d love to do business with you. If you can’t, we’re sorry.’ They leave people to fend for themselves.

The beauty of the internet is that people have educated themselves on other options. Rent to own, leasing, lease purchases, etc. They’ve also learned that they can buy homes with seller financing and they’ll go and look for those types of properties to purchase. That’s the beauty of it because I think the people that are offering that offer a very valuable service for people seeking out home ownership for the first time. Although I think the banks have gotten better, I think they still have a long way to go. I think that the free market has a tendency to dictate the direction that people are going to move towards. In other words, people aren’t going to sit around waiting for the banks to come up with a perfect loan for them. They’re going to go do what they have to do to provide for their family and to succeed on their own.

It’s such an amazing industry because there are some boundaries and there are golden rules everybody needs to follow. Outside of that, there really is nothing. In other words, if I’m sitting down with you and we’re negotiating on the purchase of a home, whatever we do creates a win-win relationship for both. However, there are some basic things that you need to be sure of. You want to make sure people put down payments of ideally around 10%. You want to make sure they have decent credit and that they have a job. You want to make sure that the deal is something that’s healthy for both parties, meaning 10, 20, 30- year terms at reasonable rates, at a 6% to 9% interest rate.

Currently that is the market exactly. The beautiful thing about that is, it gives people that home ownership opportunity. It also helps that seller sell more homes. That money goes back into their portfolio for the next project or the next property. Ultimately, that money then goes back into the economy. When you see that happening all over the country, in every city within the country, it shows me that people are really driven towards being part of the solution. In these communities and neighborhoods in cities around the country where banks are not serving, it’s an underserved part of our nation. This gives those people that opportunity to be a homeowner and to raise their family in neighborhoods that they want to be in. Go to schools where they can get an education and go the church of their choice and things of that nature.

To me it’s a plus. It’s a very positive thing and it’s not always about high interest rates. It’s all about being a starting point. The beautiful thing about that is it can change and grow over time as people and families and communities change and grow as well.