Houston Owner Finance Homes

Try to sell a mortgage note lately?

Chances are the pricing was hit by property value in one of three ways.

Home prices have dropped an average of 21% in the last three years, over 50% in some hard hit areas, and it plays a major role in how much a mortgage buyer will pay for an owner financed note.

Here’s a quick glance at what is happening around the country to home prices:

Median Sales Price for Existing Single Family Homes

2006                        2009                        Change

US                                    221.9                        173.2                        -21.9%

North East                        280.3                        240.7                        -14.1%

Mid West                         164.8                        142.5                        -13.5%

South                                 183.7                        154.6                        -15.8%

West                                  350.5                        224.2                        -36.0%

Source: Data Compiled from National Association of Realtors

So how do falling property values affect the pricing?

Big Reason #1 – Equity

When you go to sell payments on a mortgage, trust deed, or contract the note buyer wants to know today’s value of the property. This helps the investor see how much equity a buyer has in the home.

If the property value went down from the time the buyer purchased it means their equity decreased too. The lower the equity the more likely the buyer will go into foreclosure.

When an investor sees more risk they want more reward. Think of it like this:

More Risk

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Wondering whether to trust the pricing for the sell of a mortgage or land contract?

Here’s how to know if it’s a firm offer or just a soft quote when going to sell a private mortgage note.

Soft Quotes

A soft quote is an initial offer made by an investor without review of the buyer or payer’s credit. Credit plays a crucial role in pricing for both yield and investment to value (ITV) parameters on owner financed real notes. A quote without a credit review will likely be revised when credit is actually reviewed.

A soft quote is provided when only a Quote Request Worksheet is submitted without any supporting documentation. When there is no legal ability to pull credit and no indication of the payer’s credit status, the investor will often assume the best.

The quote will be

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