[quote=EconProf]. . . Trouble is, the mortgage might only be for 50% of the asking price. Enter the carry-back. The home seller would sell and create a 2d TD for 30% or 40% of the price, so the buyer would only have to come with 20% or 10% down. Terms of the 2d TD might be 10%, 3 – 5 years or so. But the seller wants cash, not a note, so they immediately advertise in the classifieds (remember them?) or sell to a broker/middleman who would turn around and sell it. But who wants a 10% note in an 18% world? So the note would sell at a discount of, say, 50% or 25% off of face value. This bumps the effective yield to up to 15% or 20%. But if you buy this note, you are instantly buying safety because it is now at a better LTV. Plus, if the house sells or refi’s sometime in the five or so years till maturity, you must get paid off at FACE value, which makes the rate of return go through the ceiling. Trust me, nothing is more satisfying than to get a call from an escrow company saying your note is about to pay off and we’d like to confirm your address for sending the check! Ah, those were the days.[/quote]
EconProf, I guess you could have called me one of those “intermediaries.” In the early eighties, I did this “legwork” for a “respected” C, D paper-lender located in Mission Valley, who not only had several investors wanting to purchase these second trust deeds for a deep discount, besides himself, he had several who wanted to purchase trustees deeds, if profitable. At that time, I took all my lunch breaks in the recorder’s office, county-clerk business office and on the steps of the old courthouse downtown where I examined titles, sometimes ordered preliminary title reports (if there were advanced funds) and gathered information from the documents posted on two chained and locked clipboards, which were updated daily by the trustees, as well as observed selected trustees sales. At that time, the grantor-grantee index was comprised of hundreds of blue cloth binders in numerical order referencing the microfiche housing the filmed documents. Including reviewing microfiched documents, it could take hours at the recorder’s office to properly examine the title of ONE property.
When “buzzing thru” the county recorder in those days, I observed many others trying to do what I was doing who obviously didn’t know what they were doing in there, or where to start, turning their work into a multi-hour/multi-day endeavor, but I was too time-strapped myself to help anyone! Unfortunately, there were no “classes” avail. with which to learn this type of work. It could be compared to the (now old) lawyer who learned to shepardize cases by stacking the books and periodicals from his library open on top of one another so has no need for “CDs” or an online service at this late date – LOL!
The tax-payment information could be viewed in a very slow green liquid-line CRT (in a separate office on the other side of the bldg.) with a stick-figure in the corner that kept blinking, as would the screen. “Recent sales” info was on microfiche, updated every 4-6 mos. In 1984, I got access to the MLS.
If I found a viable investment deal with (distressed property with substantial equity) and also was able to view property, I would take photos, (both inside and out if I could get in). I would then present my “pkg.” to the lender who would pay me a one-half percent of what he and I determined the property was worth (usually a few hundred dollars). If he was able to successfully make a loan to the defaulting trustor on any of the properties I researched or successfully bid at the trustees sale and obtain a trustees deed, I would receive another one-half percent of the “value” of the property. I only performed due diligence in the cental SD area so this worked out fine for me as a “moonlighting gig” in addition to my “day job,” that I could do on my own time 🙂
Regarding assumable loans, I know them well, EconProf and yes, they ARE beneficial at the time of marketing a property. I have had these types of home loans almost all my life (and still have one). IMO, they were the cheapest to obtain and easiest to close loans in existence 🙂
Do any Piggs know if assumable loans are still available?
