Note Buyers And Discount Rates
Looking for some information on who out there is buying notes and what is the normal discount rate they require?
I spoke with one the other day who wanted a discount of 8% which seems a bit high to me considering a realtor will only cost me 5%.
Thanks for the input.
[ Edited by telemon on Date 01/23/2004 ]
No input from the note folks out there?
Are you talking about an investor buying an owner financed note on a home? If so 8% is cheap. I have seen discounts from 10 - 35%. There are a lot of variables.
John
If you are referring to selling a seller financed note to an investor, then there is no "standard" discount that is used in the industry. There are to many variables that will affect the discount of a note. The primary function that determines the discount on any given note is RISK,RISK,RISK.
The variables that come into play when an investor purchases a note are as follows: Position of note, term of note, down payment, credit of buyer, type of property, seasoning of note,interest rate,frequecy of payments, etc. As you can see there is a lot more involved than just selling the note. Several factors have to be considered before an offer can be made. The discount on any given note is based on the yield that the investor needs to achieve in return for the risk he is willing to take.
[ Edited by bpteos on Date 01/26/2004 ][ Edited by bpteos on Date 01/26/2004 ]
You need to give data on a subject note. Look at it this way if you had a first that was 13.5% interst only paid monthly, ballon in 20 years, ballance of ten thousand with a property value of one hundered thousand you could sell it not at discount but at a premium.