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Specializing in seller financing, Dawn is a visionary real estate professional who gets families into (or out of) homes and investments in a way that empowers and enriches them, as well as the communities in which they live… with or without banks and regardless of market conditions. Dawn is the antidote to America’s addiction to Wall Street’s financial opium. She makes the powerful, non-bank, strategies usually reserved for sophisticated investors accessible to everyday people, making or saving them thousands and instilling hope as she illuminates hidden opportunities. As a seasoned note investor intimate with seller financing and the secondary market for private mortgage notes, she provides mission-critical expertise that is extremely rare in today’s marketplace. Sellers: know what your note will be worth before you create it. "Landlord Liberation", "Buyers: The Seller is Your Bank" and "Note Investing for Newbies" are key gateway books for those wishing to engage with The Realm. Visit www.NoteQueen.com.
The seller is gonna make a loan. He's originating a seller carry loan. He's carrying back the mortgage. He's carrying back paper. Right?
Dawn:Notes are made on paper. Right? Paper instruments. They don't usually know that there's a secondary market, so they don't have anyone to call. Ring.
Dawn:Ring. Ring. Ring. Okay. I'm thinking, k.
Dawn:The buyer offered me 5% down and 2% interest amortized over a hundred years. I just wanna know what would you pay for that note? Is this a good deal for me? Right? They don't know.
Dawn:They don't have anyone. Actually, that's what I am. I'm private a private Fannie Mae underwriter for seller carryback paper because remember I wanna be the midwife. I wanna get in there before they ink the terms. It's called seller terms too because terms, think about it.
Dawn:You're giving someone a term, an amount of time to pay you off. You're selling over time. That's a term. That's an easy way to remember it maybe. Welcome, everybody, to Property and Paper Live.
Dawn:This is Dawn Rickabaugh with notequeen.com. This is where we talk about seller financing, real estate, and note investing. The things that people don't realize is that seller financing gives birth to the note business. There would be no note business, no seller finance note business if there was no owner financing. So what I like to do, my favorite place to play in this space is when that little baby note is being born or conceived.
Dawn:Right? And I wanna be the midwife to make sure that that transaction comes together in a way that all the financial outcomes are optimized and risk and reward is fairly shared among all parties unless they choose not to for some reason. Right? So, you know, it was interesting. I, was having a phone conversation yesterday with with someone who's you know, one of our members had had brought someone to say, hey.
Dawn:I think you guys should connect. So we had a a brief meeting, and he's very sophisticated in a lot of ways. But that doesn't mean people understand this space. You know? I've been around it for so many decades now that it's just kinda second nature.
Dawn:And if any of you have been in real estate, you know, for very long, you it's pretty normal to you if you've invested or bought multiple homes or been a real estate professional. Anyway, he says, well, so I've got this house in Arizona that I might think about owner financing, and what are the benefits again? So we go over those, and he goes, well, I guess I would have to use a special seller financing broker and, like, have a special title company and a special way to to close this. Right? And I said, no.
Dawn:No. You, I said, as far as selling a property, most of the time, unless you already have a buyer or you're gonna sell to your tenant, you're gonna do just as well to get on the MLS and get mass mass exposure and just advertise owner will carry. Right? Make that a big point of the advertising. And and so we we solved that one, but he thought that we had to have a totally different way of closing a seller finance transaction.
Dawn:So it just reminded me that things that I take for granted, are aren't so obvious to most people. So it's so much like it's so much just like a regular real estate transaction. And I remember not too long ago, I, put together this little let's see if I could share my screen. This little presentation here let's see if we get in play mode. Okay.
Dawn:Here's how a typical real estate transaction works. Right? Everyone's pretty familiar with this, at least in concept. Right? The buyer makes an offer.
Dawn:They get a contract, and they put an earnest money deposit down in escrow. Right? They open title in escrow. The the earnest money goes in, and, they they start the title report, and the buyer begins this process of getting qualified by a bank. Okay?
Dawn:And once the bank so what the bank is gonna do is they're likely gonna call up Fannie and Freddie Mac. They got them on auto dial. Right? They're gonna call them and say, hey, Freddie and Fannie. So what do you guys bought?
Dawn:What bought what kind of rates and terms are you buying these days? Oh, okay. Is this what you want? And how much if how much will you pay if I do it this way? Well, how much will you pay me if I do it this way?
Dawn:How, you know, how can what will you pay for the note if I sell it to you after I create it? And they get the number where they know that they can get Fannie and Freddie to give them the highest possible price, then they decide what the note indeed the note terms are gonna look like for the buyer because, of course, the bank wants the note to be as valuable as possible on the secondary market. The bank is making a loan. They're originating the loan, and then and that's funny. When a when a promissory note is in the origination phase, we say this is the lending best business.
Dawn:When it's sold on the sold to someone else, meaning assigned to someone else, that we call the note business. It's really the same documents, a note and a data trust or the assignments of those documents. Right? So they they say, okay. We know what we're gonna offer the buyer because we know that Fannie and Freddie are gonna pay top dollar for this type of note.
Dawn:So that's the kind we're gonna create. Right? So then the buyer probably puts in a little more down payment, and then the bank throws in the rest of it after all the due diligence. You still got insurance, all the normal things, the inspections. In this case, obviously, a bank needs an appraisal.
Dawn:And after they're satisfied and the buyer has signed the notes and the deed of trust and it's recorded, The money goes in, and all of a sudden, now the buyer owns the property, but they're in bondage to the bank. Right? Because if they don't keep their promise to pay, the bank is gonna take the property back through foreclosure. Okay? And in those note and deed of trust documents, the bank is listed as the beneficiary or the mortgagee, depending on the state.
Dawn:They're the ones that have the rights to collect those payments, and they've got this property as collateral. And so the buyer starts making their payments to the bank. And then pretty soon, that bank is gonna sell it up to Fannie and Freddie. The buyer pretty much doesn't matter to the buyer. They usually have the same servicer.
Dawn:Maybe the servicer will change. Maybe it won't. Okay? But, usually, those loans now are sold up the food chain. Now here's how a seller financed transaction works.
Dawn:The buyer and the seller come to an agreement. They sign a contract. The buyer they open escrow. The buyer puts in their earnest money deposit, and they go through all the due diligence. Right?
Dawn:The inspections, the title company is getting a a title report because there is gonna be lender's title policy. All the same things as if a bank was involved. The only difference is there's no bank on this page at all. There's just two parties here. But all the same processes go except it's not very often where there's an appraisal that has to be done.
Dawn:Right? The the underwriting is now just done by the seller. Whatever the seller wants, and the buyer has to make sure that the property is is fit and they understand what's going on. They they know what they're gonna what they're getting into, if they're gonna ask for repairs or not. Now the seller, they don't usually know that there's a secondary market.
Dawn:They don't know that there are private Fannie Mae's like me and private Freddie Mac's like some of you on this call or listening, note buyers, the private note buyers. The seller is gonna make a loan. He's originating a seller carry loan. He's carrying back the mortgage. He's carrying back paper.
Dawn:Right? Notes are made on paper. Right? Paper instruments. They don't usually know that there's a secondary market, so they don't have anyone to call.
Dawn:Ring. Ring. Ring. Ring. Okay.
Dawn:I'm thinking, k. The buyer offered me, 5% down and 2% interest amortized over a hundred years. I just wanna know what would you pay for that note? Is this a good deal for me? Right?
Dawn:They don't know. They don't have anyone. Actually, that's what I am. I'm a private underwriter, a private Fannie Mae underwriter for seller carryback paper because, remember, I wanna be the midwife. I wanna get in there before they ink the terms.
Dawn:It's called seller terms too because terms. Think about it. You're giving someone a term, an amount of time to pay you off. You're selling over time. That's a term.
Dawn:That's an easy way to remember it maybe. So, ideally, I wanna talk to the seller before they created the contract. Right? Because that way, I can say, if you want it's fine if you wanna do it that way, but just so you know, eyes going in wide open, you're looking if you needed if you or your heirs ever needed to sell this note, you're probably gonna take I don't know what it would be. Something crazy.
Dawn:Hundred years? That was crazy. 10¢ on a dollar. I don't know. Something crazy.
Dawn:But, anyway, there's no appraisal. None of that, but everything else is the same. The the prorated taxes, the insurance. The buyer still needs to get the insurance. Okay?
Dawn:So when they're happy, the seller flies across the page, and they agree to be the lender. Right? The sellers there's only two people still in there, but the seller changes hats, plays a different role. He went from selling the property, owning the property. Now he's the lender, and he owns the note, the promissory note, the loan against the property.
Dawn:Okay? So that he originated a seller carrying note. And if that person ever wanted to sell the note, that's where the traditional note business came from that's centuries old. Right? It's the bank paper, the institutional loans.
Dawn:That's the newer kid on the block. I mean, she we didn't even have a federal mortgage market until, like, nineteen thirty ish or something like that. But in the sixteen hundreds, things were always done on a private basis. One mom and pop to another, different structures. And the buyer becomes they own the house the same way they would if they got a bank loan.
Dawn:The only difference is, as you can see along the bottom there, the seller instead of Federal Bank of London, I don't know, the beneficiary in the note and and mortgage or deed of trust documents. It's their name instead of Bank of America, you know, Chase, whatever. Okay? That that's really the only difference. The closing is quicker and easier and cheaper.
Dawn:Yeah. And but everything else is the same. Right? And, hopefully hopefully, the seller, since they're gonna be a lender, will get the memo that they need to talk to a private Fannie Mae or Freddie Mac to say, I'm thinking of doing the note this way. Right?
Dawn:And if I do but if I need an extra 100,000 like, the buyer, I'm I'm willing to carry, and they have 50,000 down, and that's pretty good. But I need a $100,000 more, then I'll go, well, mister Seller, what we have to do is reverse engineer this note so that I can buy three, four, five years of payments and give you the extra 100,000 without it costing you a very big discount. Right? So if we reverse engineer it, we can optimize the financial outcomes for everybody. So in that case, the seller would walk away with the buyer's down payment and a extra 100,000, and maybe they give up five years worth of payments, but they got the cash they needed up front.
Dawn:And then they start receiving the payments all over again month after month after month. Okay. So just another way to put it is so in the house in the middle, we got the house someone wants to buy. Down here, this little family wants to buy. The owner with equity, all that cash stacked up high inside of that house, that's the value locked inside that house.
Dawn:That's the money. That's the equity that the seller, in this case, is going to loan to the buyer, and it's the same documents. Right? A note and deed of trust. Down payment goes up there.
Dawn:The buyer gets the house. I promise to pay 1,500 a month for the next thirty years. Okay? But if I don't keep my promise, there we go. The house serves as security or collateral for the loan, the note terms.
Dawn:The buyer owns the property. They're on title just like any other regular sale. And the seller, because now they're the lender, they also should get a lender's title policy just like if there was a bank that made the loan, they would have a lender's title policy. There's hazard insurance, fire insurance, and the buyer, because they own the property, is the named insured, and the seller is the loss payee or mortgagee because they're the lender. So if the house burns down, the lender's gonna get paid off before the buyer gets the rest of the money.
Dawn:Okay. So that I think I'll just stop there. Is are there any questions? Really, that's the and and it's really so easy to and most professionals. Right?
Dawn:It's easy enough that most professionals, real estate brokers, title companies, attorneys, they can walk their clients through the mechanics of a seller finance transaction. But what they can't do, unless they buy and sell notes for their own portfolio, they cannot tell their client. Well, usually, they don't even tell them that, hey. In four to six weeks, you're gonna start getting letters and postcards asking to buy your note. They're blindsided.
Dawn:It's like, what? What's this? Somebody wants to buy my what? What do I have? You know?
Dawn:And, they start googling around. Right? But not only do they not even tell them that there is a market of people, private Fannies and Freddies, that wanna buy their payment stream. It's because it's an annuity. It's a stream of income, and people will buy it at a certain discount depending on the terms that have been negotiated between buyer and seller.
Dawn:Getting back to it. So it's bad enough they don't even know that there's a secondary market, but almost nobody in their world is gonna be able to tell them what their note will be worth. And, hey. What do you really need long term, short term? Maybe we should make the terms this way to optimize that for you, mister Seller.
Dawn:K? They don't think of that. That's where we come in, people that are on calls like this. That's where I come in. I, you know, I can create the retail market is is it's just, it's critical knowledge that's not out there.
Dawn:It's critical expertise that we have as seasoned note professionals to be able to come in and help help these transaction make sense for everybody. So any questions about just the process of closing a self financed transaction? Okay then. Well, then it's we're just open. I I kept my promise.
Dawn:I taught what I was gonna teach today. What's going on, people? It's gonna be
AL:Hey, Dawn. How's how how are you doing how are you going about doing the marketing for the burnt out landlords?
Dawn:You know, I'm really I'm
AL:having one heck of a time with that.
Dawn:Tell me what you're expand expand upon that, Al. And great to see you again. Sorry. I was in the middle of a thing before, but, yeah, great great having you on. So you're you're sending out, but are you are you doing direct marketing?
Dawn:Or
AL:Direct marketing. Doing both direct marketing and email marketing. Marketing. And, you know, in in our or what we're doing is single family homes is is is it. Doesn't really work for duplexes or preplex, whatever.
AL:But these guys are put under the ether by whoever advises them. And I said, you know what? You got depreciation recapture and all that, and you pay more for capital gains and all that. And all that talk, it's still I can't I can't get them on the other side, and I don't so this is good that you're having this session today. Yeah.
AL:It is. It's challenge.
Dawn:And and I've over the last couple of calls, I've kind of been going over, let me share my screen again. And and it's not an easy thing. And I've spent, like, my whole, many, many years trying to go, how do I get to these people? Because the people that know, they they plan their whole retirement around it. Right?
Dawn:Mhmm. But most people don't even get the memo to have the conversation. And what's the job of an attorney and a CPA generally? The CYA. They're deal they're notorious deal killers because they don't understand.
AL:Right. Anything that know what they don't know. Yeah.
Dawn:So sounds like they just say no because then I can never be sued for something you know? I can never be sued for saying don't do that or whatever.
AL:It's just
Dawn:it's just a huge cost and a lot of loss. But it seems like mostly, you have to go after it like you're you're a cash buyer first, and then the the owner financing is the secondary conversation. Mhmm. I'm I'm gonna try, and I do wanna bring it up because I've made some, more improvements over here on notequeen.com/shop That's the quickest way for me to get to it.
Dawn:Okay. I've been alright. These marketing templates that I've had for a long time, they I've updated them a lot, and I'm I'm making a bunch of different ones. We can even have it, you know, customized, but let oh, let's see. I wanted to bring up the one so I'm working on all of these marketing materials, seller financing for listing agents.
Dawn:I've got buyer's agents, listing agents, keep or sell, landlords, high equity. Okay. Like this one. So because I have different target markets, and I don't know how it's gonna work. I've got a couple people now that that are saying, you know, I'm gonna send your flyers out.
Dawn:And if something comes of it, then you can you know, we'll work out something where everyone gets paid.
AL:Mhmm.
Dawn:Oops. I didn't mean him to bring up his hi, Jim.
AL:The the the I'm sorry for interrupting, Dawn. The the theme seems to be the theme seems to be yeah. I understand that inflation has really drank my milk, so to speak. And even though my rents are going up, I'm still you know, the expenses are eroding my profits. And I said, well, there you go.
AL:And that's been the case with the last four offers that I made. They're still not moving from that center because they're getting, to your point, they're getting ill advised from their attorneys or their real estate agents. They don't understand anything about depreciation recapture. They don't understand if and they don't or really don't care. I said, listen.
AL:I'll agree to your price as long as you agree to my terms, and I try to get creative, you know, 10 ways to Sunday the way you and I have spoken in the past.
Dawn:Yeah.
AL:And even with with with a really good down payment and a and a structure that is that works for both of us, beneficial to both of us Mhmm. I still cannot get them to move from, like I said, that center. So
Dawn:Yeah. Interesting. Well, I it it is happening. There are there you know, it it just maybe there's different areas of markets or something or but, I mean, every day, like, wholesaler types, they're getting owner financing every day, some of these guys. And at
AL:I know.
Dawn:And at 0% and and almost no down payment.
AL:Yep.
Dawn:Okay? So it's out there. And I have like I said, like, thank you for engaging with my content. If you'd like to hear the rest of the replay, please go over to citizensoftherealm.com and join our free community. If you'd like to participate live, be sure to subscribe at notequeen.com.
Dawn:And if you have a situation where you could use some one on one help, check out notequeendeepdive.com and schedule a private consultation. I guarantee that one hour with me will either make or save you thousands. Take this information and go out there and create financial solutions just one mom and pop to another. See you next time. Take care everybody.