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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.
But I didn't, and the person that was my eyes and boots on the ground didn't see the glaring notice on the front door and tell me about it. So I just thought, me, this is what was just falling through the cracks. We'll just take a swing at it. And we've had it rented since '20 yeah. The 2018 till now.
Dawn:But I recently you know, someone called me saying, we're fish and game. Do you know that there's people living in this house? And I'm like, you are not fish and game here at asset manager. So I'm wondering if the the gig's gonna be up. You know?
Dawn:We are just we're just riding along on a 25% cash on cash return for as long as it lasts. You know? We're going to go ahead and get started. So welcome, everyone. This is Dawn Rickabaugh.
Dawn:This is Property and Paper live where we talk about the dance between property and paper where real estate and note investing connect is seller financing. At least in my world, I don't deal in institutional paper. I have no interest in bank paper whatsoever. I'm only interested in seller finance paper, owner financing, one mom and pop to another, as I like to say. So if this is your first time here, you're listening after the fact, please go over and subscribe at notequeen.com.
Dawn:And if you wanna join our free community called the citizens of the realm, you can do so, and that is where the full replays of these hour long, masterminds, live. Okay? As well as I put some tips in there, and eventually, we'll probably get some we're kinda new, so we haven't really got a lot of dialogue going in there yet. But it'll come online little by little as we get used to each other and and all that. So and there are some freebies in there for you if you wanna go over and check it out.
Dawn:Citizensoftherealm.com. So today, before we get started, does anyone have anything that they're gonna want to talk about today? Any particular questions, a scenario you're dealing with?
Sri:Hi, Dawn. This is Sri. How are you?
Dawn:Oh, hey, Sri.
Sri:I have a question if I may ask. Yeah. Recently bought a bunch of reverse mortgages wherein these are directly purchased from HUD. We are one of HUD's approved buyers. 21 mortgages to be exact
Jack:Mhmm.
Sri:Where the borrowers have passed away. And so one of the property after the borrowers passed away, the son, I guess, was cooking something in the kitchen, and he burned down the whole property Yeah. Or 75% of the property. So the property fixed up is probably worth about $5.50. The payoff doesn't matter because the payoff is most of the time much higher than what the property is worth in reverse mortgages.
Sri:Right. Since the property burned down, asset value is about $1.20. I bought the loan for about $60. So Hardy is telling me that there are two options. They did not file the claim.
Sri:It was covered under the insurance when the property got burned down. They said the insurance I can claim the insurance, but I don't know the process of actually how you claim the insurance as a lender. Have you ever done that, or anyone on the call has done that?
Dawn:I personally have never had to do that. So, basically, just reiterating in case people didn't hear, you just bought a portfolio of 21 reverse mortgages from HUD, and the as is value after the burn down, it was one
Sri:Just one property. Rest of them are fine.
Dawn:Just one property. This one property, you before you bought it, it burned down. Right?
Sri:Yes. Yes.
Dawn:Yeah. Yeah. So just for people to be, you know, like, hey. What is Sri doing here? He so it's worth $1.20 as is, probably land value or whatever.
Dawn:Right? And you bought it for 50¢ on the dollar $60. So then you're going, how do I get the insurance money to rebuild this place? I actually don't know, Sri. I've never had to do that.
Dawn:Do you know who was the insurer?
Sri:Looked in the documents. I'm still waiting for the collateral package because I just closed it
Dawn:Yeah.
Sri:Ten days back. I didn't get the collateral package yet.
Dawn:It seems to me that all you gotta do is just reach out to them and prove that you're the loss payee mortgagee. Mhmm. I'm sure HUD would work with you on that because they're probably named.
Sri:Yep.
Dawn:But I I can't imagine it being a lot harder than that. It's like, oh Okay. Just prove that you're you're belonging chain of title. That's what I would do. And
Jack:Can you hear me?
Dawn:Oh, who yeah. Jack?
Sri:K.
Jack:This is Jack. Hi. Hi, Question. Did did you say it burned down before you bought it or after you bought the note?
Sri:Before I bought the note.
Jack:Okay.
Sri:So so the the sequence of events is the loan was originated in 2009. The the well, the main borrower, I guess, were passed away in 2019. The wife passed away in 2023, and that's when you know, I generally wait. So what they do is they look for the property tax and insurance are delinquent. So the property taxes were delinquent and hard put in lender placed insurance or forced based insurance and bought their own insurance policy.
Sri:So So they it takes a while for them to actually start the foreclosure process or sell the note. In the meantime, Sun still had access to the property. He was cooking or something. This is a hearsay from the neighbors, But 75% of the property completely burned down. Hard at a different valuation.
Sri:Now they have a different valuation. So but the property burned in 2024. I bought the note ten days back. So but knowing very well that the property is burned down, and I got the land value appraised at 1 twenties. Was to buy it at 60.
Sri:So I had said that, yeah, I'm eligible to actually file a claim for the insurance company. But I've as a lender, I've never done it before.
Jack:Yeah. And had had the first place insurance on it? Yes. I'm surprised actually that they didn't claim it.
Sri:Well, it's it's what what what are the real house?
Dawn:Yeah. Why why are they they dumping them? Just just refresh that. Like, what's their motivation?
Sri:Happens is
Dawn:they dumping it for these prices?
Sri:Yeah. So what happens is they sell mortgages in bunk in bulk. So this might be I mean, whenever borrower passed away, they immediately get insurance so that they're covered. It might be a oversight on their part because I brought this up after the after the note was sold. But they will very well know that, you know, prop initially, the max claim amount was $4.25 on the property.
Sri:So hard all our insurance hard notes, reverse mortgage have a max claim amount come along with the note when you buy it. So that max claim amount actually transfers to the buyer, whoever is the new lender. Right? It's unlike other mortgages where the insurance cease to exist once a new lender buys the loan. They had to get their own insurance.
Sri:I have to get my own insurance, but the property was already burned down before I got the insurance. Right? Right. Why they did not do it? I don't know.
Sri:But, you know, they are dealing with 24 they're trying to sell 2,400, 2,500, 3,600 sometimes a quarter. So when you're selling so many loans, I don't know if they can it's not, like, a single investor who has a bunch of mortgage. They can easily keep track of insurance and all of that. This is yeah. We are talking about thousands of properties.
Sri:So tons of notes rather.
Dawn:Yeah. They're just trying to dump a bunch of problems, for their own reserve reasons or liquidity reasons, whatever it is, or requirements, I guess, that they have. And they just need they're gonna sell it. Someone can take a big bunch off their hands, and then, then it filters down to smaller investors. Right?
Dawn:Yes. Relatively smaller groups like yourself.
Sri:Yep.
Dawn:And you have a group of investors too. Your phone number I see is up, so for anyone who wants to call you. But, yeah, that that interesting HUD thing, I anyway, I'd I'd love to hear if it doesn't go that way. But Mhmm. Yeah.
Dawn:Please return and report. But, it seems like it should be relatively simple. I don't know how long it would take. But
Sri:Yeah.
Dawn:Yeah. I had a really, I I was telling you about this since it's it's relevant to I was, asking Sri, like, a week ago. I said, because it's really weird with these reverse mortgages. I remember when my mom died in twenty eighteen, January, we were we we we just barely finished the funeral, and we're trying to clean out the house. You know?
Dawn:And she hadn't even been dead for a whole month yet, and they'd they'd have these guys come over snooping around to see what the asset's like. And I go, you know what? You can get out of here right now.
Sri:Did it have a reverse mortgage, or what what did
Dawn:it do? My mom did when she had a reverse mortgage, and they were like dogs on that. You know? They were just on it right away. Like, okay.
Dawn:What's the condition of the property? My brother let him in the house, and the dude's all snooping around. And, of course, we're in grief mode still, and I was just like, out. Out. Let's go.
Dawn:Yeah. Get get out of here. Look. Before you guys can turn around, I'm gonna have this thing sold. So don't worry.
Dawn:Just go away right now, please. It was really but in this case where someone brought me a deal where the person died in 2013. Right? So they should have taken the property back, like, right away. But Yeah.
Dawn:In 2018, five years later, they still hadn't done it. So the son just says, I need to get, like, and anyway, I need to get a little bit of money out. I can't do anything. I'm living somewhere else now. I'm not even in the state.
Dawn:And so I gave him I I don't know. I think I gave him 5,000. It was too much. I should have paid one or two. What I should have done is negotiate to buy the note right then from HUD, but I didn't.
Dawn:And the person that was my eyes and boots on the ground didn't see the glaring notice on the front door and tell me about it. So I just thought, me, this is what's just falling through the cracks. We'll just take a swing at it. And, we've had it rented, since '20 yeah. The 2018 till now.
Dawn:But I recently you know, someone called me saying, we're fish and game. Do you know that there's people living in this house? And I'm like, you are not fish and game here at asset manager. So I'm wondering if the the gig's gonna be up. You know?
Dawn:We are just we're just riding along on a 25% cash on cash return for as long as it lasts. You know? We got all our money back out a few years ago.
Sri:I'm really surprised that
Dawn:Think of that. Think of that Thirteen years since the person died.
Sri:Yeah. That's that's generally how how long it takes. At least more than a year. I'm surprised that in your case, they came about just in a month after your mom passed because they they generally don't know until either the insurance has lapsed or the tax are not being paid. Until then, they won't even know.
Sri:So I don't know how they got to know within
Dawn:They they must have really wanted the property out. That's all I can say. You know, it's like a near it was, by that time, near a million dollar property. I don't know. They were on it, and I was not happy.
Dawn:It's not a you know? I I'm sure it's a tough job that they have to do. But, yeah, he didn't get, like, cookies and milk or anything when he walked in. So, anyhow, that's very interesting. And and, Sri, and I had heard, but, you had told me that there's no statute of limitations on reverse mortgages.
Dawn:So if that would have been the case, I could've just do a quick quiet title action and just remove them. But, apparently, it doesn't work that way with reverse mortgages. So no statute of limitations. Very interesting.
Sri:Statute of limitations only depend on the state. Only thing it might apply is if they have actually accelerated the loan and did nothing. And so from the acceleration date, certain years might have passed. And then maybe statute of limitation would come into picture. But if they have not accelerated in a reverse mortgage
Dawn:Yeah.
Sri:I don't think that actually really applies.
Dawn:Yeah. It seems like they can sleep for as long as they want. But once they wake up and start something, if they don't finish it, that's where you're going. Maybe you have such an account.
Sri:If you look at the the mortgage or deed of trust, it clearly states that, you know, what the violations are. And they can clearly when the note were we called you or what the violations are. Right? So if they say that we didn't know about the borrower's debt because there's no p and I payments. Right?
Sri:Yeah. We didn't know about borrower's debt, then they can just use that reason for not triggering the SOL.
Dawn:Yeah. Very interesting. Curious. I learn stuff all the time, lots of times by doing it and doing it maybe not the right way. Then I then I learn.
Sri:At least you got the cash flow
Dawn:for some years. So It's work it's worked out alright so far. But, anyway, well, thanks for bringing that up, and and, yeah, do keep me posted on that. Is is that it for now, Sri?
Sri:That should be it. Thanks, Dawn.
Dawn:Alright. Thank you. Appreciate you participating. Before we get too far into it, I just wanted to go over and am I screen sharing? Not yet.
Dawn:Okay. There's just a lot happening in the market in the world. Right? And and, you know, it's it's not going away, you know, anytime soon. It's not like, oh, it's gonna be calm next month.
Dawn:So this was an interesting I don't know if you guys took a a look at it. I follow Adam Taggart of Thoughtful Money. I love his channel. I also have been following Melody Wright since he first had her on, which kinda gave her her publicity start, really. She does put out a substack.
Dawn:I subscribe to that. She's very, been in the secondary market. From the institutional side, helped did all this work during the great financial crash, the GFC two thousand and eight, and all these workouts. And her story is interesting to me because, you know, she comes from the institutional side, and she thought they were doing so many positive things and helping homeowners and helping the servicers and the lenders survive just the big, big mess in the years following 2008. But at the end of the day, she describes being very disillusioned and going, I think I was fighting for the wrong team.
Dawn:Like, you know, she she really isn't. But still, her a lot of her clients are institutional, you know, banks banking institutions. So she's kinda straddling. And then I watched her discover the the private note market that we were just talking about. She's like, where what is this shadow market?
Dawn:You know, where it it leaves the institutional realm. It leaves where NAR isn't tracking all the, you know, all the sales and the activity. So she she discovered, I think, the DME, the Distressed Mortgage Expo that Nathan Turner runs, and I'm not sure if Dave puts anyway, they they put on this this convention, and she found them. And she's like, Here's where a bunch of notes are going. And then she got wind just recently, not you know, within the last year or so about the whole subject to thing and, you know, the the Pace Morby stuff.
Dawn:And she says, I'm blowing the whistle on this whole thing. I mean, already, the the vendors or the servicers that are really on to the subject to and subject to meaning if you sell a property or you buy a property subject to, you're buying a property, then the seller's loan stays in place. It doesn't get paid off, and you don't assume it. It's just kind of like you just quietly take it over. That's what subject to means.
Dawn:But, anyway, there's a clause in in almost all institutional loans where the due on sale clause, if the title to the property changes, they have the right to accelerate the loan or call it due. Right? And usually, historically, that happens maybe one or 2% of the time. But in recent months, I think Mr. Cooper and Rocket Mortgage, I believe, have gotten really savvy to this, and they're actively looking for these subject to transactions to call the loans due.
Dawn:Okay? But the other lenders, other servicers really haven't caught onto it. And Melody, it's kinda funny. She's in one way, she was very disillusioned with the traditional institutional mortgage market. But then at the same time, she's trying to protect them from, like, people just trying to get out of a tight situation.
Dawn:I know there's a lot of abuse with the subject too, and I have a lot of problems with the way that some things go down. But in some situations, it's like the only way that a solution can actually get done. And so she's try she's blowing the whistle hard, you know, on subject to trying to wake up the lenders. And with AI stuff coming online all the time, I think it will increasingly be accessible for the banks to to get a lot more aggressive about looking for these subject to deals. That's just kind of a side note, but what I wanted to say is it's so hard to figure out what's going on in the market.
Dawn:But she is so deep in the numbers. Like, it actually makes my head hurt trying to read her articles sometimes where it's just like, woah. That's a lot of data. But she thinks prices are gonna slowly grind down. And in some areas, it's pretty hard hit.
Dawn:And that just puts the whenever I see things like this or, what was this other one I was gonna bring? This biggest buyer discounts in twelve years. The market froze, but the distress didn't, and they're making the argument, hey. There's a lot of people that were just hanging by their eyelashes waiting for, hey. We're gonna have rate reductions.
Dawn:The prices will come back. It's not working. When rates fell to 6%, six point o two, the buyers didn't come back in droves. So, basically, it's like the dis but so those sellers that were just barely hanging on, they're not getting relief. And so at some point, they're gonna have to sell, and that's when prices, rents, and different things are going down.
Dawn:So the average buyer is now receiving three and a half or 3.8 discount off of list price, translating to roughly 16,000 on a medium priced home. Seller negotiations pushing discounts as high as 32,000, and that's just in the regular, you know, retail market. Banks are holding $71,000,000,000 in seriously delinquent multifamily loans. Credit tightening, pending home sales hit record low as demand refuses to recover. Job revisions signal deeper distress ahead for commercial real estate.
Dawn:Zombie foreclosures stay low, but distressed pipeline remains active. So, basically, if these so just between these two things, this newsletter that I get and, you know, that I follow her and Adam and his work quite a bit. It's like, what if now we know that there could be appreciation. Like, it's real estate's a hard asset. And and in a way, they'll always long term have value, but we could have another correction.
Dawn:So I just feel like all these things are the a perfect storm for these alternative seller financing, whether you're buying or selling. If if you're if you're trying to basically, for one, if you think that you have to sell, you're gonna need to want or have to sell anytime in the next one or two years, freaking just get it done. Don't wait it around. Right? Because once it starts rolling down, it's really hard.
Dawn:You have you have a first mover advantage of trying to sell. And if you do need to sell, don't be stupid on price. You know? Come out the gate 5% below what you think it'll sell for and and get the bidding war going on. But if you can hang on for however long, who cares?
Dawn:Because it's always gonna produce some sort of rent. People don't get tired of living in houses, except for my daughter who doesn't like living in houses. They bought a house, and they sleep outside as much as they can. You know? It's like, I bought her shoes, and she wouldn't wear them to high school.
Dawn:So, anyway, some people are like that. But most people don't get tired of living in houses. But, anyway, if if there's a ton of competition and nobody's moving, you're either gonna have to drop the price or you're gonna have to offer terms or some combination of the two. Right? So most people only have their one trick ponies.
Dawn:The realtor goes, okay. Time for another price reduction. Time for another price reduction. Now owner financing is not for everyone, but there's a lot of situations where it would work and would be a great solution for both seller and buyer to get the deal done, to get a good price for the property, to sell quickly. A buyer who's really qualified, has a big down payment, can afford it, but just can't maybe they're self employed.
Dawn:There's a big bunch of people who are self employed that have trouble getting traditional financing. So that's a that's a perfect match. Lots of times, landlords selling to their tenants, that's a perfect match. Right? If the underwriting makes sense.
Dawn:And or you just go in with your eyes wide open. Even if you decide to do a bad job of underwriting, like take 0% down or something, it's fine. But as long as you go out with eyes wide open, if you ever need to sell this note, just know that you're not gonna get top dollar, and here's why. You know? And if you still decide to do it, great.
Dawn:You you've been advised. There's nothing that's wrong about any which way to do it, but just understand so that you don't you're not so disillusioned and and broadsided by someone offering you 50¢ on the dollar or 30, or no one will buy it at all because of you made some strategic errors in the deal structure, the paperwork, etcetera. So so when I see these signs of stress, you know, it's a little alarming. Of course, I own real estate, and I want it to be worth as much, but the market, when when the traditional Wall Street banking thing starts to break down, this is when what we know how to do here in rooms like these becomes so critically important because we, in the creative real estate space and seller financing and especially that note buying piece that a lot of people don't understand, that's what we can make the world go around without Wall Street, without the institutional banks. We can do it on a private basis.
Dawn:So that's why I get really excited. In fact, I was talking to a some some guys that have a big company over in Texas, and they're doing a lot of this seller financing subject to. And then, of course, one of their main things is is being able to refinance that buyer in two or three years so that they're just they're getting deals done, and then they're filling their pipeline of refinances. And then not only do they run a big business doing that, but they you know, the guy I was talking to him and he's he's like, oh, yeah. And I do my own bunch of real estate, you know, we buy houses kinda thing.
Dawn:He goes, I run a big business with that. And so he's very knowledgeable. They're even pitching this subject to owner financing kind of stuff all the time, and he doesn't know the first thing about the note business, the secondary market for notes. And I said, guess what? We we we could collaborate because so this is a guy that's been doing, like these are big, big operators, and they don't understand the secondary market for note.
Dawn:They don't understand they understand, oh, I can buy with owner financing, and that's great. But they don't even think the next step of, well, then that's a paper investment. That's an option on a note. You know, there's there's all these juicy things that, you know, professionals and even the most, you know, big big time real estate investors, they just don't get the memo somehow. And so they're leaving so much money on the table because they don't understand the secondary market for notes and the hidden opportunities that are just so juicy when you buy with owner financing.
Dawn:And also when you sell with owner financing, you get to defer capital gains, have income for retirement that greatly exceeds the your net rent generally, and you leave a great inheritance. So, anyway, to me, there's a perfect storm coming up if we do have some times at So some 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. And if you have a situation where you could use some one on one help, check out notequeendeepdive.com and schedule a private consultation.
Dawn: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.