Selling a Second Lien Position

[Alex Booth]

I've just become aware of "creative financing" a few months ago as I'm selling some of my SFH in Texas. The offers vary wildly but many of them are a mixture of cash plus second lien equity financing at 0% interest + a 7-10 year balloon. I'm not sure that I want to hold that extra payment for 7-10 years. Is anyone familiar with a note buyer who would buy the second lien position at a discount?

[Chris Seveney]

@Alex Booth

We are very familiar with notes. Never ever ever ever write a note at 0% interest

First the government will still tax you. It’s called imputed interest and follows AFR

Also you will Get probably 20-40% of amount owed if you sell it on the secondary market

For a second lien position 9–12% is where you want to be. If you had that type of rate you should get 90-100% of what is owed.

Remember house values do go down and if the house were to ever go underwater and borrower files bk your loan could be crammed down or stripped (worthless) on a second position note.

Be happy to tell you how to structure it best for resale purposes