Investor is selling my note... Asking for too much personal info?

Question

Hi everyone,

I had bought a SF rental property in early August from an investor that was selling his portfolio. I paid him 20% down and he seller financed the other 80%. Two days ago I received an e-mail from him stating that he is selling the note off to an investment firm and needed my SS# and employment history for the firm.

I'm not just going to send him that information no questions asked. But, my question is, should I have to provide him or the firm any of this information since I am not technically a part of their transaction and what should my response be?

I've never been through this so I don't know what the norm is. Any input is greatly appreciated!

Dave Van Horn · Answer

Hi Nathan,

To be quite honest that is pretty normal information that he should have gotten from you prior to giving you the initial seller financing. What do your loan documents say if anything in regards to the ongoing cooperation with your lender post origination? This may be a good chance to negotiate a discounted payoff. Sounds like your lender needs money.

Best,

Dave

Dave Van Horn · Answer

Happy to help @Nathan Reed.

If this were me, I would be reluctant to give up the information and here's why:

The note owner sounds desperate to sell as it is, if you don't give your SS# and work history the likelihood of them being able to sell that note is slim (unless they discount it even more). At which point, you become the only game in town.

So what you could do is this: take your note and mortgage docs and approach a seller-financed company (like a Colonial Funding) or a seller financed broker (like Donna Bauer or Jeff Armstrong)  and say "what would you pay for this note?"

They're going to ask you for the pertinent information about the loan (credit, pay history, etc) After you give them the info, they'll tell you what they'd pay for the note - if you do this at 2 or 3 places, you'll essentially learn what this note trades for and how much it's roughly worth.

Having that information will be incredibly useful ammunition when talking to your lender. So once you get a dialogue going, ask your lender "How much are you going to sell this note for?" And when he/she tells you a price (presumably hire than the numbers you received from the seller-financed brokers/companies) you can come back with your offer that's probably close to 70 to 80 cents on the dollar. Meaning you'll get a discounted loan payoff of 20 to 30%. If he/she agrees, then all you need is the money.

So as for funding the deal, if you don't live in the property, you might be able to try a commercial  or portfolio lender for financing. You could also use private money  until you get seasoning, especially if you get a discounted payoff from  the lender. Private money can come from anywhere, but you could try your local REIA group - sometimes there's lenders there if the deal is sweet enough.

Best of luck.

- Dave

Dion DePaoli · Answer

Chances are you are not obligated to comply with that inquiry.  The seller should have collected that prior to making your finance arrangement.  The finance contract is made and can not be amended without your agreement.  So it won't hurt you to comply to a point you are comfortable.Refinancing seller financing within 12 months is typically treated like a purchase transaction.  After 12 months the lenders will treat the transaction like a refinance.  That will likely be what you bump into wherever you go.

Nathan Reed · Answer

Thanks for the reply Dave!

I read through the loan docs and I couldn't find anything that says that I have to provide any more information. The only "invasive" thing that it specifies is that he can come inspect the property when he likes with proper notification.

Great idea about the discounted payoff. I hadn't thought of that. Although, I did meet with my bank to see if I could just refinance and pay the loan off. Sadly, my bank wants 1 year of seasoning so I was going to explore some other avenues. You wouldn't happen to know any PA lenders that don't require seasoning on investment properties would you?

Investor is selling my note... Asking for too much personal info?

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