Note Sellers – What's Holding You Back in 2026?

Question

Good morning Everyone!

Note holders and seller-financers – performing residential notes should be moving, but I'm seeing sellers sit tight. Equity's building monthly, yet inventory's down 40% from last year on the channels I'm watching.

Quick poll for note sellers:

• Locked into 3-4% rates and waiting for refi wave?
• Servicing reports too messy for quick sale?
• Just not seeing fair offers in current tapes?
• Tax hit on gain killing the math?

Buyers – what's your top rejection reason lately? LTV creep? Borrower red flags? Weak collateral?

One data point each – sellers especially, what's the #1 friction right now? Active buyers monitoring for trends that matter.

Matthew Bernal · Answer

From what I am seeing, a big friction point right now is expectation mismatch. Sellers still price off peak demand, while buyers are underwriting tighter and discounting more aggressively.

On the buy side, clean documentation and clear borrower strength matter more than seasoning alone. If the file is solid and structured right, it usually finds a home.

Curious to see if others are seeing the same gap between pricing expectations and current underwriting.

Doug Smith · Answer

I'll chime in. Gurus without a formal credit background or a basic understanding of credit keep pushing "seasoning", so people are poo-pooing well-originated new loans as they have not been "seasoned". There was a movie quote where one character said "we're at the bottom of the barrel" to which another character replied "then we find another barrel." I think what's holding people back is being taught how to buy notes by people that have zero formal credit or special assets background. Then they get stuck when the deals they are looking at step outside of being vanilla like the ones they were shown at the Airport Holiday Inn that one weekend. A well-originated new loan with a credit report, liquidity verification, and capacity verification at an appropriate LTV that has been papered properly can be a great source for a portfolio. If the note world is only looking for the cast-offs from the big funds or seller-originated notes, then they might struggle to find deals that have not been recycled or rejected by institutional shops. They just need to find another barrel.

Chris Seveney · Answer

If I underwrite a DSCR loan at 6.5% and can sell it to an institution and make money off it, but a seller financed deal that was just as well originated the buyer wants a 12% yield when I wrote it at 9% - where am I going to focus my time and energy? Yes if it has hair on it then it may not sell at par and at a discount, but people have unrealistic expectations as Doug mentions because some guru who still uses 480i resolution camera and a grainy background then gets you to meet up at the local airport hotel telling you that you can retire with "mailbox money" and how easy it is does not mean that is reality.

Note Sellers – What's Holding You Back in 2026?

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