The world around us may one day go paperless but the real estate industry never will!
In real estate, you will find that the word ‘paper’ usually
references documents regarding the financial aspects of a deal.
For example, promissory notes, deeds of trust and mortgages.
However, ‘paper’ is also a reference to a creative hidden
market – the paper market, also known as the seller-financed
mortgage market.
Are you aware of just how large the paper market or the
seller-financed mortgage market truly is?
One out of thirteen homes sold in Canada has some kind of seller financing. Further, this market continues to grow at the rate of over $4 billion a year.
Government and industry sources estimate that $335 billion in
private paper exists in our country right now! Of that total,
nearly $100 billion consists of private residential mortgages.
Just what is private paper or seller financing, anyway? Generally speaking, private paper refers to the notes and security instruments created by private parties.
Private parties are those individuals or investors who are lending from personal assets rather than through large institutional lenders.
Although the majority of private paper assets exist in the form of mortgage notes generated when sellers carry back some or all of their equity in the properties they sell, a great deal of private paper is also created as a result of other types of transactions.
Attorneys, for example, have taken promissory notes secured by real estate as payment for legal fees.
Swimming pool builders and home improvement contractors use the private paper device to secure payment for their work.
Real estate brokers have taken private paper for their commissions.
Bail bondsmen often take private paper security for their bail funds.
Divorce and probate settlements frequently utilize private paper to facilitate the equitable distribution of assets to the affected parties.
Many folks believe that the growth in the mortgage industry and the low interest rates our economy has enjoyed over the past few years have wiped out the need or inclination for private paper.
This is not true. Since 1993, private residential paper assets
have grown from $75 billion to approximately $100 billion.
That’s $4 billion per year in new private paper created over the past six years.
Note Worthy
The incredible growth in the private paper industry has refashioned what was once a small market into a full-blown financial sector in its own right.
What just a few short years ago was a “hidden market” has slowly crept from darkness into light. Networking has become the byword, as industry participants have learned to work closely with one another.
Modern technology has also played a significant role, as
communication between note professionals has improved. Another key ingredient that is propelling the growth of the note industry is liquidity!
No longer are note buyers playing strictly in their own backyards. A farmer dealing with his local note broker can now sell his note to an investor living somewhere else. What’s the significance of this?
Simply put, the movement of capital, which in turn lubricates
the economy.
The average note holder is now holding a high-return, highly
scrutinized instrument, which he can keep or sell with relative
ease.
Selling A Partial
Did you know that a note holder can even sell just part of a note and keep the rest? That’s known as a partial purchase. This device is fairly unique in the investment world. How many investments allow you to sell a portion of your future revenue for cash right now, while still receiving the other portion of that revenue stream as income?
Investors now have a higher degree of confidence in purchasing paper or playing the paper game. Further, they have an increased opportunity to find enough deals to sustain their portfolios and their investment objectives.
Conversely, sellers enjoy an increased bidding atmosphere that will usually ensure they get the best price available.
To Your Success!
Aiden Win
Mr. Foreclosure
P.S. Becoming a member of the
Foreclosure Insiders Club is an excellent way to keep tabs on properties in your area as they go
from pre-foreclosure status into foreclosure.
You’ll have an advantage over other investors and realtors in your area who don’t have access to this information and everything is conveniently delivered right to your computer!]
