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Note Success in a Recession

Written by Jeffrey R. Armstrong – President/Owner of Armstrong Capital

Your favorite Master Note Buyer – Straightforward, Honest, Fair…

I’d like to write about two things in this article: the changes to the seller financed note industry that the recession may or may not have brought about; and the increased level of skills needed to succeed in the note business in today’s economy.

Today’s seller financed note market is a much different place than it was just a couple of years ago.  Demographics, technology changes, real estate market fluctuations, interest rate levels and consumption patterns have all been major forces in redefining the seller financed note business.  Compared with a couple of years ago, the mix of investors for seller financed notes is spread much more thinly; the types of notes in demand have changed; and the skills and education needed for success are greater.

The story during the past few years is familiar to many of us.  It has been one of declining real estate values, declining credit scores resulting from high unemployment, stricter conventional lending requirements and more recently tighter note buying criteria as well.

However, there are increasing opportunities in the seller financed note business.  People have been buying individual seller financed notes for over 50 years and that strategy will continue.

Long Term Trends

When real estate values were going up and everyone that could fog up a mirror was able to get a loan to purchase a property and the number of seller financed notes being produced was at a low; bringing the seller financed note business to the bottom of a wave or cycle, if you will.  So the long term trend, in a nutshell, is one where there will be more and more seller financing taking place to sell properties, if fact we are already seeing evidence of this.  This is the direct result of the tighter lending criteria for people to obtain loans needing to fit into a sugar cube much less a box anymore.  When people can’t qualify for loans they resort to seller financing to purchase properties and for sellers to sell their properties.  With more notes to go after our volume will go up as well.

Has the recession changed this dynamic?  Certainly, in the past year, all industries have been affected by the current downturn in one way or another, some more so than others.  What has happened for us in the seller financed note business is that with the glut of defaulted notes, increasing foreclosures and REO’s many institutional and private note investors pulled out of the market to manage their non-performing assets.  Thus, there has been a significant decrease in the number of actual end note buyers in the seller financed note industry.  And, of the note buyers that remain they have tightened up their criteria for purchasing seller financed notes.  However, the recession has brought about a need for people receiving payments on their seller financed notes and that need is cash – cash to live on, pay bills and keep things going until they get back on their feet again.  If you remember the only time that a note holder is going to sell all or part of their note is if and when they have a need.  So not only do we have more notes being created than the past several years, we have more people in need which has the number of note holders accepting our offers going up as well.

The Importance of Advanced Training

For the most part, the future of the seller financed note business, in spite of the current downturn, will be a continuation of the trends witnessed in the past. It will have it’s ups and downs but there will always be a need for the buying and selling of individually held notes on the secondary market.

Perhaps the most striking result of these structural changes in the economy, and certainly the most relevant for those entering the seller financed note business, is the increased level of education and skills that are needed to succeed.

Now more than ever, advanced training, especially post-secondary education are necessary to learn the many niches within the note niche.  Some of the niches include basic note brokering, note investing, note manufacturing, note creation, the use of notes to buy and sell property, non-performing notes, note portfolios and many more.

We see advanced training pay off today where the recession has forced many experienced note brokers and investors to compete for the same notes.  And we will see it pay off when the recession ends, as more and more notes are available and more and more investors step back into the market.


Every generation has its own challenges to face. And certainly those in or entering the seller financed note business today face some challenges, both long and short term. But at the same time, the strategy isn’t that different than it was in other times.

Find something you like to do. That supports your lifestyle. Get yourself trained, be that on-the-job training, purchasing continuing education books and products, attending workshops and industry related conventions, subscribing to newsletters (both free and paid), or beyond.

Work hard, make good decisions. Develop meaningful relationships and contacts.  Be patient – think of success as where you’ll be in ten years, not 18 months.  And have faith that the seller financed note business both the brokering and investing sides will work together to create opportunity.


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