Selling Mortgage Notes? Find the Right Note Buyer!
January 1, 2012 by Tracy Z · 5 Comments
Note Investors fall into one of four groups, but which one is right for you? Safe to say it’s not “The Posers!”
Here’s a look at each group including tips for finding and selecting the best note buyer.
Questions on Selling Mortgage Notes
Owner financing is on the rise with more sellers agreeing to accept payments from buyers. There are many reasons people agree to a carry-back real estate notes including:
- Quick sale of the property
- Monthly income from the note
- No hassles of bank financing
- More qualified buyers
- Property that is hard to sell or finance
Rather than waiting 20-30 years for payments, many sellers opt to sell future payments to a Note Buyer. Here are the seven most common questions we receive on selling mortgage notes and trust deeds.
Why Would I Sell My Mortgage Note?
Circumstances change and many sellers would prefer cash today rather than small payments that trickle in each month. Here are just a few reasons people have sold their note for cash:
- Retirement
- Taxes
- Investment Opportunity
- Expensive Medical Care
- Vacation
- College Tuition
- Unexpected Financial Changes
- Peace of Mind – no more worrying if the buyer is going to miss payments or having to foreclose
- Accounting headaches, IRS regulations, paperwork hassles, and the list goes on…
What Is A Note Appraisal?
A note appraisal reflects the current market value of your payments similar to what a real estate appraisal provides for real property. Frequently referred to as a “quote” it shows what your future payments are worth to an investor in cash dollars today. We recommend having it evaluated once a year as pricing may change based on market conditions.
How Do I Maintain the Value of My Note?
Many of the items that affect the value were determined at the time the property was sold. However, keeping good records of the payments received and requiring the buyer to provide annual proof of current taxes and property insurance will help maintain the value of your important asset.
Can I Sell Just Part Of My Promissory Note?
Investors can purchase all or part of the remaining payments. Selling part of the payments allows you to receive a lump sum of cash up front, then payments when the note reverts back to you.
To minimize the discount, many people elect to sell just enough payments to meet their cash needs today and keep some of the future payments as an investment or nest egg. Always ask for an option that meets your needs.
How Is The Value Determined?
The value of a note is affected by the down payment, interest rate, payment amount, length of repayment, buyer’s credit rating, and payment history. The type, condition, and value of the property also impact the value of your note.
The time value of money, which makes payments due now more valuable than payments due in 20 to 30 years, is also factored into the offer. Due to inflation, money in your pocket today is generally worth more now than later. All of these elements will be taken into consideration in determining the current value of your note.
How Will Selling My Note Affect The Payer?
The payer or buyer experiences no change in the way the payments are structured. The only change will be the address where the payments are mailed.
How Do I Get Started?
The first step is to obtain a quote from a note buyer. The investor will ask some questions on the property sale and terms of the promissory note. This can usually be done over the phone or by completing an online worksheet. The investor may also request copies of the documents relating to your transaction, such as:
- Promissory Note
- Mortgage (or a Trust Deed, or Land Contract in some states)
- Closing statement
- Buyer information
- Pay history and current balance
- Previous title insurance policy
- Current hazard insurance policy
The investor will provide an offer subject to the standard title, appraisal, and buyer’s credit review. Once the review is finished and the documents gathered the transaction is reading for closing. This process typically takes 2-4 weeks. If preferred, an attorney or title company can handle the exchange of funds for the original closing documents.
Grab your copy of the Note Buyer List today!
Real Estate Note Investing: “Wow, That Sounds Risky!”
October 19, 2010 by Greg Gehlen · 2 Comments
That is the reaction I generally get when I tell people what we do. Or sometimes they will respond with “Oh, that’s got to be tough right now.”
Perhaps it is my answer, but mostly it is because many people’s perception has been clouded with everything they hear and read on the news about mortgages and foreclosures over the past few years. Read more
Note Buyer Burns to Learn – Real Deal #160
August 24, 2010 by Tracy Z · Leave a Comment
Wonder why note investors require proof of insurance before buying notes? This Oregon cash flow note explains it all! Read more
