A mortgage note, also known as a real estate note or promissory note is a payment agreement between a seller of a property and the buyer. The buyer pays a lump sum deposit and then promises to pay the rest of cash in installments, and this promise is what is referred to as the mortgage note. The transaction is usually described by many as owner-financing but the note received is an asset that can be bought in cash by a third party. The main reason why people sell their notes whether in full or in part is the need for liquid cash.
The Process Involved in Selling Mortgage Notes
Selling mortgage notes is very simple especially because many companies and individuals are willing to buy such notes on the notion that they are collateral-backed securities. The good thing is that you can also sell your mortgage notes over the internet through commercial note buyers online. The only thing you need to do after identifying your buyer is to fill an online form and make an offer based on the current market price. If you are not sure of how to get the best rate, work closely with a real estate attorney, and he will help you get a competitive rate.
You can either sell the entire mortgage note and forget the future payments or sell part of the note and receive payments in two ways. The first way is that you get a lump sum now and wait until the note buyer gets fully paid from the installments without you receiving a penny and then resume receiving once they are fully paid. Secondly, you can agree with the buyer to receive a certain percentage of future payments whereby you will receive the lump sum cash and also continue receiving a small percentage of the future payments from the note.
Valuing Your Real Estate Note
One thing you need to know is that mortgage notes are usually sold at a discount, and therefore you will not receive the exact principal value of your note. Different factors can help you determine the worth of your mortgage note, and these include property appraisal, the credit rating of the borrower, lifespan of the mortgage, first position, remaining payments and down payment amount placed on the note. All this information is found on the promissory note and again if you need help in pricing your mortgage note, seek the help of an expert.
Finding The Best Buyer For Your Mortgage Note
The following considerations can help you identify a trustworthy note buyer:
Ensure that your prospective buyer is licensed to operate in your state of interest because if they are, it is likely they will adhere to the standards of the real estate industry and therefore guarantee seller’s protection. Check your buyer’s experience in the industry and specifically in buying mortgage notes. Selling to an experienced buyer will ensure that nothing unexpected happens due to lack of knowledge or necessary resources. Review your potential buyers’ reputation from people who have worked with them before. Never ignore references because if a buyer proves to have had many bad experiences with other sellers, it is likely you will not be spared either. Finally, compare different buyers so as to land yourself a better deal because if you settle with your first buyer, you will have to take everything they offer at face value.