A real estate note is created when a property – a house, commercial building, mobile home, land, etc. – is sold using owner financing. The note states the terms under which future payments will be made and is generally accompanied by either a mortgage or deed of trust that serves to make the property collateral. The real estate note, which can also be referred to as a mortgage note, deed of trust note, promissory note, or just a note, includes items like the payment amount, the due date of the payment, the interest rate and term, the grace period, and what happens in case of default. The note, along with the other documents, is best prepared by a title company or a knowledgeable attorney. The deed of trust or mortgage should be recorded with the county in which the property is located to protect the interests of the note holder.
If you are considering selling your note, you would first call a note buyer like us to explain the history of the property and to give general information about the note. The note buyer can counsel you as to the various options available to you and the price that they can pay you for the note. Except in rare situations, there will be some amount of discount, meaning that you will receive less than the current balance on the note. Once both parties have agreed upon a price, the buyer will check the payer’s credit, collect copies of relevant documents from you, and do a title review and appraisal before providing the funds.
As your mortgage note investor or broker, I will work closely with you in the collection of the necessary documents needed to finalize this note sale. I will get you the best prices for your promissory note because I have relationships with the top buyers in the country. It usually takes 4-5 weeks to close, depending on how fast documents can be gathered and how quickly the due diligence period runs its course.
1. Signed note buyer’s agreement.
2. Promissory note.
3. Deed of Trust or Mortgage.
4. Closing statement.
5. Proof of fire insurance.
6. Proof of payments made over the last 6-12 months.
7. Title policy, if one exists.
The price paid by note buyers depends on elements such as the amount of down payment, the payer’s credit score, and the type and condition of the property itself. Whenever possible, get as big of a down payment as possible and try to sell to someone with decent credit. Buyers of notes are always considering what would happen if there was ever a default, so the less risk that they see in the note, the better the price that you will receive.
As a note broker and note investor who has dealt with thousands of note holders, I can tell you all notes are different and some are much better than others. The following is a list of items that can influence how valuable your business note might be:
1. Down payment – 10%+ is best
2. Interest rate – 7% + is best
3. Note term – at least 3 years but not more than 30 years
4. Seasoning – at least 2 payments received on time
5. Property – one that is in good condition and could be easily sold, if needed
6. Credit rating of payer – 650 + will get you the best offers
Having a good down payment can make up for less seasoning, or better seasoning and pay history can compensate for lower down payments. A poor credit rating can be helped with good equity and seasoning. In other words, just because your note does not meet all of the standards above does not mean you cannot sell your note. Each item will affect the value unless other factors can over compensate for it.
As a top mortgage note buyer, I would be happy to evaluate your note to determine if it can be sold and if your price expectations and needs can be met by this sale. I will provide a free no obligation assessment and quote to you, then you can decide if you want to sell your note. I will not pressure sell you. It is your money and your decision to sell!