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HOW TO SELL YOUR NOTE
What is a Mortgage Note?
Whether called a mortgage note, real estate note, or deed of trust note, it is essentially a promise to pay at a specified interest rate and over a prescribed period of time. The mortgage or deed of trust is an additional document making the property collateral for the note in case of a default. A land contract is less commonly used when selling properties, but combines the note and mortgage into one document. Notes that are performing and in 1st position are nearly always much more valuable and marketable than notes in default or in a junior lien position.
To ensure that the documents will be valid and will stand up in case of future problems (such as court), it is best to have a title company or attorney prepare the documents. Normally, they would also take care of accompanying documents like the settlement statement and the title policy. Once the documents have been completed and signed, the note and mortgage should be kept in a safe place like a safe deposit box.
Why Sell A Note?
Whether you wanted to use owner financing or had to in order to make the sale, you will want to understand the advantages and risks of holding a real estate note. The advantages include being able to collect a nice monthly income that is probably at a higher interest rate than you would receive at a bank.
Of course, as with anything, there are trade offs that include:
- Risk of default: If the buyer stops making payments, can you manage without that income for several months or possibly years? Can you afford an attorney to manage a foreclosure and do you have the financial ability to make needed repairs to the property?
- Insurance: You will want to be shown as a mortgagee on the insurance policy, and ensure on an annual basis that the insurance remains in place and paid up.
- Property taxes: At least once per year, you will want to check with the county to be sure that property taxes have been paid and are current.
- Maintenance: Since the property is collateral for the note, be sure that the property is appropriately maintained and that the new owners have not done anything to reduce the value.
Choosing A Note Buyer
Most people don’t have more than one mortgage note during their lifetime, so it is important that they sell the note right the first time. Fortunately, there are some easy ways to make sure that you are choosing the best note buyer:
- Does the person on the other end of the phone line sound trustworthy, competent, and service oriented? If your gut fee is negative, find someone else.
- Does the note buyer have a lot of experience in buying notes? If they have been in business for less than five years, be extra careful.
- Check out the reviews of the note buying company with the Better Business Bureau and on Google. Read the reviews to see whether they are a good match for you.
- Do a search of the note buyer on various search engines like Google and Bing to be sure that you are not missing anything about them.
- Find out whether they are licensed real estate brokers. In some states, they are legally required to be licensed. With other states, it is not required but having a license demonstrates a higher level of commitment and competence.
In general, it is a good idea to speak with 2-3 note buying companies to get the best price for your note and to find the best fit. Ask the note buyer how frequently they will update you and what could adversely impact the quote that they gave you.
Finding an Excellent Note Buyer
Note buyers like Mortgage Note USA can help you to understand the value of your real estate note, as well as make offers to buy all or part of your note.
An excellent mortgage note buyer is one who can not only get you a great price for your note, but will also provide you with great service and provide the utmost integrity.
Here are five ways to make sure that a note buyer or note broker is right for you:
- Experience – Does he or she seem to know what they are talking about and have they been buying notes for at least five years?
- Licensed – Does the person or company have a real estate broker license? While that is not required in most states, a license shows more professionalism and a higher level of competence.
- Accreditation – Has the Better Business Bureau or a similar organization given high marks to the note buyer. Again, this is not legally required, but does indicate more trustworthiness.
- Clean history – Use your favorite search engine, such as Google or Bing, to investigate the history of the note professional and make sure that there is no history of poor behavior.
- Gut feel – When you talk with the person, look at their website, or read their materials, does your heart tell you that this is someone that you can trust and easily work with?