How much does my note cost? This is the most common question that note sellers have as they try to market a real-estate note. We will be discussing the important question of “What is my note worth ” and how to determine the value of a real-estate note .

How Much Does My Real Estate Note Cost?

There are many variables that affect the value of your real property note, also known as a mortgage note or promissory notice. Although each note is unique, these are the main factors that determine its value.

1. The equity in the property. This is a percentage of the property’s value. It includes the down payment, and the length of time the mortgagor (or mortgage seasoning) has been making payments. The general rule is that the higher the amount of money you have paid, the better your quote will be.
2. The structure for the promissory notes. Consider the length of the mortgage note and its payment schedule. Payments received later are more valuable than those received earlier. The interest rate on the mortgage note is another important consideration.
3. Types of property. Every property and every note type has its risks. Single-family homes are more at risk than mobile homes, commercial buildings, and vacant land. They can be quoted lower than real estate notes for mobile homes or other properties. Anything that resembles the shack above would be worth the land’s value.
4. Location and condition of the property. Both the market value and the value of the mortgage note will be determined by the condition and location of your property. It’s advantageous when the property is occupied by an owner and has easy access to water, electricity and roads. It may be more difficult to sell commercial notes if the property’s environmental history and related potential consequences makes it more likely that the note holder will be liable. Multi-unit apartments and general office buildings are more attractive than specialty businesses.
5. Lien notes. In most cases, 1st lien notices are more valuable than second lien notes. This is because the risk to the holder if a 2nd note is held is much greater.
6. Payment history and credit rating of the buyer. It is crucial that the note seller takes into account the credit rating and payment history of the buyer in the event of a partial sale or full sale. Ideal credit scores of 680 and higher are recommended. Although a lower credit score and a history of paying on time may be acceptable, a credit score less than 600 will usually require the seller to sell their note at an increased price.

These are only a few of the key variables that must be considered when determining the value of a mortgage note. Selling a promissory notes at a discounted price is a common concern. For more information on structuring your mortgage note to maximize its value, see our Tips for Creating a Real Estate Note. A general rule of thumb is that the seller should not take a lower discount for a mortgage note if the interest rate or term of the note are longer. Call us today to discuss your options to reduce the discount on your mortgage note. We are happy to answer any questions.

How long does it take to get the cash payout from selling my note?

After you have decided to sell your mortgage, and received a quote from an investor, you will need to submit copies of the Title Policy and Note as well as the Closing/Settlement statement. The mortgage note buyer should offer to arrange for and pay for title or appraisal services if there are none.

The process generally takes between 3-5 weeks from the start to funding, although it can vary by buyer of mortgage note. You should be able to choose whether you want the cash electronically or by check.

Alan at ELM Capital can help you sell your real estate note. He will review your data and give you honest feedback on what you can expect from your mortgage note.