Real Estate Note

You might have heard that your mortgage note, also known as a real estate note, can be sold for cash. The cash can be used to pay down debt or make investments. It is important to understand the process and how private mortgage buyers can help you get a great deal if this is something you are thinking about.

We discussed in the previous article how to structure a real property note to maximize its value. Let’s assume that you have now set up the note, received at least one payment form the property buyer, now you need to call Seascape Capital, a real estate note buyer, to sell your mortgage note.

Most note sellers consider selling their entire mortgage note. You may consider this option if your financial situation is favorable and the note is likely fetch high values.

You should understand all options before you decide on the best one. Note sellers may not like the interest rate they receive on their note but want some cash immediately. What can you do if your note does not meet certain criteria to be sold at a high price? Good equity and strong buyer credit. You can sell some of the payments, which is often a good idea. This is known as a partial and can often result in a higher rate of return.

Example of a partial

Here’s an example. Let’s say you sell a house for $120,000 and the buyer gives you $20,000 for a down payment. You then have a $100,000 note with 7% interest for the next 15 years (180 monthly). While you enjoy the monthly income, $30,000 is needed to make another investment or pay off debt. In exchange for purchasing the next “x” amount of payments (for example, 60 payments), we could offer you $30,000 and then the note will revert to you for the remaining term.

You can also structure your note in other ways that suit your needs. For example, you could get a lump sum now and then receive a portion of each monthly payment. This is known as a split-payment partial. You can ask a knowledgeable note buyer for more information about the various options available.

These items are only applicable to 1st lien liens. You may be able sell the note if you have a second lien. This is where a bank or other investor has a higher senior lien on the property. However, the price you get will not be as high. These types of notes are generally not available for sale at a decent price unless the buyer has contributed at least 30% of his money or built-up equity.

Getting Started

You have now received quotes for both a complete buyout and a partial purchase of the note. Now, you can choose the one that suits your needs. Note purchasing is not regulated in all states. You need to make sure you work with a reliable broker or investor. These are some of the things you should be aware of:

There should be no upfront fees. A buyer of ethical notes won’t charge you for providing quotes or checking the buyer’s credit.

No closing costs, points or other fees should be added at any stage of the process. All fees are already included in your pay price.

Note buyers might require you to pay the appraisal and the title policy if the property appraises below the sale price or if there are any problems with the title. These payments should not exceed the actual cost of the buyer.

You should ensure that you receive a written agreement from the note investor that covers the purchase price and contingencies. Ask questions if there is anything unclear.

Make sure that your note investor checks the credit history of the property buyer before you sign any contracts. Unscrupulous buyers have been known to quote one price, then lower it towards the end. Often they use the excuse that the property buyer’s credit is low. This “bait-and-switch” approach is not legal or ethical.

What are the steps to selling your note? It is easy and straightforward.

Please contact us to provide basic information regarding the note and property (type, sale price, payment amounts etc.).

Your offers will be responded to within one business day

We ask that you send us copies of the mortgage deed, note, settlement statement, proof of payments and the Deed of Trust or mortgage if you accept the quote. We need to verify the buyer’s credit history and do our due diligence. We arrange for title and appraisal policies if there are not.

It usually takes between 3-5 weeks to receive your money once you have approved the quote and provided the documents. You have the option to receive your cash electronically or by check.

A great way to get a lump sum is to sell your note. We are available to answer any questions you may have.

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Commercial Real Estate Note ApplicationSelling Your Real Estate Note