A company that purchases mortgage notes and deeds of trust notes from individuals and companies is called a mortgage note investor. Sometimes the term note buyer can be used interchangeably with note investors, but note brokers often refer to themselves as buyers. Note investor is a company that buys notes on the market using its own money.
From small businesses like Seascape Capital, to larger entities that are affiliated with banks and other financial institutions, note investors come in all sizes. Note investors in the United States purchase notes either nationally or in specific states.
Why work with a note investor?
Note holders can benefit from the expertise of a competent note investor to help them understand the strengths and best ways to sell their note. Note investors who are experts in the field can explain the process and help you understand why a note is priced differently. They also know what to expect at closing. These note investors are experienced and can answer any questions you may have.
What to Look for in a Note Investor
Like any other profession, not all note investors are the same. It is crucial to choose the right company first, as most holders only sell one note per lifetime. Here are some things you should look out for:
They must have been working full-time for note investing for at least five year.
A company should have positive reviews from the Better Business Bureau as well as search engines. What are the complaints against the company if it doesn’t have positive reviews?
Do you see any negative reviews on rating websites, or state government sites for real estate?
It’s a good idea for a company to be licensed in at least one state. While licensing is not mandatory in all states, having a license shows a greater level of dedication to your business.
You want to make sure that the person you speak with on the phone is trustworthy, competent, and customer-oriented.
What a Note Investor Sees
Each mortgage note is unique and prices will differ depending on the differences. These are the key elements that note investors consider when calculating risk and the likelihood of default.
1. Types of property
Owner-occupied houses are the most secure type of property. Unimproved, raw land can pose a risk, especially in rural areas. There are a variety of land parcels that can be used for commercial properties, mobile homes, or improved.
2. Payer Credit
Credit score and credit history can be used to predict the likelihood of default in the future or regular late payments. Note holders will get better offers if the payers have higher credit scores or have personally guaranteed the note.
3. Equity
Property equity is the sum of the down payment, monthly payments and any increase in property values. As a buffer, note investors want to have more equity.
When pricing a note, note investors should also consider the location and condition of the property, the terms and how the property is being used.
Why work with a Note Investor?
Working with a note investor, or broker, has its advantages. A note investor works directly with the company buying your note. There is no intermediary. Note brokers can help you get a better deal because they have connections with many investors.
ELM Capital combines the best of both. Seascape Capital not only buys notes but also works with outside investors in order to obtain other offers. Seascape will offer you a higher price if it receives more from outside investors than it can.
ELM Capital brokers 1st-lien note transactions in all 50 states. Seascape Capital buys both mortgage notes in full and in sets. Seascape can help with business notes if a company uses owner financing and has little to no real estate.