What’s Involved When You Sell A Note

2014 May 12
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The process of selling an owner financed real estate note is pretty simple. You first request a quote from us. If you like the quote, you provide us a copy of the note, mortgage or deed of trust and borrower information. We then pull credit on your borrower to see if it works with our quote. We then order an appraisal or BPO (Realtor estimated value). If the value is sufficient, we then order title and then close by overnight delivery. The whole process can take 2 to 3 weeks. You can also sell a commercial note. The process is similar, although we generally close commercial notes much faster. Call us at 1-877-655-5625 for a quote to sell a note.

You also can sell a partial note where you can sell a certain number of payments. This usually is a better deal, particularly on notes with long amortization periods (25-30 years). In these partial note purchases, note buyers take possession of the note (original) and security (Deed of Trust or Mortgage). Once the payments purchased are satisfactorily made, note buyers turn the note back to the note seller.

Lastly, we are land contract buyers. So if you need to sell a land contract, we can help. 1-877-655-5625. Ask for Ron.

 

Sell My Mobile Home Park Note

2013 August 1

Can I sell my mobile home park note? Very likely. While there are some issue with selling a mobile home park note, you nearly always can sell a mobile home park note. One issue that buyers of mobile home park notes might be concerned with is the case where the borrower is a corporation or an LLC where there is no personal guarantee. While this is not usually a deal killer, it could effect the price, particularly if the mobile home park mortgage buyer makes a full offer. This is of much less concern if you want to sell a partial mobile home park note. For pricing information when selling your mobile home park note, see the below general note pricing info. Call today and ask for Ron Stone at 1-877-655-5625. We’re available 7 days a week.

Sell a mobile home park note

How Does Note Discounting Work, aka What will the Discount Be When You Sell a Note?

If you are thinking about selling a note and have done much research, you probably know by now that the industry purchases real estate notes at a discount. You’re probably wondering what the discount on selling a note would be.  Actually, it varies a lot. Below are just some of the variables, although they are big ones.

First, every note buyer has his or her own set of return targets, some significantly higher than the industry average. Secondly, the actual discount rate on a note is set based on the perceived risk of that particular note. Third, there is the pure mathematical calculation for the discount. Allow me to explain.

Let’s use a discount rate of 10% to calculate a purchase price of 3 theoretical notes. Please understand that a 10% discount rate does not mean you take the balance of your note and take 10% off of it for a price. What it means is you use that rate to “discount” the future payments, calculating the net present value of your future income stream. The key thing to remember is the further out you have payments, the larger the discount will be. Below are the three examples. All Notes assume an original balance of $100,000 and that 2 years of payments have been made.

 

Note #1 – 8% interest and an amortization period of 15 years. The payment is $955.65. The current balance is $92,505.69. Applying the discount to the remaining 156 payments, you get (before closing costs which are handled differently by each note buyer) $83,255.70.

 

Note #2 – 8% interest and an amortization period of 30 years. The payment is $733.76. The current balance is $98,259.94. Applying the discount to the remaining 336 payments, you get (before closing costs which are handled differently by each note buyer) $82,634.77. Notice, despite there being a lot more payments, the price is lower.

 

Note #3 – 6% interest and an amortization period of 30 years. The payment is $599.55. The current balance is $97,468.24. Applying the discount to the remaining 336 payments, you get (before closing costs which are handled differently by each note buyer) $67,519.90. That’s a huge difference due simply to the math calculating the discount on a note.

 

 

 

Owner Financing Musts

2013 July 27
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Here are a few things you want to do when you owner finance the sale of your home or commercial property.

  1. Don’t be shy about the terms. Charge an above market interest rate. I would shoot for 7 or 8%. Set as short an amortization rate as you can. Also, get as much down payment as you can, even if you have to give some on the interest rate.
  2. Check credit. Even if the buyer doesn’t have great credit, you can still offer the owner financing. Poor credit will help you get better terms. Just keep in mind that if your buyer has very poor credit, you may not can sell your note.
  3. Find an attorney knowledgeable in not just real estate but in owner financing transactions.
  4. If you are selling a commercial property and the buyer is buying through a corporation or LLC, get personal guarantees.
  5. No side agreements.
  6. Be sure the Mortgage, Deed of Trust and Note are recorded immediately after closing.
  7. Have your buyer pay for a Lender’s Title policy.
  8. Be sure they have a paid up homeowners insurance policy at closing listing you as the mortgagee.

That about it. If you want to sell your note shortly after closing, check with me before finalizing the terms. We are no seasoning note buyers. You can often sell a note with no seasoning. However due to banking regulations, we require one payment to be made. We are available 7 days a week at 1-877-655-5625. Ask for Ron.

Hows A Private Note Buyer Computes The Price They Pay

2013 July 10
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For starters let me state the apparent. If you sold a house or commercial real estate and are holding the owner financed note  for the purchaser, you have a precious financial asset that can be marketed. This as any other financial asset has a risk and a value (value of the future stream of income ) that you can sell to other individuals or purchasers. Or if you own a home you need to sell, you can offer owner financing to get top money for the house, sell the home and then you can sell the mortgage note you are holding in a concurrent closing for an immediate payoff.

Many mortgage buyers present the note buying process a mystery. And while not every mortgage private note purchaser has the identical requirements just like a stock mutual fund there are 5 principal elements that affect the value they will pay for a owner financed note. I have listed them below.

These factors include:

1. The the amount of equity the buyer has in the property as determined by on its appraised or estimated worth or sales price. The higher the equity, the greater the purchase price as there is a smaller amount  risk for the purchaser.

2. Seasoning on the mortgage, meaning it’s been around a good while. In this instance private mortgage  investors are for the most part looking for a good payment history. These buyers desire to see that the mortgage  is being offered and the longer the time period, the better. (Risk)

3. The rate of interest on the private note. The higher the interest rate or spread as compared to a benchmark such as the ten year treasury, the greater the price offered. Mortgage note sellers should be keenly aware of this factor for their asset. If, as many gurus forecast we go into a time of significant inflation due to all the government spending, the value of their private note could fall significantly. (Time value of money.)

4. The time left on the note (or balloon period). While this will impact the value, many mortgage investors like lengthier periods than others. (Due to the time value of money)

5. The credit quality of the borrower. Most mortgage note purchasers have established minimum credit score requirements in order to buy a mortgage. Additionally, these private investors will want to evaluate the buyer’s credit report for its history, recent bankruptcies, etc.

Mortgage note buyers will usually add a sixth issue, the size of the purchase outlay  (Risk). The higher the dollar exposure, the less liberal they will be on credit, the amount of seasoning, etc.

One final word about note seasoning requirements, in particular as it pertains to the sale of a note through simultaneous closings. Obviously, selling a mortgage note formed from the sale of a residence results is the lowest period of monthly seasoning required for a note. And while this would cut the price a note investor is willing to pay, if there is a respectable down payment or combination of a good down payment and the seller is willing to hold a second mortgage, this type purchase can be a very nice deal for the home seller. This is due to the residence seller 1) Being able to sell the home much earlier, 2) Usually being paid top money for the home and 3) Not having to pay sales commissions. One more thought. You can also sell a land contract with an underlying mortgage. You just need to be sure the price is high enough to pay off the existing mortgage.

So there you have it, private mortgage note or mortgage selling revealed. I hope this was enlightening.