New York foreclosures generally go through the courts, which raises a buyer's cost of default and thins the field of bidders. We look for the buyers who do bid here and show how each offer was built.
Why the first offer on a New York note can be a poor one.
The same worksheet comes with every offer.
| Remaining balance | $129,400 |
|---|---|
| Payments left | 168 |
| Buyer’s target yield | 8.0% |
| Purchase price | $115,000 |
| Discount from balance | 11.1% |
| Our fee | shown on every offer |
| Sell the whole note | Sell 60 payments | Keep it | |
|---|---|---|---|
| Cash today | $115,000 | $56,200 | $0 |
| Payments still coming to you | None | 108 payments of $1,140 | 168 payments of $1,140 |
| Total you receive | $115,000 | $179,320 | $191,520 |
| What you give up | Every future payment | The next five years | A lump sum now |
Illustrative example. Totals add up the payments as scheduled; they assume the payer keeps paying and are not adjusted for the value of money over time.
The promissory noteThe mortgage or deed of trustA payment historyThe closing statement from the saleNew York notes split along the same line as the state. Downstate, in the boroughs outside Manhattan, on Long Island and in Westchester, sellers have carried loans on small apartment buildings, on mixed-use buildings with a shop below and flats above, and on houses sold inside a family. Property there costs more, so the balances are larger than upstate.
In Buffalo, Rochester, Syracuse and the Albany area, investors have sold older houses and two-family homes on terms. In the Catskills, the Adirondacks and the Finger Lakes, the note is more likely to be on a cabin, a lake property or acreage.
New York commonly uses a mortgage, a document that gives the lender a lien, or legal claim, on the property. A foreclosure generally has to go through the courts, which is called judicial foreclosure, and a court case costs a lender more time and money than a trustee’s sale does in the states that allow one.
A buyer builds the cost of a possible default into the return they ask for on the price they pay. A court process raises that cost, with two results for New York notes: some buyers do not bid on them at all, and those who do look hardest at equity, the gap between the property’s value and the balance owed. A note with a large down payment and years of on-time payments still attracts offers.
With fewer bidders, one buyer’s number tells you less about what the note is worth, which is the case for asking several, and that is what happens when you request a price for your note from us. It is also a reason to look at selling only some of the payments, which leaves less of the buyer’s money exposed. A partial needs enough payments left and a payer with a steady record to be worth pricing, and our page on whether a partial beats a full sale sets out when it comes out ahead.
The state charges a tax when a mortgage is recorded, and how that tax treats an assignment or a change to the loan is a question for a New York attorney. A loan on a co-op apartment is a separate case. It is secured by the owner’s shares in the building corporation and the lease that goes with them, in place of a mortgage on real estate, so the paperwork is different and you should say at the start that the collateral is a co-op.
An ordinary mortgage is transferred with an assignment of mortgage, recorded where the original mortgage was recorded. Have a New York attorney or title company confirm how any of this applies to you before you sign, because the rules are revised from time to time.
Collect the note, the recorded mortgage and your payment history, and work out roughly what the property is worth today against what is still owed, because equity is the first thing a New York buyer will ask about. As an example, a house worth $300,000 with $180,000 owed has $120,000 of equity, which is 40% of its value. If you do not know the value, recent sales of similar property nearby give you a starting figure, and a buyer will check it for themselves in any case.
Foreclosure in New York generally goes through the courts, and a court case takes a lender longer than a trustee's sale. A buyer who would have to wait to recover a defaulted loan either asks for a higher yield or declines to bid. Buyers who know the state still make offers on notes with good equity and payment history.
Possibly, but it is a different kind of loan. A co-op loan is secured by shares in the building corporation and a lease, in place of a mortgage on real estate, and the building's board may have a say in transfers. Tell us it is a co-op at the start.
We cannot tell you that. New York charges a tax when a mortgage is recorded, and how it treats an assignment depends on the details. Ask a New York attorney or the closing agent before you sign.
It can be. In a partial, the buyer purchases a set number of payments and has less money at risk than in a full purchase, which is easier to price in a court foreclosure state. The note needs enough payments left and a steady payer for a partial to be worth pricing.