Sell My Mortgage - How Do I sell my mortgage note?
A simplified and transparent system to sell your mortgage note is outlined below. Today, a person or company receiving loan payments has the option to sell a mortgage note for a lump sum of cash instead of keeping the loan over several years in the long term. Depending on your capital needs, you can choose to sell everything or only a portion of your note. We will dig deeper into the sales process and thoroughly discuss all of the options and pricing variables below.
I need to sell my note now, how fast can I get a Cash Offer
If you sold your home or business with seller financing also know as owner financing, they is a good chance you created a private mortgage note and a trust deed to secure the promissory note.
There are many parameters that a note holder needs to be aware of when trying to sell there mortgage note to a a note investor or via a note broker.
What is my Real Estate Note's market value?
How is the market value measured by the sale to a note lender on the secondary mortgage market of a real estate receivable? This is a topic in this industry that comes up several times a day. When calculating the value of a real estate receivable for sale, several primary and secondary variables come into play. Here is a list of goods that should be known to sellers when bringing their asset(s) to market:
Down Payment Amount
When determining the actual value of a promissory note for sale, this piece of information is at the top of the list for buyers. This variable determines how much money one can get and determines if the seller-financed loan can even be sold at all. When you sell a property and build a promissory note, the more cash you receive as a down payment, the more likely you will see interest in marketing that asset down the road, plain and simple. The down payment determines how much equity the borrower has in the property (referred to as Loan to Value or LTV), thus deciding how safe the loan will be as an investment in a lender portfolio.
Borrower's credit score
When pricing a note out for purchase, ninety percent of the time, credit score comes into play. When selling the asset to an investor, the higher the borrower's credit score making payments, the higher the seller's chances related to many deals. If you intend to create a mortgage loan to sell to an investor, it would be prudent to check the person's credit buying a property from you. Many sellers make the error of not pulling credit upfront. They discovered that the individual making payments has credit so bad that the note can not be sold at all, months or even years after the loan is made.
Terms of Loan and Amortization
The terms of the loan and the amortization are essential factors in deciding what your asset can sell when placed on the market. It is long and short, as follows:
Interest rate-The interest rate is a crucial mechanism for deciding how much money one would gain if an investor were to sell a real estate bond. The interest rate should represent the risk that a seller takes in the first place by seller-financing the land. When the asset is sold, the greater the interest rate, the larger the lump sum payment.
This is another significant factor in deciding the amount of money that one will earn while selling notes to an investor. Amortization/Payback Period. The more you prolong the installments over time, the less cash you can receive when a seller-financed loan is sold. The shorter the payback period, the more money you are going to get. To clarify, for note offerings, a 30-year payback period (with no balloon) is not perfect. If you are trying to get the best dollar for your asset, you can do the worst thing. The best thing you can do if you plan to sell the note you make to an investor is a 10-year payback period (with no balloon). To earn top dollars for the asset you offer, it is often advised that you strive to remain between a 10-year and 15-year payback period (or amortization).
Balloon payments are seen by some buyers positively when selling real estate notes and by others as too risky to purchase. It is proposed that balloon payments be avoided entirely with the current legislation that affects balloon payments in seller-financed notes (Dodd-Frank Wall Street Reform Act). If you wish to include a balloon payment inside the state where the property is located, you will have to hire a licensed mortgage originator. We do not mind balloon fees, as when we purchase mortgage notes, they do not make a big difference in pricing.
Personal Guarantees (Important ONLY if the creditor is a company)
If you sell your property (and make a note) to a business that is not publicly listed on the stock market, a personal guarantee only comes into play. Suppose the company is a private S-Corp, C-Corp, LLC, LP, or Trust. In that case, it is advised that one of the company's officers obtain a written personal assurance to ensure that payments are continuously made if the company is no longer able to make the payment. When you sell to a corporate borrower, not having a personal guarantee will cause you to earn tens of thousands of dollars less than the bid you receive. It is so necessary! Again, if you are going to receive payments from a private company, it is only. If the borrower is a private citizen, a personal guarantee is not required.
Payment History and Seasoning of Loan
At least 6 - 12 note payments should have been collected to earn top dollar on your mortgage loan. If there are less than six months of payments made, we will still buy the loan, but you do not get absolute top dollar. It is also proposed that you receive all payments by check, direct deposit, or money order from the borrower. Always make photocopies of your documents if you intend not to deposit checks or money orders into your bank account. Owing to lousy borrower loans or lack of equity, payment history is generally the cornerstone of a loan sale (or both). Keep producing copies. If you work as a lender on a receivable property, it is an excellent practice to get into it.
Your original mortgage records are still treated as cash. The reasoning for this is that they are just that, an IOU. If you lose or misplace your original promissory note, since most states do not include them in the reported databases, you can risk not being able to sell the note at all. The paper is similar to a car's pink slip. The new owner can not legally take ownership of it if you attempt to sell a vehicle without a pink slip. For mortgage note assignments, the same rings true. When selling your loan on the open market, the cleaner the documents you hold, the simpler your sale will go.
Using a Title Company to close the sale of property
When selling your property and making a notice, it is often prudent to use a title company or an attorney's office to ensure that the correct protocol is taken when moving real estate to a creditor. Using a title insurance policy, the title insurer will guarantee a simple title, which is quite essential. According to your particular jurisdiction laws, the title company will also take care of the promissory notice and protection instrument's language. In the end, trying to save a buck by cutting this corner would bite you always. It is not worth it, and down the road, it makes for a sloppy loan sale. Often, everything can be counted and presented on a HUD-1 or Settlement Statement when cash exchanges hands concerning the down payment, proving that you received money on the down payment.
Selling Options when a mortgage note is sold, How to sell mortgages?
There is a wide variety of options available open to sellers who plan to take their debt instrument to market:
Complete Purchase Buy-Out
A full purchase buy-out is when a seller of a mortgage asset sells the whole note, earns the most money available up-front (determined by the asset's characteristics), and then has no more liability or servicing obligation whatsoever. This then leaves the seller to go on with their financial goals.
A Split Buy-Out is the complete purchase of the note in 2 or more lump sum levels. It typically consists of a lump sum at the sale closing and then scheduled lump-sum payments at subsequent dates before the sale is complete. A note sale is generally broken up this way for several reasons, but the most common is the borrower's poor performance and property market securing the asset. This choice is also a winner for sellers looking to minimize the tax liability exposure in any one given fiscal year.
Reverse Partial Buy-Out
A reverse partial buy-out is acquiring a portion of a note, but the investor does not start collecting until a later date. For instance, a seller may obtain a lump sum of cash at the sale's closing and then continue to collect payments on the said asset for a specified period. This would allow the seller to benefit from the interest received on the payments and the lump sum they received previously at the sale's closing. The investor would then begin receiving fees, usually through to maturity, at an agreed-upon future date. In certain extremely unusual instances, after the lender has completed its allocated portion of the compilation of such payments, the note will be reverted to the original seller and an additional date down the line.
How to Sell a Mortgage Note
The necessary steps to selling a mortgage note are as follows.
Collect all the information you want to sell on the mortgage note
Provide the purchasing agency with the information for a free quotation
Decide if the amount offered is right for you and continue the deal.
The purchasing firm will conduct the process of diligence and signing.
The purchasing agency will finance the transaction that receives its cash from the note seller.
I want to sell my mortgage notes, but where am I going to start? For the note seller, the method is relatively quick. Ensure you have all the correct details to obtain a mortgage note quote before beginning the note selling process. This will include the house's address, the loan's size, the interest rate, the payback period, and the homeowner's creditworthiness. Please feel free to contact us and talk to a live person to answer your questions directly if you are not sure or miss any details about the note for sale.
Depending on the state/property venue, local assessors' availability, the title companies' availability providing the title search, etc., this whole method of selling a mortgage note can take anywhere from 15 days to 30 days. We pay for ALL of the costs associated with your mortgage asset acquisition, including valuation, BPO, and title fees.
How to find the best note buyer for your mortgage note
You know the steps of selling your mortgage note now, but you might still be wondering how to sell cash for my real estate note and find the best buyer.
Gauging the offers of various buyers for your note is incredibly critical. After all, a mortgage's value is not static; it can adjust along with fluctuating national interest rates from day today.
Besides, you should ensure that the mortgage note-buying company with which you work has specific characteristics that will make you feel comfortable offloading your note.
Trustworthiness should be the first and perhaps the most significant attribute. Nobody wants to get involved with a business that appears to be trying to cheat them out of something, be it cash or a chance. Without trying to get you to sign something first, a successful mortgage note-buying company can give you a quote for your note. In this same way, consider that a reputable mortgage note firm will review the mortgage note itself to ascertain its value; if a company is looking at you, the seller, and your credit history to evaluate the value of your note, it is possible that the company is not trustworthy. The buyer's credit score told the conditions of the note. It should make your history meaningless.
Another thing to bear in mind is that at full price, or 100 cents on the dollar, note buyers usually do not purchase mortgage notes. In buying your note, businesses bear their own expenses, such as valuing your property and looking for its title. Somewhere, they will want to recover these expenses, and the best way is by discounting your mortgage note's price. Beware of businesses, however, that try to lowball you on your note
How to find the best mortgage buyers to buy your promissory notes
How can I say if I have found the right company to purchase my note?
If you are dealing with a "real" and knowledgeable mortgage note buyer who will treat you equally and give you the best price for your note, there are several ways to decide.
To bear in mind, here are some things:
Does it appear professional to the customer you've contacted? Do they make up for themselves in a professional way? Do you trust this person's ability to help you get the money needed when your asset is sold?
Direct Note Buyer vs. Note Broker
Is the business or person you deal with a direct note buyer or a broker? It is not wrong to deal with a broker as many are worth their weight in gold. That being said, dealing with a direct buyer means, depending on the note in question, you're likely to save money on the broker fee that may vary between $2,500 and $10,000. Working with a direct buyer will make sure you always get the best possible bid. Working with a good broker means that you need to do less work in pursuit of a quote. Many sellers choose to work with a direct funding source, such as the Amerinote Xchange team set up here.
Is there a Stronger Business Bureau Accreditation for the organization you are working with?
You go with the gut. Do you believe there's an up-and-up company? Does it sound as if they know what they're talking about? Hightail it out of there if your intuition tells you otherwise.
It is a fact from our deep experience and in-depth knowledge of the secondary market that the difference between the financing of a note deal and the exceeding of one's financial and customer support standards all comes down to the unique source of funding you use. When selecting a mortgage note purchaser, money is the first determining factor, but if the service you offer lacks quality and effectiveness, what is the point of wasting your time?
When buying real estate notes, what do investors look for?
Both mortgage buyers have an investment appetite of their own, which is determined by the risk tolerance of the lender. There are no fixed note buying conditions in the secondary mortgage market that all note buyers obey.
It will determine what a mortgage note buyer will expect when purchasing a real estate note for their portfolio, depending on whether you are buying performing mortgage notes or non-performing mortgage notes.
Most mortgage note buyers are interested in three main things while carrying out notes:
Score of Credit
Structure of loans
On non-performing notes, the majority of buyers are searching for:
Value for Existing Property (Market)
Foreclosure Procedures inside the State of Property
Last Payment Received/Applied by Borrower
This is something that, when selling a mortgage note, all well-informed noteholders should know. For a note buyer, it all comes down to one big thing—RISK! This is something that when they decide to sell mortgage loans, a vendor can bear in mind. Danger of non-payment, risk of default by the creditor, risk, risk, risk. Regardless of who you want to sell mortgage notes, all (smart) mortgage note investors will first look at the down payment or equity of the asset in the real estate.
The equity in the collateral determines the soundness of the loan as an investment. The equity dictates the protection standard of the loan. The higher the risk, the less a note buyer is worth the loan. A good rule of thumb is: the less cash one receives as a down payment, the less cash the note is worth on the secondary market to a note buyer. The answer is a large loan-to-value (or LTV).
A bad down payment is 0 percent to 9 percent, a fair down payment is 10 percent to 14 percent, a strong down payment is 15 percent to 20 percent, a big down payment is 21 percent -30 percent and an excellent down payment is 31 percent or more, just to explain.
The very next thing all note buyers look at is the credit score of the borrower (Equifax Score, Trans-Union Score, and Experian Score, also called a Tri-Merger).
- A bad credit score is 600 or lower,
- 601 to 675 is a decent score,
- 676 to 720 is a good score,
- 720 to 780 is a great score,
- and 780 or higher is an excellent score.
Most note buyers can only go down to a credit score of 600, while we will go down to a middle-score of 500 FICO. The rest of the note's equation would really differ between the buyers after the credit factor.