While a commercial note has many characteristics in common with other note types, it has unique features. If you are considering selling a commercial note, you may already be aware that note buying companies generally consider the following notes to be commercial in nature:
- Notes on apartment buildings with more than four units
- Industrial notes
- Notes for mixed use properties, such as when a retail shop is downstairs and an apartment is upstairs
- Office building notes
- Special use properties including gas station notes, restaurant notes, mobile home park notes, church notes, etc. (we also do buy notes on auto repair shops and many others)
- May have multiple or varying uses
- Property value is often determined by income production or other factors not related to comparing it with similar properties in the area
- The note is more often signed by an LLC or corporation rather than by an individual
- More consideration is given to environmental concerns, zoning, usage, etc.
Getting the Best Price for Your Note
A commercial note buyer is generally able to give the best prices if the following are true:- Good down payment of at least 10-20%
- No other large liens or loans against the property
- Personal guarantee on the note rather than the buyer just signing as a member of an LLC or corporation
- If there is a personal guarantee, a strong FICO score above 650 will help
- Good pay history showing that the new owner can make full and timely payments
- The note collateral is mainly the property and does not include the business
- Additional factors like properly prepared documents, attractiveness of the property, the business performing well, etc.
Selling a Commercial Note
If you are looking to sell your commercial note, here are the normal steps that you would take:- Contact 2-3 note buyers that are knowledgeable, experienced, and well-reviewed by the Better Business Bureau or a comparable entity.
- Provide them with the requested information about the transaction, and await offers within 1-2 business days. You can expect to receive offers to buy the full note or just some of the payments.
- Once a price has been agreed upon, you will be asked to submit copies of the relevant documents and provide other information.
- The commercial note buyer will review the documents, order an appraisal, and later request a title commitment.
- Once the above due diligence is completed, you will be sent assignment documents from the investor, which you will sign and return with your original documents.
- After the assignment has been recorded with the county, the funds are wired to you. From the time that you send copies of the documents until you receive your funds is generally about 4-5 weeks. Since each note transaction is unique and commercial notes can be complex, the time period to close can occasionally go beyond five weeks.