If people are at all familiar with mortgage notes, they can probably figure out that a Minnesota mortgage note buyer is someone who buys owner-financed notes in the state of Minnesota. My experience from being in this business for over eleven years is that most individuals are not familiar with either of the terms of mortgage note or owner financing, so the term Minnesota mortgage note buyer would be a complete mystery. So, let’s first define the terms. A mortgage note goes by many names such as real estate note, deed of trust note, or just promissory note, all of which describe nearly the same thing. The note is created when a property like a house, a commercial building, or a piece of land is sold using owner financing.
For example, our fictitious property seller Steve is selling his Minneapolis condo to Becky for a price of $150,000. Becky had some financial issues a few years prior, so banks are not willing to loan her money to buy the condo. Instead, Becky offers to give Steve a $25,000 down payment and asks him to carry a note of $125,000 over a 30-year term and at an interest rate of 7%. Steve agrees to this arrangement and asks his attorney or title company to create the note and the other related documents. Once the transaction is complete and both parties have signed the appropriate papers, Becky will begin making principal and interest payments to Steve each month until the balance left on the note is zero.
Continuing this example, after Steve has received three payments from Becky, he realizes that he is paying a high interest rate on his credit cards and would be better served to pay off that debt rather than receive Becky’s payments. Steve would contact a note buyer like Seascape Capital to find out how to sell a note and the various options for doing so. They would then follow the process below to possibly sell the note.
A Minnesota mortgage note buyer is much the same as a buyer of notes in other states, and the process is identical. Here are the steps that would usually be followed:
1. The note buyer would collect information about the property and the financials from Steve.
2. The buyer would normally offer at least a couple of different options for buying the note. One could be to buy all of the remaining payments while another would be to just buy some of the payments (e.g. the next 60 payments).
3. Assuming that the price has been agreed upon, the Minnesota mortgage buyer would check the credit of the payer and send an agreement to the note holder.
4. Steve, the note holder, would fax, e-mail, or regular mail copies of documents relevant to the transaction such as the note, the closing statement, and the title policy.
5. The note buyer would conduct due diligence, which involves reviewing the documents, doing an appraisal, and obtaining a title commitment.
6. If everything checks out, the two parties would complete some paperwork for assignment of the note, and Steve would receive either a wire or a check for his note. Steps 4-6 normally take about four weeks from start to finish.
Finding a Note Buyer
While it is relatively easy to find a mortgage note buyer, it is much more difficult to find one that is trustworthy and competent to handle your note sale. A 2-minute video that provides insights in to getting the best buyer can be found at http://www.youtube.com/watch?v=VnHk01C5orMThe video discusses getting someone who interacts well with you, has the experience to know what they are doing, is accredited by the Better Business Bureau, and is licensed as a real estate broker. Most note holders only sell one note in their life, so it is important to do it right the first time.