Prior to selling your property or business with owner financing, you may have never heard of a mortgage note or known that you could sell such a note to a private note buyer. Most who sold a property used an attorney or title company to create the mortgage note and related documents.
Now that the note has been created and you have started receiving regular payments, you have a choice to make. Should you hold on to the note for many years and manage the possible default, insurance, and property issues involved? Or, should you contact a note buying business that is knowledgeable about buying mortgage notes and managing them? The down payment is a key factor in determining the price and terms of the note, making it an important detail assessed during the evaluation process.
Understanding Private Mortgage Notes
A private mortgage note is a financial instrument that represents a loan secured by a property. Essentially, it is a contract between the borrower and the lender, detailing the terms of the loan, such as the loan amount, interest rate, repayment schedule, and any collateral involved. Private mortgage notes are commonly used in real estate transactions, especially when traditional financing options are not available to the buyer. These notes can offer a steady stream of income for the lender, but they also come with certain risks, such as the possibility of the borrower defaulting on the payments. Understanding the intricacies of private mortgage notes is crucial for anyone considering holding or selling one.
Benefits of Selling a Private Mortgage Note
Selling a private mortgage note can provide significant financial benefits. One of the primary advantages is receiving a lump sum of cash, which can be used to pay off debts, invest in new opportunities, or simply provide a financial cushion. Additionally, selling a private mortgage note transfers the risk of borrower default to the new owner, relieving the original note holder of the responsibility of managing the note payments. This can be particularly appealing for those who prefer a hassle-free and quick transaction. The process of selling a private mortgage note is often straightforward and can be completed relatively quickly, providing immediate financial relief and peace of mind.
Contacting and Choosing a Mortgage Note Buyer
There are hundreds of mortgage note buyers and note brokers in the U.S. These private note buyers market themselves via the Internet, direct mail, or other mediums. A very small percentage of them have the competence, experience, and integrity that you should demand.
To help you screen out the bad actors and find the best company, look for these elements in a private note buyer:
- Experience—Has the note company been in the note buying business full time for at least five years? A more experienced mortgage note buyer will be better able to manage the process, solve problems, and get you the best pricing for your note.
- Licensing—While most states don’t require licensing to broker or buy mortgage notes, a real estate broker license demonstrates a higher level of knowledge and commitment. If the property that you sold is in California or other states requiring licenses, you can avoid future issues by using a licensed company.
- Trust And Service—Look at online reviews on search engines and on the Better Business Bureau site to validate the trustworthiness and service level of the private note buyers. If the note buyer’s BBB grade is less than A+, find someone else.
- Good Feeling—While this one is more subjective than the ones above, listen to your heart and your gut to see whether you are comfortable with the person at the other end of the line. Do they seem like they will do what they say, do they answer your questions thoroughly, and do you feel that you will be treated right?
About Seascape Capital
Seascape Capital is a reputable note buyer and broker with over 20 years of experience in the industry. Our team is dedicated to providing fair market value for notes and guiding sellers through the process with transparency and communication. We ensure that our clients are informed and comfortable every step of the way. At Seascape Capital, we pride ourselves on our expertise in the note buying industry and our commitment to providing exceptional service to our clients. Whether you are looking to sell a mortgage note or need advice on the process, Seascape Capital is here to help you achieve your financial goals.
The Mortgage Note Selling Process
Once you have decided to sell a note and have chosen the best mortgage note buyer, there are steps that are common in most note sales:
- You and the private mortgage note buyer agree on a price that will be paid for your promissory notes. Often, the note buyer will have provided you with the option to sell all of your note or to just sell some of the payments (called a partial).
- Private mortgage note buyers specialize in purchasing promissory notes secured by real estate. You will be asked to sign an agreement and to send copies of relevant documents like the note, mortgage, and settlement statement. Never send over original documents at this stage of the process.
- The mortgage note buyer will quickly review the documents, and will order a drive-by appraisal and a title search. In almost all cases, the note buying company will pay for all of the normal expenses.
- The appraisal and title will usually take 1-2 weeks, and will be reviewed and approved by the note buyer upon receipt.
- You will sign documents assigning your note to the company buying the mortgage note.
- Within 1-3 business days, you will receive the funds via wire or check. From start to finish, the process takes 3-5 weeks.
Next Steps
If you have decided to sell your note or even have questions about it, please call Alan at Seascape Capital at (858) 208-7776 or complete the mortgage note application. Mortgage note holders often seek buyers due to various financial motivations. We look forward to talking with you!
