Michigan, our 26th state and one that borders four of the Great Lakes, has almost 100,000 square miles of land. Perhaps you owned a piece of that land, sold it using owner financing, and now wish to sell a Michigan note. You have come to the right place to learn the basic process and what to do.
When you sold the property – normally a house, commercial building, mobile home with land, or a vacant land parcel – you and the buyer created a note. The note can also be referred to by other names such as a promissory note, mortgage note, or real estate note. Regardless, the note states the interest rate, term, payment amount, date payments are due, and what happens if there is a default. Unless a land contract was used, the note is usually accompanied by a mortgage that makes the property collateral. The note or land contract should always be signed by the buyer of the property.
When the buyer has made a few payments, you may decide whether to sell a Michigan note or keep it. The risks of holding on to the note yourself include:
- Late payment or no payment at all (default)
- The buyer not maintaining the property, which directly affects the value of your collateral
- The buyer failing to pay the property taxes and fire insurance
- If you are elderly, the payments may outlast you, which can be a headache for your heirs
Selling the Note
If you would rather have cash now instead of waiting for the payments, be aware that you do not have to sell the full note. If you do not need all of the cash from the note, you can choose to only sell some of the payments (called a partial). Let’s pretend that the balance on your note is $75,000 but you only need $20,000 to pay off some debts. A Michigan note buyer could bring you various options, including one to vie you $20,000 in exchange for buying a certain number of payments. The process and paperwork for selling a full or partial note are nearly identical.
Once you and the note investor have discussed all aspects of the note and agreed upon a price, the process begins for selling your note. Here are the typical steps involved:
- You will be asked to sign an agreement showing what has been discussed and to send copies of documents related to the original transaction
- A processor at the note buying company will review the documents and ask any needed questions.
- The note buyer will order an appraisal. Most of the time, this will be a drive-by appraisal or broker price opinion, which are faster than a full appraisal.
- Next, the note buying company will order a title search to ensure that there are no other liens against the property and that property taxes are current. Taken together, this and the previous step usually take 2-3 weeks.
- Assignment documents will be mailed to you by the note buyer. You sign those documents and return them with your original note and mortgage.
- Within 1-5 business days, depending on the note investor, your funds will be wired to your bank account.
Seascape Capital has been involved in the purchase of a number of Michigan notes. Seascape has an A+ rating from the Better Business Bureau and is fully licensed in its home state.