Tag Archives: debt

Selling a Real Estate Note 101: Can I only sell part of my mortgage note?

Can I Only Sell Part of My Note?Selling a mortgage note (also called a real estate note or promissory note) can be confusing, especially if you are a first-time note holder and have never worked with a note buyer before.  This “Selling a Real Estate Note 101” series is designed to be a resource for those people.

In a previous post, we covered the common reasons why people sell their mortgage notes and how that process works. What we haven’t addressed yet, however, is the option to sell just part of your mortgage note (also called a partial). Here are some of the common questions about partials.

Why only sell part of the note?

  1. In tough economic times, the note seller may not be able to find a buyer for the full value of the note (or the seller would have to take a bigger discount). For more information on how the value of a note is figured, please read What is my mortgage note worth?.
  2. Sometimes the seller only needs a small sum of cash for a particular purpose (college tuition, unexpected medical bills, to reinvest, or pay down debt, for example).
  3. Selling a partial note provides the seller with immediate cash flow now while getting the note back in the future (once the partial sale’s terms have been fulfilled) to collect remaining scheduled payments.
  4. The seller also gets the flexibility to sell another part of the note at a later time, if they wish.
  5. A partial note sale will often yield the seller more money for their note in the long run.
  6. Another advantage to the partial note seller may be the delay in some of the capital gains taxes.
  7. It is easier to find a mortgage note buyer since buying a partial note is considered a less risky investment.

How does a Partial work?

  1. In a full note sale, the buyer purchases the entire amount of the note, meaning all of the remaining payments. In a partial, the buyer agrees to buy part of the note, usually in the form of a specified number of payments (e.g. 60 monthly payments), or a specified amount of the balloon payment. There are even partial sales (called a split partial) where the note seller and note buyer split the monthly payments. For more information on the different options for partial note sales, please contact us.
  2. Typically, note investors require a minimum note balance of $50,000 before they will consider investing in a partial note.
  3. The process of selling a partial mortgage note is very similar to selling a full note. Please refer to our post on Should I Sell My Mortgage Note? for more information on the process and paperwork required to get started.

The bottom line is that a partial can be a win-win when it reduces the amount of discount the
seller takes and makes for a more secure investment for the buyer. To talk about your options
with a partial sale or just have your questions answered, please give us a call.

Next week, we will be covering more important tips for selling a mortgage note. Please
comment below to let us know if you have found this information helpful or if you have been able
to share it with someone who has. We invite any and all feedback!

Selling a Real Estate Note 101: Should I sell my note and what is the process?

There is a lot to consider when deciding to sell a real estate note (also called a mortgage note or promissory note). Last week we answered the question What is a mortgage note?. Here we take a look at some of the common reasons why people may want to sell mortgage notes and walk you through how to sell a note.

Should I sell my real estate note?

Let’s be honest- this is a personal question that only you can answer. What we can do is give you important information about selling a real estate note to assist you with making the best decision possible for you.

Some of the common reasons why people choose to sell a mortgage are:

  1. To receive a lump sum cash payment (often for the purpose of paying off unexpected expenses such as medical bills, tuition, or large purchases, or to make other investments or reinvest at a higher interest rate).
  2. To eliminate the burden of managing payments, insurance, and taxes.
  3. To simplify their estates for their heirs, or in the event of a divorce.
  4. Additionally, selling your mortgage note (or deed of trust note) frees you from worrying about default and foreclosure, bankruptcy of the payor, or the property becoming devalued.

How do I sell my mortgage note?

Once you have decided to sell your mortgage note, you can take the first steps in the process of
selling a note.

To save yourself time and frustration, we recommend that you start by gathering the paperwork and information you will need to provide to prospective note buyers. This will include: knowing the sales price, any lien information, current payment terms and type of payment, and a detailed description of the property. If selling a commercial note, you will also need: leasing information, zoning information, and the environmental history of the property. This will facilitate the process of getting a quote.

Next, you will want to find a mortgage note buyer. It is a good idea to contact several note buyers to establish a comfort level, ask questions and get mortgage note quotes. It is especially
important that you find a trusted note buyer whom you find to be a valuable resource and operates on a high level of honesty and integrity (which we will cover in more detail later in this series).

Every note buyer has their own process, but most should be able to quote you a purchase price and conditions of the sale within two business days or less. Remember, getting a quote does not obligate you to sell to that buyer.

If you are still feeling confused about whether selling your real estate note is right for you, please give us a call so we can answer your specific questions. Next week’s topic will be on how note buyers determine the worth of a note. As always, if you have additional information
to offer or general questions you think others might have as well, please enter them in the comments below and we will be happy to respond.

We hope to see you next week.

Ill Prepared — Mortgage note investor

That a politician would think short-term and try to stabilize only current economic problems is to be expected, though pathetic.  However, I fail to understand why U.S. citizens are not making more noise about the country’s long-term financial problems.  Well, I guess that it is easier to understand when we can observe that a large percentage of Americans are infinitely more knowledgeable about TV reality shows than even basic economics.  When nearly half of the U.S. population receives some form of government support and see normalcy in the media and around their neighborhood, the country’s debt problems seem far away.

The U.S. has a national debt of nearly $1.5 trillion – about the size of our annual GDP – and has run deficits of over $1 trillion for the past three years.  We continue to have enormous entitlement programs that politicians are afraid to touch, are fighting two overseas wars, and in general have a population that is unwilling to suffer short-term pain to better the country’s long-term prospects.  Lots of people want the debt problem solved, but think that other parts of the population should pay for it.  The politicians and Fed continue to spew out programs destined to fail just to show that they are doing something.  The media latches on to any nibble of good news (retail sales up slightly, a few more people getting hired than the previous month, the stock market going up for the last two weeks, etc.) as signs that the recession is over.

Meanwhile, on the other side of the Atlantic, the Europeans are facing a mess, with many questioning how and if the Euro can survive.  Greece is one of several basket cases there.  In the fall of 2009, analysts at Standard and Poor’s figured out that Greece’s debt would increase to 125% of GDP in 2010.  A few weeks later, PIMCO, the world’s largest investor in government bonds (it lends money to governments by buying their bonds) sold all of its Greek bonds.  The following April, Greek debt was downgraded to junk status and it became clear that the debt of Greece would have to be restructured (a fancy way of saying that the country was bankrupt and that holders of their debt would suffer a nasty haircut).  In June 2010, the European Central Bank bought 25 billion euros in Greek bonds – the first installment is what would balloon to 150 billion euros in purchases of bonds from not only Greece, but from other troubled countries like Italy, Spain, and Portugal – in an effort to calm markets and stabilize bond prices.

The Euro countries have nearly doubled their combined national debts since 1997, in defiance of all of the original rules.  The 17 Euro nations now total 8 trillion euros in debt, while banks hold European government bonds with a face value of one trillion euros.  The future of the Euro is in jeopardy, and nobody knows for sure how it will all play out.  One certainly is that it is going to get ugly.

Both the U.S. and European debt problems have been known about for years, and were only exasperated by the recent recession.  Most of the key political leaders were aware of the problems long ago but chose to ignore them.  They acted in ways that seemed to help in the short term but wrecked the future.

Short-term responses to long-term solutions continue to this day.  From Fed bond buying practices to the administration’s constant giveaways, the debts get worse while the present shows little improvement.  I recently saw that a couple of politicians are proposing a “Home Act” that allows Americans to make penalty-free withdrawals from their retirement accounts to make mortgage payments.  The homeowner can tap his or her retirement account for up to $50,000 or half of the account value, whichever is less.  While this could perhaps help a small percentage of people, for most folks it would just gut their savings and only delay an inevitable foreclosure.

For the future, the current economic situation means more pain to the population.  Real estate prices will probably go down another 5% between now and the end of 2012, as people without jobs can’t buy houses and interest rates can’t get any lower.   Unemployment will most likely go up slightly while average household income (which decreased from 2000 to 2010) will decline further.  The stock market is the hardest one to predict as it is so irrational, but I expect a small boost to stock prices over the next few weeks and possibly months (mostly due to the European bailout), followed by a gradual decrease over several years.  Europe’s near-term problems are deeper than those of the U.S., so I would expect more pain there for the next few months and years as it tries to sort things out.  The U.S., which controls its own currency and will feel less pressure to act, will have problems that go out much further.

As I’ve said before, I advise people to invest conservatively, keep a rainy day fund, and stay current with the news.  “Dancing with the Stars” can survive without you for a couple of weeks.

Alan Noblitt is a mortgage note investor and note broker.  As a mortgage note investor, his company will buy mortgage notes on nearly any type of property and in most of the 50 states.