Introduction

If someone close to you has passed away and named you as the Executor of their estate, then make sure you look to see if there are one or two mortgage notes in that estate. If so, it is then up to you to figure out what the mortgage note(s) are worth and what to do with them now that your loved one has passed.Navigating the unfamiliar world of note business, especially if it is sudden, contains a lot of pressure and puts a lot on your shoulders. So, you will need help—but luckily, with help, the process is not as difficult as it sounds.

In fact, the person who left the mortgage notes to you has left you an investment that you can continue to keep, or cash in and sell the note for money as one would a home.
We have worked with many Executors and through our experiences, we have learned that there are six main steps that have helped the most to simplify the mortgage note process. You can read about these six steps and download a note selling checklist.
So, let us briefly take a look at the first three steps and outline what you can do to make sure that the mortgage notes left to you are valued accurately and handled with professional hands.

1. Clearly Define Family Expectations

This is an important first step that precedes the actual note valuation process. It is crucial to clearly define family expectations. If you have siblings that are also beneficiaries on the estate, this is especially true—they own part of this estate too and must be consulted with and it is a good idea to get an idea of what everyone’s goals are for the mortgage notes in the estate. Perhaps one sibling wants to sell it and another, or perhaps you, do not want to sell.
These minor disagreements are common when it comes to beneficiaries and especially when more than one person is left as a beneficiary. However, we have also seen these disagreements turn into a full-blown family feud, so be sure to sit down or pick up the phone and make sure all of the beneficiaries named know what has been left to whom, what they want to do with the note, and what you want to do with the note. It is necessary to make sure that everyone is on the same page before proceeding further.

2. Become Familiar with the Note Valuation Process

If you have never held a mortgage note before, or never even heard the term, you are not alone. This seems like it would make selling difficult if you have slim or non-existent knowledge on the subject. You will hear terms such as loan-to-value (LTV), discount, seasoning, selling, splitting the note, and the term note, itself. Luckily, our guide to mortgage notes gives you an excellent starting knowledge of notes, what they are, how to sell them, how to keep and utilize them as investments, and what to do next.
The best way to familiarize yourself with the valuation process, is to seek the help of a professional who can guide you through this process. You want to seek out a note buyer or note broker, who will take the time to explain the whole process to you, answer any questions, explain how selling will benefit you, update you on current real estate market conditions, and your part in the process and what you can expect to receive at the end of it.
You can also read through our blog for tips and best practices for selling mortgage notes—advice and information that you can trust.

3. Consider All Options

Remember, you do not have to sell the full mortgage note. If a dispute does arise between beneficiaries about selling versus continuing to hold onto the note and receive the monthly payments (in essence, the ‘mortgage’ paid by the ‘payor,’ or home owner), you can consider a split payment partial.
With a partial, you can sell as much or as little of the note as you want. This could be the solution that may satisfy all of the parties involved if such a dispute comes up. Make sure that if you decide to take this route, to definitely get in touch with a note buyer or note broker, who can guide you and the other beneficiaries through this process.

There is no sure-fire or easy answer to the question of when the best time to sell your mortgage note is. When a mortgage note owner sells their note, they typically do so for a variety of reasons, both personal or because it is in their best business interest to do so.

Signs that Selling a Mortgage Note Would be Beneficial:

If Possible, Sell When Note is Not in DefaultSince mortgage owners sell their notes for business and personal reasons alike, the question changes more into identifying when the best time to sell one’s note is.

Ideally, one should sell their mortgage note when it is NOT in default, if possible. An example of a note in default is if the owners stop paying the mortgage payments to the note holder. While nearly any note is sellable, even ones in default, mortgage notes that are in default are sold at a much larger discount, and the seller loses money on the deal. This is because the mortgage note would pose a greater risk to the note buyer.
If there are any concerns that your payer is at risk of future default, it may be a good time to sell your mortgage note before this occurs. This way, you can get more cash out of the note before it is subject to discount due to default.

Sell When You Have the Finances to SellWhen you sell your mortgage note, it is best to do so during a time where you can afford not having the monthly mortgage payments while it is being sold or brokered to a note buyer. This gap is where you will have no mortgage payments, but you also have not been paid yet for your mortgage note.So, make sure you do not need the money for a few weeks, ideally, for at least one month, or four weeks. If you are in need of cash immediately, then selling your mortgage note is not the best way to go about that.

Selling your note is an option that takes three to four weeks to complete and there are several entities/parties that are involved in the process: from title and escrow companies, the appraisers, and servicers. Coordinating the buying and selling of a note takes time and may encounter some delays.
Sell your note before you are in need of the money, or save up money before selling the note, so you have enough to handle your personal and business fees for at least a month. If you are in need of immediate cash, and must sell your note, you could take out a small, personal loan and pay the loan back plus interest, after your note is sold. Interest for small, personal loans are often high, and you must realize that you would be taking a small profit cut from the sale of your mortgage note, depending on how much your mortgage note is worth and how much money you took out with a loan.

Sell When you Have the Time to Sell

Not only is it best to sell your mortgage note when you can afford to do so, financially, but it is important to have the time to sell it as well. This way, you can shop around for different buyers or have your mortgage note broker shop around, for the best deal possible.

Time gives you the ability to negotiate a fair price for your note, rather than being the one desperate to sell—note buyers know how to play hardball when note sellers are desperate to sell and do not have the time to negotiate. Time gives you the upper hand.
Sell When the Sale of your Note Offers a Better Investment OpportunitySelling your mortgage note when doing so can allow you to take advantage of another and better investment opportunity, is simply good business. Since it is a personal investment, you have to be aware of better investments out there or have someone looking for you.

Most notes pay a decent interest rate and they are a good investment since the note holder receives the mortgage payments and can then sell the home at full market value—this investment is for the patient and those who plan on investing and reaping its rewards years later.
If another investment opportunity shows up that could pay you a better return, then this is a great time to sell your note. Many investors use cash from their mortgage note to buy into another investment that will produce them a higher return.

Sell When Your Property Hits the Value Sweet Spot

When your property is calculated to be worth 30% + more than the remaining balance; that is an excellent time to sell your mortgage note. This is the value sweet spot. Make sure to pay attention to your mortgage note’s LTV (loan-to-value).
To calculate the LTV, simply divide the remaining balance by the property’s value. The best time to sell your mortgage note is when your loan-to-value is below 70%.
A high LTV results in a greater discount and therefore, less money in your pocket. With the current real estate market, the condition of the property will also affect the LTV. Although the two factors are out of your control, you can stay informed on the market conditions and take action to sell your note when the time is right. This will require a steady checking of your LTV, so make a note to check it bi-weekly or monthly for your benefit.
Consider Selling a PartialDepending on the terms of your mortgage note, some note buyers will not be able to cash out your full note.
However, a partial could actually be a better option for you. Many note holders actually receive more cash in their pockets over the lifespan of the note by selling a partial. If you are not as familiar with selling a partial note, contact a note specialist to learn more about it. You can also read more about partial note sales here.

Conclusion
So, there you have some considerations to take into account when deciding when the conditions are best for selling your mortgage note. The best time will depend on your financial needs, your time commitments, and your future plans. If it seems like now is the right time for you to sell your mortgage note, begin by getting a free quote. That is always the best way to start the process and determine if it is worth selling right away, or if you should wait it out a bit more for more favorable conditions, if possible.