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.
