When a seller of a property has chosen owner financing to supplement their income and avoid the traditional selling of property via banking institutions, sometimes they find it time to sell their mortgage note and receive cash in full. This is where note investors or note buyers will step in on the open market and buy your note from you, essentially taking over your future payments from buyers in return for giving you a lump sum of cash. This releases you as the owner financier and frees you from the property while cashing in on your asset.
Have you felt overwhelmed at the prospect of finding and selecting the right mortgage note buyer? It seems like there are so many willing to buy, but the myriad of options to choose from do not make it easy to choose the fairest and most experienced mortgage note buyers.
Below is a handy guide of 6 things to look for in mortgage note buyers. This will help you narrow down your search of potential note buyers and give you a better start, and more confidence, in selling your note at a price that is fair to you.
1. Experience in the Industry
When selling your mortgage note, you certainly do not want to start off with a new buyer/investor. There are a number of reasons for this. Some novice note buyers are posers who pretend to be investors, but they rarely, if ever, fund a deal themselves. This ends up in a chain of note brokers that can make it difficult to close the deal. Deal DIRECTLY with a note buyer, and not through those who put up a buyers’ façade in order to broker notes to other buyers.
This is why it is important to deal directly with a note buyer who has verifiable experience in the industry. Experienced note buyers understand the process, can answer your questions honestly and will provide a higher-quality service to you during the process.
2. Strong Reputation
A strong reputation is crucial to choosing a note buyer. While dozens of note buyers can be experienced in years, it is the quality of that experience with customers that dictates reputation. Independent testimonials, ratings, or references are all excellent ways of establishing a note buyer’s reputation in the note buying market. A trustworthy buyer can answer your questions honestly (rather than trying to fool you) and work professionally.
3. Response Time to Your Requests
When putting out feelers to different note buyers, take notice of how long it takes for them to respond to your requests for quotes or questions, and the quality of those responses. If a buyer is really a professional and cares about their customers, then they will get back with you quickly in order to get your business. A smart note buyer understands how fluid the market is and how quickly a note can be sold—if they do not respond quickly to your request, they are losing out on a fleeting opportunity to buy a note from you—if a buyer fails to recognize this, then they are not a very good buyer and not one you should work with. A good note buyer has dedication, is a quick responder for your business, and knows that most sellers are looking at multiple buyers and they will want to stand out from the crowd and impress you.
4. Individual Note Pricing
As stated before, it is important to observe potential note buyers and how they behave. Avoid the ones that do not care for you as a customer, because they simply want their money and are not likely to be the type of person to be honest, fair, or professional. A good note buyer will attend to your needs, as they know they have a reputation to keep and you may act as a reference or customer again in the future.
This means that giving you an individual and unique quote is an important part of separating the good eggs from the bad eggs. If a buyer sends you a generic number that they offer everyone as an umbrella price, then ditch them. If they do not have the time or dedication to take a look at your property information and give a quote that is unique to you and your property, then they do not have the time nor willingness to do further business with you regarding your asset.
If they cannot give you a personalized quote, then why on Earth would you give them your money?
5. Willing to Pay Fees Without Hidden Costs
Great note buyers with stellar reputations, professionalism, and a thriving business do not make it a habit of hiding hidden fees to their customers. This gives them a bad reputation, bad references, and makes them lose customers. A great note buyer will not need or wish to rip you off due to some hidden fees and costs. This is simply not worth blowing the deal to them, to hide a few bucks from you.
A company that is upfront with their fees and costs are the ones you want to use. The others that do not offer this information but claim to have a higher payout or cheaper cost, is likely hiding something from you. You do not want to get involved in that.
In fact, good note buyers will pay all of the fees involved themselves rather than charge you, with any normal note transaction. This helps you feel at ease, as you are without risk, and can focus on the main deal with the note buyer.
6. Investor Type
Institutional (National) Investor/Buyer or Private (Regional) Investor/Buyer is a question you must ask yourself when first seeking out a note buyer.
Institutional Buyers will purchase notes on a national scale and are often the “big boys” of the note buying industry with the ability and cash to write you a check at closing.
The other type of investor are the private or regional buyers. This type of buyer purchases notes on smaller scales, usually in their geographic region. It is more difficult to track down this type of buyer, but with the internet, a little bit of searching and researching can find you the best ones in your area.
But first, you must ascertain using the above tips, whether they are able and equipped to service a note, close the deal, and underwrite. Their capabilities and reputations must be researched by you for you to be completely comfortable with using this type of investor.
Conclusion
It is best at the end of the day, to begin your search using the tips above and always trust your gut and logic when it comes to trusting the people you will be working with. It will be up to you to decide which note buyer you will choose, and you will want to make sure that it is the best buyer for you.
