When you’re ready to sell your mortgage note, how can you get the highest offer?
First, do not expect to get the full value. Investors need to make some profit and they do this by discounting the amount. The amount of discount can vary from 10% to 50%, all dependent of several factors.
The many factors companies or investors look at when offering you a quote on your mortgage note are described below, but once you find the company who invests in what note you are offering, gather as much information as possible. With your information, the investor can determine what will be offered for your note.
Property Type
Some companies will only offer and purchase notes on single family and multi -family homes. Others prefer commercial notes or land or buildings, mobile homes, private land only.
Are payments up to date?
Is the borrower paying on time and is up to date? If not, a note can usually still be sold but “non-performing notes” are sometimes more difficult to sell and usually has a deeper discount.
How long have you been receiving payments? How much equity is in the property? What is the value of the property?
The longer you have been receiving payments, the better. When a note is “seasoned”, and or when the borrower puts down a large down payments, it proofs to all that the borrower has more invested in the property and will be less likely to stop paying.
How many payments remain?
The longer the term that remains, the better. This is a better investment to someone who purchases notes therefore the offer is usually higher. If the term is shorter, the less the discount will be.
What is the interest rate on the note?
Investors need to be able to calculate all numbers to determine if it makes financial sense.
What is the credit score of the borrower?
Having the credit score of the borrower helps the investor determine how much of a discount will be offered. If the borrower has a low credit score, a larger discount is usually offered.
Finally, what position is the note in? Is the note in first or second lien position? Knowing where the notes stands is important to whether or not the investor will make an offer. Some investors make offers only on first positions. You also want to know if you are dealing with a middle man. A middle man is one who connects a seller to an investor. This means the middle man needs to be paid and sometimes a fee or a smaller payment is offered. Avoid this by going directly to a company or investor.
Some of the factors are out of your control such as the borrower paying or their credit score. What you can do to get the highest offer out of selling your mortgage note, ask for references, and ask questions. Be sure to keep good records of all transactions and deal with a reputable investors.
