Secrets of the Note-Buying Business
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Note Brokers vs. Note Investors
When you do a search on "sell mortgage" on the Internet you will find thousands of companies who will offer
you a free quote on your note. To get a top spot Sponsored Link (= paid advertising) they may pay as much as
$20-40 per click just to get someone to LOOK at their web site.
Most of them are Note Brokers. Note Brokers are not investing their own money to buy your mortgage.
Note Brokers Compared to Real Estate Brokers and Mortgage Brokers
Note Brokers, just like Real Estate Brokers and Mortgage Brokers earn a fee for bringing buyers and sellers
together. BUT, unlike Real Estate Brokers and Mortgage Brokers the fee is not a fixed percentage.
How Note Brokers Get Paid
You send note brokers all the details of the note, a copy of the mortgage, the note and other documents too.
They then will submit this information to private or institutional mortgage investors. They get the best offer and
then they calculate how much to offer you. The DIFFERENCE between what your note is worth and what you
will accept can amount to thousands of dollars and this is how their fee is calculated. This is how they can
afford to pay for that costly Internet and TV advertising.
Should you use a Note Broker
Does this mean you should only offer your note for sale to actual note investors? NO! A note broker does a
valuable job and is entitled to be paid for their services. A good note broker can often offer you a higher price
even after being paid a fee. Just like a Real Estate Broker can often get you a higher price for your home.
But how do you make sure that you are getting the best price and not leaving too much on the table?
Hungry note buyers will compete when you advertise your mortgage.
Sell your mortgage for cash rather than receiving monthly payments.
You can sell all of your mortgage or you can sell part of your mortgage. For example, you may need just
$10,000 now to pay off some credit cards. But your mortgage may have $50,000 principal still owing. You can
sell just part of your mortgage to give you the cash you need. After the buyer has received the payments they
bought, the mortgage reverts to you and you receive the rest of the mortgage payments.
Selling commercial real estate notes allows you to convert small monthly payments into an immediate lump
sum of cash. A commercial real estate note is simply a loan document signed when you financed the sale of
your investment property. Commercial real estate notes are available for office, retail and industrial
establishments.
Commercial real estate note selling is based on certain fixed standards. The outstanding balance amount
and the period of time are important for most buyers. Second in importance is the value of the property.
People generally sell part of their commercial real estate notes instead of selling them as a whole. Partial
sales are more profitable in most cases.
When a business involving real estate is sold, two notes are generally created, one each for the business
and the real estate. The business note is similar to private mortgages and trust deeds, but it is not secured
by real estate. A business note is generated when a person sells a business and decides to carry on the
financing and collect regular payments from the new business owner.
A potential seller can sell commercial real estate notes as a whole, or a part of them. The best way to sell
commercial real estate notes is to browse websites that display real estate note listings. Visitors to these
websites range from individual buyers to companies and financial institutions. The chances of getting a
better deal are very high. Real estate brokers are the natural source for selling commercial real estate notes.
They can assist you in finding an ideal buyer. Advertising in local newspapers and real estate magazines
also helps you sell commercial real estate notes.
Real estate note buyers can either be individual buyers or companies. Most real estate sellers usually accept
real estate notes as part of a larger real estate deal that has been agreed upon. Payments are mostly made
in installments. People holding real estate notes often sell them when they are in need of big lump-sum
amounts. Many sellers do not to hold real estate notes for long time.
Real estate note buyers purchase different types of privately held real estate notes. They can be land sale
contracts, promissory notes, contract for deeds, deeds of trust, and other types of real estate debt notes.
Residential notes, commercial notes, and vacant land notes are popular among real estate note buyers, as
these are common and the risk involved is minimal. Real estate note buyers sometimes act as brokers.
Real estate note buyers can buy a part of the real estate note, or the whole thing. The price depends on
market values. Notes in the first lien position are preferred mostly by real buyers. Real estate note buyers
demand copies of the deed of trust or mortgage, title policy, and closing statement, along with the note. Most
real estate buyers pay the complete amount within a week or two. This delay is due to a slow preparation of
documents.
Several real estate note buyers provide online quotes. Online purchases allow you to compare different rates
of real estate note buyers and choose the right note. Confidentiality and competitive prices are offered by
most professional real estate note buyers.
Note buying is especially prevalent in real estate. Suppose a seller sells his house and takes a certain
amount of down payment and for the rest of the amount he accepts monthly payments till the time the due
amount is paid off.
Take the case of a house which is available for sale for a price of $100,000 and for which the seller accepts a
down payment of $25,000. For the rest, he agrees to accept a monthly installment of a certain fixed amount
from the buyer.
Now consider a situation where the seller is in an urgent need of liquid cash. It is here that note buying
comes into the picture. The seller can contacts a note buyer to whom he can sell the promissory notes.
These promissory notes refer to the monthly installments, which the buyer of the house has to pay.
The buyer will now pay the installments to the person who has bought the promissory notes from the seller of
the house. The seller can sell all the promissory notes, or a part of them, with an agreement that all or the
partial fixed (in case only part of the promissory notes have been sold) mortgage payments would go the note
buyer until the debt is paid off.
There are other ways also on how notes work. The seller and the note buyer can also decide to divide the
monthly installments between themselves. The option, which the seller chooses, will depend upon the
urgency and the amount of his or her cash requirements.
There are certain fixed standards upon which note buying is based. First consideration is the outstanding
balance and the period of time until the value of the note materializes. The value of property is also taken in to
consideration.
There are many companies, which buy mortgage notes in exchange for a lump sum payment. The process is
very simple. The promissory note holders put their notes on bid. The investors review these notes and
ensure if they fit in their portfolios. Then they bid on those, which are of interest to them. At the end of the deal,
the investor gets the notes and the seller the payment.
The process of note buying and selling also involves additional fees like transaction fee, appraisal fees, tax
certificates, and escrow fees. This additional fee is allocated between the seller and note buyer during the
contract phase of the transaction.
