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How To Convert Your Real Estate Notes Into Quick Cash
By David Springer, Thu Dec 8th
If you're a real estate investor needing quick cash, sellingyour notes could offer a fast, easy solution. It can happen to anyone. You find yourself in a situation whereyou need a chunk of cash--instantly. Maybe you have to handle anemergency or simply want to free up funds to invest elsewhere.Whatever the case, selling mortgage notes can put money at yourdisposal within a matter of weeks. Selling mortgage notes allows you to convert small monthlypayments into an almost immediate lump-sum of cash. You won'thave to wait to recoup the bulk of your investment. Plus, youcan avoid the risk associated with owner financing. And you canspend the money however you want; it's yours and there are nostrings attached.
Mortgage note buyers purchase a wide variety of privately-heldmortgage notes, including promissory notes, land sale contracts,deeds of trust, contract for deeds and other debt instrumentssecured by virtually every type of property. They can work withyou if you're receiving payments on residential, commercial andother types of property. Some examples of the type of notes you can sell, include: * Residential Notes - For houses, townhouses, condominiums,apartment buildings, and mobile homes * Commercial Notes - For office, retail and industrial * Vacant Land Notes - For developed land, undeveloped land andland not designated as a specific-use property (such as farmland or waste storage) How It Works Selling mortgage notes simply allows you to receive cash now foryour future payments. You may be eligible to take advantage ifyou've sold your home or an investment property via ownercarry-back financing or seller financing and are now receivingpayments on that note. You could be cashed out in two to threeweeks, receiving the funds by check or electronically. Most note buyers prefer to buy real estate secured notes thatare in the first lien position or wrap around the first lienposition. If you have a second lien--where there's a bank oranother investor with a more senior lien against theproperty--you may be able to sell the note. However, the pricethat you get won't be nearly as high--unless the buyer has atleast 30 percent of his own money as a down payment or inbuilt-up equity. Here's how the process of selling notes works: You need tocontact several mortgage note buyers and request a quote. Theywill probably ask you to submit copies of the deed of trust ormortgage, the note, title policy, and closing/settlementstatement. If there is no recent appraisal or title policyavailable, they may be ordered at the note buyer's expense. Each of your notes will be evaluated on a case-by case-basis,with a number of aspects considered. These factors include thepurchaser's equity, payment history, seasoning of the note,credit rating of the buyer, term of the note and the remainingbalance due on the note. A Variety of Ways to Sell Notes If you're like most note sellers, you may automatically think ofselling the entire note. That could be the best
route if thenote represents a high value and this is the best fit for yourfinancial situation. However, you also have the option of selling only part of thenote. This could be ideal if you like the interest rate you'reearning on the note, but just want to receive part of the cashnow. Over the long run, a partial payment may be able to provideyou with a much higher rate of return. For example, let's say you sold a house for $120,000, the buyergave you $20,000 as a down payment, and you have a $100,000 noteat 7 percent for the next 15 years. You enjoy getting the incomeeach month, but need $30,000 for another investment or to payoff debt. You could opt to receive that $30,000 in exchange forbuying the next "x" number of payments, after which the notewould go back to you for the balance of the term. Or as anotheroption, you could take a lump sum of money now, plus receivepart of the payment each month thereafter. If you're not surewhich option would be better, don't worry. A note buyer can workwith you to determine the best solution for your needs. Tips for Selling Your Notes Most mortgage note buyers focus on making the process relativelysimple, easy and fair. They offer competitive pricing, completeconfidentiality and hassle-free closings. However, the notepurchasing business isn't highly regulated, so be sure to locateand work with a reputable company. Here are some things youshould keep in mind about purchasing notes: * Up-front fees: There should be no up-front fees. A good notebuyer isn't going to charge you just to provide quotes or checkthe buyer's credit. * Closing and other costs: There should be no points, closingcosts, or other garbage fees at any point in the process. Anyfees are already included in the pay price to you. * Appraisals: Note buyers normally require you to pay for theappraisal or the title policy ONLY if the property appraises forless than the sales price or there are problems with the titlethat prevent the purchase. However, these payments should coverjust the buyer's actual costs. * Credit checks: Be sure that the note buyer checks the creditof your property buyer up front. Unscrupulous buyers have beenknown to quote one price and then lowering it toward the end ofthe process. They often use the excuse that the "propertybuyer's credit was low". This is a twist on the old "bait andswitch" scam, and it's completely unethical. * Written Agreement: Ensure that the seller gives you a writtenpurchase agreement covering the purchase price, contingencies,etc. Also, don't hesitate to ask questions about anything thatis not clear. Any items that are not spelled out in black andwhite are part of the agreement. It's that simple. Selling real estate notes is easy, and it can be a great way togenerate a lump sum of cash for other uses. About the author:David Springer is a consultant for Sovereign Funding Group.Sovereign Funding Group is an experienced, reputable companythat offers convenient, no-risk services to help you with theselling of your deferred payments and business financingincluding real estatenotes.
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