Get the Most Money For Your Note
What Makes a Note Most Valuable
What is and is not important in selling a note to a note buyer
Over 30 Billion Dollars of Seller Financed Notes were created in 2022!
Mortgage (Aka Deed of Trust): A Legal Security Document that “secures” a piece of real estate to an obligation to repay money (Promisory Note)
Note (Aka Promissory Note, IOU): A Legal Document between a Lender and a borrower, which the borrower agrees to pay the lender back. It includes the Amount, Interest, Term, Monthly Payment and balloon amount, if applicable.
Land Contract (AKA CFD, Contract for Deed): A Mix between a Mortgage and a Rent Agreement. The borrower agrees to pay a designated amount until a determined date. At which time the deed is transferred to their name.Sell Your Wrap Note Sell Your Note
There is a lot that goes into calculating an offer on a note. We have been buying Mortgage Notes for over 10 years now. One of the biggest question we get from Seller Finance Investors is how do I make my note more valuable! We held a webinar/podcast on this topic as well.
The Three big factors:
- “Note Numbers” IOU (Loan Amount), Interest Rate, Term & Balloon
- We have a “Note Numbers” Financial Calculator – Here
- Non-Note Details
- Risk Level
1) The Keys to the Note Numbers!
The Note buyer is buying a string of Payments (IOU) so those numbers are extremly important. Although they are also buying into a debt with the borrower, the “Note Math” is one of the keys to getting the highest re-sale price
Similar to the Lottery, getting money now is less than if you wait for the monthly cash flow for 30 years. Time Value is a calculate to determine a return based on cash being worth less in the future. These factors change the price of the note
Monthly Payment ( Principal and Interest Only)
- Term – Lower the term the higher the price
- Interest Rate – Higher the interest rate (within the usury law for your state)
2) Important Non-“Note Math” Details
- For Wrap Notes be sure to read our blog!
- Using a Licensed Servicer to Track your Payments
- Work with properties that is in states where debt licenses are not required.
- Each State has a different foreclosure process and timeline. Longer foreclosure process = More discounted price.
- If you are creating a note, be sure you have
- State licensed RMLO originate the file.
- If the selling to a Owner Occupied, be sure to have the file Underwritten by a Licensed Underwriter to ensure Dodd-Frank is followed.
- Be sure you have all the Original (Wet Ink) collateral!
- Title Policy
- If the note has sold, ensure you have all the Assignment of Mortgages and Allonges
- Land Contracts are worth less than Mortgages/Deed of Trust
- Ensure the Interest Rate is within the Usury Law for your state!
- More Down Payment the more secure the borrower.
- Performing Vs Non-Performing
- Non-Performing Notes require more discount.
- 1st Position vs Junior Liens
- Higher the Lien Position the higher the value
- Deliquent Government taxes and fees (property tax, utility etc) will reduce the value
- Table Funding vs Seasoning, The longer the asset has been performing the more valuable it is. Industry prefers 3-6 months to be considered “Seasoned”.
3) Note Risk
If the loan stops performing we calculate costs for foreclosing, holding cost and expensies. This varies from state to state so there is no easy way to present this withouth building out a non-performing calculator. We do share how to build one in our Advanced Note Investing Training Class.