How To Convert Your Real Estate Notes Into Quick Cash

How To Convert Your Real Estate Notes Into Quick Cash



If you’re a​ real estate investor needing quick cash, selling your notes could offer a​ fast, easy solution.

It can happen to​ anyone. You find yourself in​ a​ situation where you need a​ chunk of​ cash—instantly. Maybe you have to​ handle an​ emergency or​ simply want to​ free up funds to​ invest elsewhere. Whatever the​ case, selling mortgage notes can put money at​ your disposal within a​ matter of​ weeks.

Selling mortgage notes allows you to​ convert small monthly payments into an​ almost immediate lump-sum of​ cash. You won’t have to​ wait to​ recoup the​ bulk of​ your investment. Plus, you can avoid the​ risk associated with owner financing. and​ you can spend the​ money however you want; it’s yours and​ there are no strings attached.

Mortgage note buyers purchase a​ wide variety of​ privately-held mortgage notes, including promissory notes, land sale contracts, deeds of​ trust, contract for​ deeds and​ other debt instruments secured by virtually every type of​ property. They can work with you if​ you’re receiving payments on residential, commercial and​ other 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 and​ land not designated as​ a​ specific-use property (such as​ farm land or​ waste storage)

How it​ Works

Selling mortgage notes simply allows you to​ receive cash now for​ your future payments. You may be eligible to​ take advantage if​ you’ve sold your home or​ an​ investment property via owner carry-back financing or​ seller financing and​ are now receiving payments on that note. You could be cashed out in​ two to​ three weeks, receiving the​ funds by check or​ electronically.

Most note buyers prefer to​ buy real estate secured notes that are in​ the​ first lien position or​ wrap around the​ first lien position. if​ you have a​ second lien—where there’s a​ bank or​ another investor with a​ more senior lien against the​ property—you may be able to​ sell the​ note. However, the​ price that you get won't be nearly as​ high—unless the​ buyer has at​ least 30 percent of​ his own money as​ a​ down payment or​ in​ built-up equity.

Here’s how the​ process of​ selling notes works: You need to​ contact several mortgage note buyers and​ request a​ quote. They will probably ask you to​ submit copies of​ the​ deed of​ trust or​ mortgage, the​ note, title policy, and​ closing/settlement statement. if​ there is​ no recent appraisal or​ title policy available, 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 the​ purchaser's equity, payment history, seasoning of​ the​ note, credit rating of​ the​ buyer, term of​ the​ note and​ the​ remaining balance due on the​ note.

A Variety of​ Ways to​ Sell Notes

If you’re like most note sellers, you may automatically think of​ selling the​ entire note. That could be the​ best route if​ the​ note represents a​ high value and​ this is​ the​ best fit for​ your financial situation.

However, you also have the​ option of​ selling only part of​ the​ note. This could be ideal if​ you like the​ interest rate you’re earning on the​ note, but just want to​ receive part of​ the​ cash now. Over the​ long run, a​ partial payment may be able to​ provide you with a​ much higher rate of​ return.

For example, let’s say you sold a​ house for​ $120,000, the​ buyer gave you $20,000 as​ a​ down payment, and​ you have a​ $100,000 note at​ 7 percent for​ the​ next 15 years. You enjoy getting the​ income each month, but need $30,000 for​ another investment or​ to​ pay off debt. You could opt to​ receive that $30,000 in​ exchange for​ buying the​ next "x" number of​ payments, after which the​ note would go back to​ you for​ the​ balance of​ the​ term.
Or as​ another option, you could take a​ lump sum of​ money now, plus receive part of​ the​ payment each month thereafter. if​ you’re not sure which option would be better, don’t worry. a​ note buyer can work with you to​ determine the​ best solution for​ your needs.

Tips for​ Selling Your Notes

Most mortgage note buyers focus on making the​ process relatively simple, easy and​ fair. They offer competitive pricing, complete confidentiality and​ hassle-free closings. However, the​ note purchasing business isn’t highly regulated, so be sure to​ locate and​ work with a​ reputable company. Here are some things you should keep in​ mind about purchasing notes:

• Up-front fees: There should be no up-front fees. a​ good note buyer isn't going to​ charge you just to​ provide quotes or​ check the​ buyer's credit.

• Closing and​ other costs: There should be no points, closing costs, or​ other garbage fees at​ any point in​ the​ process. Any fees are already included in​ the​ pay price to​ you.

• Appraisals: Note buyers normally require you to​ pay for​ the​ appraisal or​ the​ title policy ONLY if​ the​ property appraises for​ less than the​ sales price or​ there are problems with the​ title that prevent the​ purchase. However, these payments should cover just the​ buyer's actual costs.

• Credit checks: Be sure that the​ note buyer checks the​ credit of​ your property buyer up front. Unscrupulous buyers have been known to​ quote one price and​ then lowering it​ toward the​ end of​ the​ process. They often use the​ excuse that the​ "property buyer's credit was low". This is​ a​ twist on the​ old "bait and​ switch" scam, and​ it’s completely unethical.

• Written Agreement: Ensure that the​ seller gives you a​ written purchase agreement covering the​ purchase price, contingencies, etc. Also, don’t hesitate to​ ask questions about anything that is​ not clear. Any items that are not spelled out in​ black and​ white are part of​ the​ agreement. It’s that simple.

Selling real estate notes is​ easy, and​ it​ can be a​ great way to​ generate a​ lump sum of​ cash for​ other uses.




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