“Working with you was a very pleasant experience. Everyone was so helpful. You went out of your way to solve all the problems that came up. You never seemed to get stressed out. It was great dealing with you.“ L.R., Little Falls, New York
In this post we will discuss the 5 biggest problems in selling a mortgage note and what you can do if you have one of these problems. So, let’s get started.
Problem number one in selling a mortgage note is the payment performance of the borrowers. If your borrowers are not making their payments on time, you have limited options. You may be able to find a note buyer for your note, but prepare yourself for a big discount. A better approach is to work with the borrowers to develop a payment schedule that they can keep. You may have to modify the terms of the promissory note by lowering the interest rate, extending the term of the note, lowering the unpaid balance, inserting a balloon payment or a combination of these techniques.
Problem number 2 is similar to problem number 1… as it looks at the credit performance of the borrowers with other financial obligations. From an investor point of view this is a risk reward-business. The stronger your borrowers’ credit performance on their other financial obligations, the less risk for the note buyer and the more the investor will pay for that mortgage note. Conversely, the weaker your borrowers’ credit profile, the risker your note purchase is and the less your note buyer will pay for your note.
If this is your situation, we may look at sharing the risk with you by buying part of the note now and leaving you with the remainder of the note. Or perhaps a better solution for you would be to work with your buyers and a credit counseling service to raise your borrowers’ credit scores.
Problem number 3 in selling a mortgage note is lack of borrower equity. As mentioned before, look at selling your promissory note as a risk-reward business. As a long-standing top mortgage note buyer, when we look at buying a note, we are only interested in receiving note payments. If we have concerns about the ability of the borrower to make payments, we will not buy the note. So, if your payer has a financial hiccup, what motivation does he have to figure out how to make his mortgage payments? The more your borrower has at risk, i.e., the more equity he has, the more he will be incentivized to solve his problem if he has more bills than he has money.
Generally speaking. the more equity your borrower has the more desirable the mortgage note will be for our note buyers. But if there is little equity, we will look at buying part of the promissory note.
Problem number 4 in selling a mortgage note are weak terms. Let us look at two examples. We will use a $100,000 note being paid over 30 years. In the first example, the interest rate is 2%, so the monthly payment is $369.62. In the second example, the interest rate is 6% with a monthly payment of $599.55,or $229.93/month more for 30 years. Obviously, we will pay more the larger monthly payment.
The time to address the interest rate is when you are putting together the real estate transaction. I don’t know about you, but when I am selling with owner financing, I want to incentivize the buyer to obtain bank financing so I will always use an interest rate a little higher than bank rates.
Problem number 5 in selling a mortgage note is a problem with the title to the property. For the tile search, we always use a local tile company. In the 30+ years of buying thousands of mortgage notes, there was only one time that we could not get the title cleared to allow us to purchase the promissory note. To summarize, if you have problems in selling your mortgage note, reach out to us by filing out the form below or on our home page or calling us at (772) 232-2383 and we’ll help you in any way that we can.
As mortgage note buyers for over 30 years, we have been helping note holders just like you in all kinds of situations… from selling a private mortgage, selling a private trust deed, or selling almost any owner financed note. We’d are here to help! when you are thinking that I want to sell my note online, reach out to us. Although we are National mortgage note buyers , we love buying notes in Florida and Texas. If you want to free up cash in any real estate note you own… we will help! If you’d like to speak with someone before submitting your note information, just give us a call today at (772) 232-2383. Or check out our mortgage note buying process here.
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