Note Buyers are expecting what from me… when you want to sell your note?
So you’ve sold a property and taken back a mortgage… and the buyer is paying you, not a bank. So now, what do you do? Let’s make sure you understand your responsibilities as a mortgage holder… especially if you decide you want to sell your note to one of the country’s premier note buyers.
At the closing of the sale, you received several documents.
First, what is a promissory note in Real Estate? The promissory note is the borrower’s promise to pay you the debt under the agreed upon terms. The document that will allow you to take back the property if the payors don’t make their payments is called a mortgage, deed of trust, land contract or agreement for deed. The procedure to buy these contracts is similar, so in this discussion, I will use “contract” and “mortgage” to mean mortgage, deed of trust, land contract or agreement for deed.
The mortgage you hold requires that you keep good records. When you sell a note, the note buyers are expecting good records.
For tax purposes you must keep track of interest for you and your payor. Since your mortgage is a long-term obligation spread out over several years, this commitment can be tedious. And, you may have found that the monthly payments you received for several months or years were spent fairly rapidly. Maybe you are feeling uncomfortable because you don’t have much to show for those payments. Maybe you didn’t know that you may be able to sell your contract for thousands of dollars of cash. And, at the same time, get rid of the worry of late payments, the risk of default and foreclosure and the hassle of keeping proper I.R.S. records.
This might be a good time to review What is a Note Buyer to get a better understanding of the note selling process.
All Note Buyers are expecting that hazard (fire insurance) is in place. And even if you don’t want to sell your note, you must make sure your payor carries hazard insurance.
It is essential that the payor purchase and maintain fire insurance and flood insurance, if the property is in a flood zone. You must be named as an additional insured on the insurance policy. This is to make sure that in the event of a fire that the payor doesn’t receive the insurance proceeds and disappear, leaving you with a worthless note and no collateral (other than the land). If you don’t know if your payor has insurance or, worse yet, you know he doesn’t have insurance, I recommend that you not go to sleep tonight until insurance is placed on YOUR collateral.
As a mortgage holder you must make sure that real estate taxes are paid. All note buyers are expecting that taxes are current or they will be deducted from mortgage sales proceeds.
If the real estate taxes are not paid when due, the taxing authority either places a lien on the property or sells tax certificates to recover the tax amount. In each case, this creates a lien that is senior to your mortgage. This means that after a certain period of time you may have to pay the taxes to keep the property from being sold at a tax sale, rendering your mortgage worthless. Or, worse yet, if for some reason you were not notified of the tax sale or were out of town and the mail didn’t keep up with you, you could lose your mortgage and not even know it. I recommend that you hire a tax reporting service, to check for tax payments and notify you of any problems.
As a note holder, you must periodically inspect the property
to ensure that it is being kept in reasonable condition. If you find that the property is not being maintained it could indicate that the payors are having financial problems. Maintenance of the property will also be evaluated by all note buyers as they assess the value of the property as they determine the value of your note.
Also, a property in poor condition might potentially lead to default. The property condition affects the value of the property if you had to sell it after you foreclosed. If you cannot periodically inspect the property, you should hire a property inspection service to do this for you.
Or, perhaps you are considering selling your mortgage now, to eliminate all hassle associated with owning a mortgage.
Or, if you want to sell your mortgage, be sure to check out how can I sell my note. Be sure that you deal with note buyers who put the needs of their note sellers first and foremost. See what others have had to say about dealing with the note buyers.
Did you know that you may be able to sell all or just a part of your note? See some examples of how note buyers can structure purchase plans to buy just a part of a real estate note.
If you are ready to sell you note, you can get started by filling out the quick form on this page. Or if you still have questions, please call us at 772-232-2383 or visit our frequently asked questions page.
Whatever you decide, you can rest assured that we will help you in anyway that we can.
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