Bruised credit scores and stricter lending requirements following the financial meltdown and recession led to an influx of private mortgage notes. Traditional mortgages were next to impossible to obtain because many homes were left abandoned and their values plummeted. A bank-based mortgage requires a home to be extensively renovated or repaired before it is purchased, and this makes private mortgages an appealing option for many homeowners.
If you own a mortgage note, you are essentially acting as the bank in a traditional mortgage. There are risks associated with this which you may not be in a position to carry through to the end of the mortgage. This is why it makes a lot of sense to sell your mortgage note.
Other reasons you may want to find a mortgage note buyer include getting capital for a business venture, moving cash to another investment, or the need to divide the estate amongst family members or other beneficiaries. Whatever the reasons, you need to find the right mortgage note buyer and below are some tips on how to go about this.
Identify the Right Category of Note Buyers
There are four main types of note buyers you will likely deal with when selling your mortgage note. These are:
Institutional Investors – These investors purchase mortgage notes on a large-scale basis using their own funds. Depending on their strategy, they may hold the investment until maturity or sell it to a secondary market. The advantage of dealing with institutional investors such as American Equity Funding is that they can write the check or transfer the funds at closing.
Private Investors – These buyers purchase notes on a much smaller scale and their activities are limited to a particular geographic location. They are a bit difficult to find unless through networking with local investor groups or word of mouth.
Master Brokers – These note buyers are experienced mentors who buy some notes either on their account or place others with institutional funds at a fee.
Posers – These are the type of note buyers you should be cautious about because they link to a daisy chain of mortgage note brokers who rarely get deals closed. They are just pretenders at best.
The Note Buyer Rating
For a successful sale, ensure that the mortgage note buyer has a rating of A. Also, check for any unresolved complaints because these may point to disputes and hurdles you may likely face if you decide to engage the specific buyer. To be on the safe side, look for companies accredited by the Better Business Bureau.
Do an Online Search
With many mortgage note sellers becoming vocal and posting their satisfactions and frustrations online, you may stumble on a few pop-ups that can lead you into or out of a potential engagement with a particular note buyer. Keep away from companies that have negative reputations due to bad behavior, scams, or poor customer service.
Lastly, mortgage note buyers will give you different offers for your mortgage note. While the offers must not be the sole decision-making criteria, it is essential to look for buyers that provide you with value for your mortgage note.