How to Sell Real Estate Notes to Mortgage Buyers

How to Sell Real Estate Notes to Mortgage Buyers

Mortgage buyers are investors who buy real estate notes and land contracts in whole or part. Sellers who offer owner-financing often sell notes in exchange for lump sum cash. Some of the more common notes offered for sale are seller carry back mortgages, lease options, and contract for deed.

Selling notes to mortgage buyers can provide cash for other investment properties. Sellers should have a thorough understanding of the process involved, required documents, and how to negotiate the highest price.

Sellers can expedite the process by organizing loan papers and accounting records. When selling 'owner will carry' contracts, buyers will require the original, notarized promissory note; payment records; property tax receipts; tax records; and proof of property insurance.

Property owners should always retain legal counsel when executing owner will carry purchase contracts. Otherwise, their options might be limited if they attempt to sell the note at a later time. Mortgage buyers won't risk their money on purchase contracts that are not legally-binding or properly documented.

It's important to work with reputable mortgage buyers. The Internet can be a good source for locating local investors. If unable to locate mortgage buyers through online searches, try searching for local real estate clubs or online networking groups.

When possible, comparison shop 3 or 4 buyers to see who offers the best price and terms. Then, conduct research on the final 2 selections. At minimum, check the Better Business Bureau and client referrals, along with an online search of their personal or business name. Trustworthy mortgage buyers will happily provide a list of client referrals.

Once a buyer is located, sellers submit a request for purchase review. Note buyers will need to know the type of real estate secured by the note; purchase date; purchase price; down payment amount; current loan balance; payment amount and frequency; number of late payments; and borrowers' credit scores.

After reviewing loan documents and financial records, mortgage buyers obtain a real estate appraisal. Investors often utilize a broker price opinion (BPO) in lieu of traditional real estate appraisals. This is an affordable option to determine fair market value. In most cases, sellers are responsible for appraisal fees.

Finally, mortgage buyers present an offer if interested in buying the note. If accepted, closing papers are drafted by a real estate attorney, signed and notarized by all parties involved. Upon closing, sellers receive their cash payment and mortgage buyers assume property rights.

There are instances when sellers use mortgage notes as collateral to obtain cash through note buyers. Instead of buying the note, investors receive future loan installments in exchange for lump sum cash.

Overall, selling mortgage notes can take 3 or more months to complete. It is strongly advised to have contracts reviewed by a lawyer to ensure property transfers are properly recorded and contract documents legally-binding. When possible, work with local mortgage buyers who can walk you through the process.

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