Whether you’re a first-time seller or you’ve done it before, selling an owner financed mortgage note is something best done with an understanding of the process and working with someone with whom you have confidence. Choosing the best mortgage note buyer places all the stress and complexity in the hands of someone experienced.
In this article, we explore what steps to take in order to find a note buyer who’s qualified, trustworthy, and professional.
Get Educated
The last time I remodeled my home, I hired an Architect and a Contractor. They brought a lot to the table – yet because of the money involved, there were moments I needed to verify the information they provided. I talked with others, spent a lot of time on the internet, and relied on gut instinct.
I did all that, but at times still questioned my decisions. In truth, it would be impossible for me to know more than just a fraction of what the home construction pros know.
When selling a note, you CAN gain a basic understanding of how notes are priced and how the selling process works. In fact, you can do so in a relatively short time.
Reading the other posts on our website would be a good start.
But even better – we offer a free e-book on the topic of selling mortgage notes: The Note Selling Formula. In less than an hour, you’ll have a solid understanding of pricing and the process.
Ask For Referrals
Chances are you know someone who’s sold a note in the past, or who maintains relationships with note buyers. Your network can help you with an introduction in order to choose the best mortgage note buyer:
- Friends & Family Members
- Realtors
- Attorneys (especially Estate or Bankruptcy)
- Title Companies
- Accountants
Many note professionals work nationwide, or at least in multiple states. If you receive a reference from someone in a different location, it’s still worth making contact.
Schedule A Consultation
The best mortgage note buyers offer to analyze notes at no charge and provide a quote for purchasing all or some of the remaining payments (purchasing some of the payments is called a partial.)
The consultation is an excellent opportunity to determine how professional and organized they are. In a phone conversation, you’ll be able to ask questions and decide how patient they are when providing answers. If the discussion seems rushed, or they don’t seem to listen, you may want to move on.
Selling a note requires back and forth between you and the buyer, or the broker representing the buyer. Finding someone who is helpful, clear, and knowledgeable goes a long way.
Ask Your Potential Mortgage Note Buyer The Right Questions
- How long have you been working with mortgage notes?
- How many active deals do you have at a time?
- Are you part of a larger company?
- What’s your specialty?
- Are you equipped to handle my unique situation?
- Can you put me in contact with some references?
- Are you a Broker or a Direct Buyer (see below)?
Confirm That Quotes You Receive Are Realistic
Knowing a little about how notes are valued is helpful because you’ll be able to determine how realistic a quote is.
For instance, borrowers with low credit scores and homes that would be hard to appraise or sell after a foreclosure are all factors that reduce a note’s value. Histories of late or missing payments are other negatives.
It’s in your best interest to have a frank discussion about any potential flaws with your note. After this, expect prices to reflect your specific scenario.
Some brokers and direct buyers won’t reduce a price until your note is under contract–when you feel backed into a corner. Ethical note buyers never use such tactics.
Best Mortgage Note Buyer: Broker vs Direct
Note buyers fall into two camps: Note Brokers and Direct Buyers.
Note Brokers
Note Brokers act like matchmakers. They work with a list of investors and, therefore, can pair the right type of note with the right investor. For instance, one investor may prefer low balance first liens in Idaho, whereas another may have a healthy appetite for well-seasoned paper in low unemployment areas.
Note Brokers are generally paid a “finders fee” by the investor, not the note seller. Matching the right asset with the right buyer often brings in enough cash to cover the Broker’s fee and then some.
Direct Buyers
Direct Buyers use their capital (or money they’ve borrowed from others) to purchase notes for their portfolio. Sometimes their buying criteria is broad, and other times it’s specific. An example of specific criteria for a direct buyer might be a buyer who only purchases Texas notes.
Direct Buyers sometimes state they’re able to pay higher prices because there is no “middle man.” This isn’t always the case. Without the “matchmaking” component offered by Note Brokers, Direct Buyer quotes aren’t always the highest.
Check References and Better Business Bureau Profiles
Brokers and Direct Buyers will have references to offer. It can be awkward at times to call a stranger asking questions about a financial transaction, but it can turn up a lot. Inquire about professionalism, delays, and how the note buyer kept his or her word. You may also be able to speak with note servicers, title agents, and investors your buyer works with.
Take a moment to Google your buyer by name, as well as their company name. Add terms like “fraud” or “ripoff” when you search. You could be surprised by what it turns up (although hopefully nothing).
Once a transaction is over, not too many note sellers take the time to post online reviews. Don’t be surprised if you don’t find them.
The Better Business Bureau is somewhere to check for online feedback. Our company’s BBB profile is located here.
Checklist: Choosing The Best Mortgage Note Buyer
Throughout your research, consider the following hallmarks of a good owner financed mortgage note buyer:
- Takes the time to become familiar with the particulars of your note
- Familiarity with current market conditions
- Approachable and friendly
- A reputation for closing deals quickly and successfully
- Creative and proactive problem solver
- Has experience with your specific scenario
- Listens to your needs
- Provides you with an up-front quote
- Excellent reviews, plus professional handling of negative feedback
To schedule a note consultation and request a note analysis from Porch Swing Funding:
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