Often, the most common questions people ask when they sell a private mortgage note center around the “closing.” In simple terms, closing is when the note seller turns over original documents, and the note buyer disperses funds.
As a note seller, how do you know you’ll receive your money once you turn over documents establishing ownership?
The guarantee comes from using an outside party such as a title company, escrow agent, or attorney to as a neutral third party.
Note Sale Closing Process
This is what needs to happen in order to close a mortgage or deed of trust note transaction:
- Seller signs to provide an “Allonge” to the promissory note transferring ownership to the note buyer
- Seller signs an “Assignment” document transferring the Mortgage or Deed of Trust to the note buyer
- Seller turns over original copies of the promissory note and mortgage to the buyer
- Buyer disperses funds to the seller
Don’t Sell a Private Mortgage Note Without a Licensed Closing Agent
A licensed closing agent (title/escrow officer or attorney) will accept your documents, review them, accept buyer funds, then disperse funds once all pre-agreed upon terms of the sale have been met. Another term for what they provide is “fiduciary duty.”
Additionally, a closing agent will handle document recording in the correct municipal office(s).
They will be licensed in any state they do business in, and will maintain an exclusive bank account solely for handling client funds.
The fee is generally between $200 and $400 hundred dollars. Of course, having peace of mind is priceless. You can negotiate for either party to pay the cost, or they can split it.
Often your note buyer will be located in a different geographic region. This isn’t a problem. Sellers may send documents via overnight mail. Buyers may send funds via wire transfer.
Lastly, a qualified closer will be an expert on the documents for your locality. Having someone on the team who is an expert reduces mistakes.
Any legitimate note buyer should be willing to participate in an outside closing through a licensed and bonded closing agent.
When you sell a private mortgage note, outside closings offer protection and peace of mind to both sellers and investors.
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