The main reason why people sell real estate notes is so they can raise money quickly. A note is simply a loan document that was created when you paid for your investment property or house. A real estate note could be a contact-for-sale, a land-contract, or simply a mortgage note. The main thing here is that the buyer of the note would be making payments directly to you, so you might as well cash in big on it. The best thing about real estate notes is that you can sell the whole contract, or just a part of it depending on how much you want by the end of the day. The note buyer will have similar terms and conditions, as well as payments, only that the payments would be made to someone else.
Like most other real estate transactions, selling real estate notes could be a very intimidating and time consuming process. This is because you know deep down your heart that you will not be getting the full face value of the real estate note you have at hand. One thing you need to ask yourself is whether there would be payable fees in the process that you as the note owner will have to pay, and how to identify a reputable and trustworthy note buyer. You also want to understand what a normal discount on a real estate note is.
- The first thing you should understand is that there should never be any upfront fees you are supposed to pay. Should you, therefore, find someone asking for it, no doubt there is more than meets the eye? A good and reputable note buyer should be able to check your history and provide a quote free of charge.
- Still on point, you need to understand all possible fees you are likely to pay. Before an offer is made to you, the buyer would have already figured and factored in all expenses. There are, however, a couple of fees that you may be expected to pay. Such fees include fees for the title policy should there be any complications with the title that may interfere with the purchase process. Another thing you should understand is that should the property appraise at less than the actual sales price, you may be required to offset the appraisal fee. Note, however, that you will only need to pay exactly what it will cost the property buyer.
- The buyer ought to do a thorough background check on the property buyer before quoting the final price. Some unscrupulous dealers have a tendency of lowering the quoted price under the excuse that the buyer of the property has a poor credit. In the real estate industry, this is known as “bait and switch” and is utterly disreputable.
- When all is said and done, ensure the note buyer provides a written purchase agreement with all details of the transactions clearly stipulated.
You can get top dollar by selling notes when you deal with “Seasoned” notes, notes that attract a balloon payment, and loans with high rates of interest and shorter repayment periods. By keeping the above guidelines in mind, you can make the most out of your real estate notes and enjoy a smooth transaction.