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How to Sell Mortgage Notes in a Secondary Marketplace?

Mortage note

This is a continuation of our note investing training series. We will be going to diverge how to sell mortgage notes in the secondary market.

But before doing that, you must be aware of the notes that you can sell. And this time, we will be going far beyond the boundaries of performing and non-performing notes.

These are the categories:

  • Residential real estate notes
  • Commercial real estate notes
  • Business notes
  • Deeds of Trust
  • Land Contracts
  • Bonds for Title

However, the category list is endless. And it varies according to the market condition, and the underlying demand.

You have just gone through the categories, now let’s understand how to sell these notes.

The first option is the full sale thing. In this method, you can sell the entire note set. Yes, there’s an option to sell a part, but you don’t need to choose it in this process.

The process is incredibly fast in most cases, exceptions will always be there. If the note falls into the category of deed or land contract, then it should take a month or two.

Read Also: What Steps to Follow Before Approving a Mortgage Loan to Borrowers?

In most cases, note investing experts, freshers or veterans, choose this route.

If you are in a hurry to make quick money from notes, due to the following reasons:

  • Pay debts
  • Start a business
  • Pay for a property or any other asset

If you are not looking for seller-financed notes, then this is the best option.

Do you have questions or worries about this process? It’s only natural because it’s the money you are investing and a lot of it.

Therefore, it’s necessary to understand the note investing fundamentals and work with a reputed company. This will reduce the chances of facing any errors and other problems.

Also, if you work with this company, they will not bother you with the boring specifics. They will do most of the hard work themselves, which means you can focus on yourself.

They will help you provide the best interest rate, according to the market prices.

They will also set up a schedule that can work for both parties and the terms of the payment. Therefore, you only need to worry about following these terms and you are good to go.

After someone has bought the note, then the company will ensure that he also gets the best deal. So, it’s a win-win situation.

Some more reasons to go for this option:

  • The note is issued against an estate that’s going to be liquidated
  • Getting seller-financed (it may sound counter to what we have discussed before, but it’s true)
  • If you want to retire early (frankly speaking, who doesn’t?). But if this is your plan, then you need to seriously consider this option.

There’s another option for you to consider though.

Partial mortgage note selling

In every investing fundamentals class, you will get through this lesson. If you don’t want to sell the property in its entirety, you can sell it in portions.

That’s also applicable to the note industry. In official terms, this is known as the partial sale option.

Here, you can sell some parts for a lump sum. This will give you the cash you need, and you will get to own the property too.

Here, using a third-party service can be helpful too. The house owner can pay a share to the company, and in turn, the company will pay you. It can also set some rules and regulations to help the buyer too.

Why would anyone sell a portion of notes?

  • They might need the money for some events, such as a wedding or a trip
  • They might need a second income to start or maintain a business
  • They think they cannot maintain the mortgage note, or if the note is really bad
  • They might need money urgently

For people who are more capable of investing and managing the investment, this option is suitable for them.

Read Also: Starting Note Investing? Check These Things First

But if you are not one of them, going for a full sale can be the best option for you.

Also, if you want to sell the rest of the note after selling a portion, you can do it too. It’s not unnatural or unheard of, and you can have a thousand reasons to do it or none at all.

Whatever might be the case, it’s not a problem at all. The company can work through all of it.

However, you need to choose the best option in the beginning. It depends on your requirement and the situation. You must check how fast you can get that money, and what can provide you with more profits.

Now, why would you sell these notes?

  • You will be surprised by the amount of liquidity of these notes.
  • The processing is faster, and you can get your money earlier

If you can handle the entire assignment, then it’s good. Otherwise, you need to contact a professional note servicing company.

The company and its executives must be aware of all the topics concerning investing in mortgages, and how to deal with sticky situations.

The company’s portfolio must reflect their expertise, otherwise, it’s their word against yours.

The website should be the first place to look for some information. Check if the company has relevant certificates and licenses or not. Check for how long the company is running this business, and how many clients they have served.

It will be equally helpful to go through the reviews and ratings. Yes, some companies might publish some fake reviews, but they are pretty easy to identify.

Read those comments and see what people are saying about the company. It will give you a fairly good idea.

The pricing strategy of the company should be another concern. See that the company offers affordable services, not cheap.

We will try to give more hints in our next blog. For that, you need to keep checking Note Conference, a website where you learn all things mortgage notes-related.

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