Sell Mortgage Notes – A Quick Guide for Note Sellers

If you are looking to sell your mortgage note or notes, also known as promissory notes or real estate notes, there are a few items you need before we can make you a reasonable offer. They are:

  1. Your Original Promissory Note
  2. The Trust Deed or Mortgage (Security Instrument)
  3. Payment history

The Promissory note is the promise to pay and should include the following:

  1. Names of all borrowers
  2. The Full Property Address
  3. The Interest Rate (Fixed Rate or Adjustable)
  4. Late Charge Amount
  5. Amount of the loan
  6. The Term of the loan (months or years)

To have a sell able note:

The Note must enforceable under the law. Your note must have provisions that allow the note holder to force the borrower to comply with legal process in a court of law or via judgment.
The Note must also be collectable. Is the borrower able to make payments on the note?
Is the Note Marketable? If the note is offered for sale does anyone want to buy it? Is it a better investment than other similar investment opportunities?


What factors do we look at when deciding the value of you note?

  • The Quality of the borrower. How good is the payment history, how good is the credit history of the borrower? How financial strong is the borrower? What is his employment history like?
  • The Quality of the collateral security. What is the true appraised value of the real estate, the land, the buildings, the furniture and fixing and equipment?
  • The Term of the note, shorter is better as investors like to get the money back sooner rather than later. Is the Term 6 months,60 Months (5 Years), 120 Months (10 Years), 180 Months (15 Years) or 360 Months (30 Years)
  • The Terms of the note. Is it a full amortized note, does the note have a balloon payment provision, are he payment made monthly, yearly or a single payment note.
  • What are the default provision in the note, what happens if the borrower does not pay or becomes unable to pay?
  • How liquid is the note, if the note buyer or investor need cash fast how easily can the note be sold.
  • How does the interest rate of the note compare to investment vehicles of similar risk.

13 Questions You Might be Asked by a Note Holders

Some Additional Factors that are very important in the determining the value of my mortgage note

  • The Location of the Real Estate/Property. Location – Location – Location, investors like there security to be in nice neighborhoods. If the collateral security of the note is in a bad part of town the value of the note with be dramatically impacted and may in fact make the note unsellable.
  • A Lender Title Insurance Policy is very important, the note buy want to ensure that they are protected should any title issues arise whilst they hold the note.
  • A well written and clearly defined promissory note that is written in plain English has more value that a note that has tones of legal jargon. Most note Investors are not attorneys and like to be able to understand the terms of the note without having a degree in law.
  • The interest rate of the note should ideally be above current market rates or other similar financial instruments. If the interest rate is low, the note investor will discount the note more heavily to achieve his or her desired yield.

I hope this gives you a few ideas of the things we look at when deciding to buy your note.
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