A common question we get is, “how do I prepare to sell my real estate notes?” It is smart to get ready ahead of time prior to putting your notes up for sale. Early preparation makes it so much easier for potential buyers to evaluate your note.
Here are a few tips to help you get started.
Get Organized
Get important documents in order such as the original mortgage or deed of trust, promissory note, deed, allonge, assignments, insurance, and note servicer communication logs.
Gather all this information in one package to present to a prospective buyer. This makes the selling process smoother.
Create a share file folder in Google Drive or Dropbox so that you can share that link with a prospective buyer once they submit a letter of interest.
Lastly, always be transparent with a buyer about issues or problems with note – be honest with your concerns.
Review the Note
Look over your note servicer conversation logs with the borrower. Make note of what has happened with note pay history, the balance, and ensure that the property taxes and insurance are up to date.
Order a Title Report
You may want to get an updated title report on property prior to sale to make sure any title issues are addressed. Do realize that the buyer will want to generate their own report for verification.
Check the Comps
Check the approximate value of the property. Websites like Trulia, Redfin, Zillow, and Realtor.com are useful for finding comparable properties that have recently sold. Locate similar properties that have sold, preferable within the last 3 months.
The value may have gone up, down, or remained the same since you first obtained the note. Your potential buyer will get their own valuation of the property in the form of a broker price opinion.
Knowing the approximate market value will help you make an informed decision when it comes to negotiating a sale price. You can grade the note which will enable you to know how risky it is and adjust your pricing from there.
A stellar note with perfect on time payments and loads of equity in a great neighborhood would likely be considered very low risk grade A.
A grade D note is one with chronically late borrowers or missed payments. A grade F note is non-performing – borrowers who are not paying at all. Most buyers will expect a higher yield for a riskier note.
Check Out the Marketplace
You are probably thinking, “how do I sell my mortgage notes when I have no idea how to price them?” See what is selling the real world.
Visit websites like Paperstac where you can see what comparable notes (similar payments, balance, months remaining) are selling for and what is currently hot in the market. It is best to sell based upon annual yield the note can generate.
The market will dictate how much you can expect to receive on a note. You will know if your asking price is out of line with the market if no one expresses interest in your note.
Plan Your Marketing Strategy
Whether you are planning to sell to private note investment company or if you want to sell via a larger online platform, a marketing strategy is key.
Decide how you want to sell your note. Think about how much time and effort you have available to sell – this will help you determine your best strategy.
Promote Your Note
Create a marketing brochure and email your investor network. Post it on social media sites like LinkedIn, Facebook, online trading platforms, or local/national real estate investment groups.
Or you could forego the hassles of extensive marketing and contact note buyers like us who will buy your mortgage note and close quickly.
