You want to sell a note you have. I ask if you have an underlying debt. What does this mean?
Your note balance is $80,000. However, when you initially purchased this property, you did not pay cash – you have a mortgage on the property that “underlies” the note you hold. So, can you sell your note in this case?
Maybe.
Let’s say your mortgage balance is $55,000. If we offer 70% or more of the note balance, you would receive a minimum of $56,000. We would require that the $55,000 be paid off so the debt could be extinguished and we would be in 1st position. In my example, you would receive $1000 and the balance would pay off your mortgage.
If the offer to you was less than 70%, you would have to provide the difference at closing. Very few if any note holders would be willing to do this.
Bottom line, the lower the underlying mortgage and the higher the note offer – this would be the best scenario. My experience is that the math is always the determining factor if a note sale makes sense.
