It’s Spring. In real estate, that means it is selling time. Home sellers are sprucing things up, doing a little rehab and trying their best to get the highest price possible for their home.
Here in the note business, we have two things happening. Some noteholders want to raise cash and are looking to sell their note. And, some folks are looking to sell their property and carry the note, maybe for the first time.
Here are three thoughts I have for each of them:
Existing Noteholder
- Where are your documents? You might be surprised to learn the number of people we deal with who don’t have all their documents or don’t even know where some of them are. Any note buyer will want to review the signed promissory note, recorded deed of trust, final closing statement, proof of insurance and payments received, title policy, etc. You should have a clean PDF file. If not, your Escrow Company should help a little.
- Are property taxes current? We have dealt with note sellers who we inform that the property taxes are delinquent and they appear to have no clue this is the case. Develop the habit of checking with your County and making sure they are paid.
- Hire a third party note servicer. Some note sellers are very good at managing their accounts personally. But most noteholders are better off with a 3rd party servicer. They will charge a small fee and you can have your buyer pay it or share the cost with him. The servicer will collect the monthly payments, escrow taxes and insurance, keep an accurate amortization schedule, etc. and when you sell, you simply email this schedule to your buyer. Clean and professional.
New Noteholder
- Know your buyer. Again, you would be surprised at the number of sellers who agree to carry a note for 10-20-30 years and know very little about the person they just tied themselves to. Find out his job history, who will be living in the property, will others be on the note, do a credit check and maybe background check. You want to be as comfortable as possible that you are doing business with the right person. If you don’t feel that way, move on.
- Sell terms – not price. Most potential buyers are concerned about 2 things – how much down payment does he want and how much is my monthly payment. So focus on the dollar amount you want upfront and a monthly payment you expect. Negotiate from there.
- Hire a note servicer. See #3 above.
If I can help answer questions or provide guidance, please reach out to me.
