Private Mortgage Notes FAQ

  1. If I can’t sell the note at face value, how much can I get for it?
  2. How long does it take to make the purchase?
  3. How will I get my money?
  4. Who pays the closing costs?
  5. Is there a maximum or minimum size note that buyers will purchase?
  6. Is the transaction confidential?
  7. How can I make sure that I’m getting a fair price?
  8. What’s a simultaneous closing?
If I can’t sell the note at face value, how much can I get for it?

Many variables including the amount of seasoning the note has, the interest rate on the note, the length of time the note covers, the amount of each payment, and the creditworthiness of the payer will affect the amount you can get for your note. Ask your broker to give you at least three offers for your note and consider a partial sale as an alternative to get the most value.

 

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How long does it take to make the purchase?

Generally, it takes at least two to three weeks to close on a real estate note. The buyer has some due diligence to do and will order a title report and an appraisal, which will affect the amount of time. What they learn in due diligence could also affect the purchase amount you will receive.

 

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How will I get my money?

Most buyers will wire your payment directly to the escrow company/title agency, which will give it to you.

 

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Who pays the closing costs?

Sometimes the buyer and sometimes the noteholder pay the closing costs. The amount of money offered will depend on the preference of the seller.

 

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Is there a maximum or minimum size note that buyers will purchase?

It depends on the buyer. Some buyers aren’t interested in note less than $50,000. Other buyers specialize in small notes like short term notes on mobile homes. A note broker will be able to find the buyers that would be interested in your note.

 

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Is the transaction confidential?

If the buyer can’t promise you confidentiality, don’t do the deal. Again, a real estate note broker should find you buyers who understand the importance of confidentiality.

 

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How can I make sure that I’m getting a fair price?

First, ask for a thorough explanation of the basis for the offer. If any factors can be changed to get you a better offer, change them. Second, you should try to get more than one offer. If buyers know that they are in competition or that you are looking for the best offer and not just any offer, you may get a better price, depending on the quality of your note.

 

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What’s a simultaneous closing?

A simultaneous closing occurs when the buyer of your note purchases it at the same time you issue it. The transaction could take place at the closing table. Note sellers who would prefer to get their cash upfront appreciate this option. However, these arrangements are rare because not all buyers will make these purchases, and the note has to be of high quality. In fact, if you want a “simo”, consult with your broker as to how to design the note to make it more attractive to buyers. Let your broker know that you are interested in a simultaneous closing, and he will find out if one is possible.

 

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