We buy Real Estate Notes, Contracts, and Mortgages

Mortgage Buyer. Looking for a mortgage buyer? You found me.

2010-02-12T09:18:00.000-08:00

Are you receiving payments on a mortgage note?

Trying to find a mortgage buyer? Bingo - you just found one... Me!

Take a look around this blog and check out the main mortgage buying website:

looking for mortgage buyer?

Can I buy all mortgage notes? Nope. Can I buy yours? Snoop around the site and this blog, and you will find out.

Disclaimer: This site and blog contains some attitude and some humor regarding the note industry. Proceed with caution. And, remember to eat your veggies.

What is my note worth? How do you value a real estate note? Note quote 13 factors.

2010-02-12T08:43:00.000-08:00

The price I can pay for your real estate note is determined by 13 factors.

1. What type of property did you sell?

2. When did you sell it?

3. What was the selling price of the real estate?

4. What was the down payment you received?

5. What city, state is the property located in?

6. How long did you own the property prior to selling it?

7. What is the current balance on the note you are selling?

8 . What is the interest rate?

9. What is the payment amount on your note?

10. Is there a maturity date or balloon payment date on the note?

11. Describe the payment history.

12 . Are the taxes and insurance on the property current?

13. Is the note payor’s credit good, bad or ugly?

If you want a real quote or value on what your real estate mortgage note is worth, be sure you have the information regarding these 13 questions.

Note Sellers are in a Frenzy over the previous post...

2010-02-11T09:59:00.000-08:00

About an hour ago I made a post that has caused the note selling world to virtually turn upside down.

(You can skip down and read the post and return if you want to get up to speed)

Because of the deluge of calls, emails, tweets and CNN reporters snooping around, I must address the facts of this post in question.

The issue revolves around a note seller who accuses the note buying industry of trying to "steal" his 3% interest rate note. He said he is sick of all the "lowball" quotes to buy his note...

Let's look at the simple facts of what we know:

All the note seller tells us is that he has a 30 year note with an interest rate of 3%.
He mentions that he needed a quick sale of his property and that is why the low interest rate.
No other details...

Did you know? What's the value of a $100,000 balance note at 3% interest, payable over 30 years?

I will fire up my note buying "fancy pants" software to answer this question...

The monthly payment amount would be $421.60.

If an investor wanted to earn 10% yield on his money by buying this 3% note he would have to buy the note at $48,041.

Holy Schmoly!

That's less than 1/2 of the note balance!

Welcome to basic math people.

If you give someone a 30 year 3% mortgage note, than you are going to get smacked hard if you try to sell that 3% note to someone else later on.

You can see why Mr. crybaby note seller thinks that everyone is trying to "steal" his note.

He never realized that he was the person responsible for the discount being so big. It was his decision to allow such an attractive note to his property buyer.

If he knew that his 3% note would only be worth 40-50 cents on the dollar, he would have probably negotiated the seller financing a bit differently...

CNN reporters can go home now.

False alarm.

I am trying to sell my mortgage note, how come the quotes are so low?

2010-02-11T08:38:00.000-08:00

THE FOLLOWING IS A RECORDED PHONE CALL I RECENTLY HAD:
THIS IS HOW THE CONVERSATION WENT:

Me: Hello.

Caller: "I have a mortgage note that I am receiving payments on. I needed to sell the place really fast, so I gave the buyer a great deal both on the price of the house and on the note.

To help induce a quick sale I offered to carry the note at only 3% interest for 30 years.

Now, after I have received 6 payments (I wanted to season the note), I need to sell the note to generate cash for my other real estate ventures.

All the note buyers are giving me these "lowball" quotes to buy my note. What gives? I think all you note buyers are just trying to steal my note because you know I need the money.

I am just going to walk down to my local bank and get a quick loan against this mortgage note. The banks need good business these days. Heck to all you "lowball" note buyer people...

Click.

End of conversation.

The caller had whipped himself into such a frenzy he hung up.

All I said was, "hello."

Are all note buyers trying to "steal" the real estate notes that are presented to them?

Answer: ~~Yes.~~ Whoops, No? I mean maybe? What? Do I have to answer? What was the question again? No? Final answer: no.

I have an investment house I am preparing to sell, and I am considering offering seller financing...

2010-01-08T14:28:00.000-08:00

If I sell my house on seller financing what type of discount is typical when I go to sell the note?

There are too many factors involved to give a "once price fits all scenarios" answer.

The price I can pay for your real estate note is determined by 13 factors.

1. What type of property did you sell?
2. When did you sell it?
3. What was the selling price of the real estate?
4. What was the down payment you received?
5. What city, state is the property located in?
6. How long did you own the property prior to selling it?
7. What is the current balance on the note you are selling?
8 . What is the interest rate?
9. What is the payment amount on your note?
10. Is there a maturity date or balloon payment date on the note?
11. Describe the payment history.
12 . Are the taxes and insurance on the property current?
13. Is the note payor’s credit good, bad or ugly?

People always want to know what there note is worth, now you have the information that is used in pricing your note.

Question: I bought my house on a seller financed note.

2009-07-21T11:48:00.000-07:00

The lady who sold the house to me was real nice.
She gave me a fair price and a small down payment. She didn't require a whole
bunch of paperwork like tax returns or credit reports from me.

I have been making payments pretty good. last year I only missed 2 payments, and this year I am only behind for May and June.

She told me she is fixing to sell the note to an investor company like yours.

My question is this: "If you buy the seller financed mortgage note from this nice lady, will you foreclose on me because I am just a little bit behind on the payments?"

Answer: I probably would. If I buy a note, I expect to get paid on my investment. Otherwise, I might as well start making donations to my favorite charities as opposed to buying notes.

I am selling my real estate note. How come nobody answers the phone?

2009-06-19T12:55:00.000-07:00

In the note buying business, you are going to find that 95% of the people in it are part timers.

They are working their "real" job during work hours and then when they are home they can tend to their part time note broker business.

You can either leave them a message on their voicemail machine, or you can call us.

We are the investor, not brokers. Redphonefunding.com 866-478-0585 someone is here buying real estate notes Monday-Friday from 6am to 5:30 pm Seattle time.

Want to talk to a real person about selling your note? Pick up the phone and give us a call.

Again, 1-866-478-0585 to get a live note buyer on the line to answer your questions about cashing out your real estate note.

I am thinking about creating a seller financed note.

2009-06-11T09:42:00.000-07:00

I am selling a rental house and the last potential buyer couldn't obtain a new loan from the bank.
My real estate agent said I should offer seller financing and carry the note for the buyer.
Obviously, this would facilitate a quick sale of the property. But, I am not sure I want to carry the note for the next 20 years.

My real estate agent says that I could take a 10% down payment and get a good return of 5% interest rate. He says that should I want to sell this note, it would be very simple to sell the note to a note buyer.

Is this accurate? Is the real estate agent shooting straight with me?

A: Nope.

Typically, the agent is looking out for their commission, not your best interest.

With only 10% down payment (and realize 6% will go straight to your agent), this small down payment will prevent a note buyer from buying the entire note from you. The reason is that the loan to value of 90% is just too high for a note buyer.

5% interest is better than you could earn in a CD, but most note buyers are going to be in the 10-18% yield range. Which means you will be taking a decent hit even on a partial note sale.

Will seller financing enable you to sell the property quicker? Yes.

Will you be able to sell the note for 95-100 cents on the dollar like most real estate agents suggest?

No way.

Note Buyer, My note payor has bad credit...

2009-05-21T14:43:00.000-07:00

Calling all note buyers...

I just talked to a note buyer and he asked me what the credit score of the payor on my note is.
How do I know? He makes his payment on time, that's all I care about.

What's the dealio with the credit score of the note payor?

Answer: Like everything else I have said in these related blog entries, credit score of the note payor is just 1 factor in the 13 factors that determine the value of your real estate note.

Obviously, the credit score (good or bad) doesn't tell you what the payment history will be on the note in the future.

Credit scores are just a value that the credit bureau's assign based on the creditors who have reported to them, based on an individuals past accounts...

Some note buyers place a great deal of emphasis on credit scores, other note buyers place very little weight on the payor's credit score.

Want to sell your note? Call me and we can talk about what I would pay to buy your note.

Note buyer? I am selling a real estate note. I just found out that the payor has let the property taxes go delinquent...

2009-05-18T07:57:00.000-07:00

I called the county tax office and they told me that the people I sold my house to have not
paid the real estate property taxes for the last two years.

They owe $1,603 in delinquent taxes.

I want to sell my real estate contract now. Is this going to be an issue?

A: Yes.

I am happy to buy a real estate note, but I do need the property taxes and insurance to be current and up to date.

(Many note holders forget to verify that their borrowers maintain hazard insurance on the buildings)

There are three ways to handle the purchase and sale of your real estate note when the payor has delinquent taxes owing on the property:
1. Contact your borrower and tell him to get in to the county asap, and pay the taxes.
2. You can pay the taxes and then have your borrower re-imburse you.
3. I can buy your note and pay the taxes out of the note proceeds and then you can seek re-imbursement from your payor.

Bottom line: I have to have the property taxes current at the point I buy your note.

It is certainly worth a phone call once or twice a year to the county treasurer and the insurance broker to verify that your payor is keeping up to date on property taxes and insurance.

Looking for the best price on selling your real estate contract?

Looking for a note buyer. How important is the payment history on my note I am selling?

2009-05-08T11:39:00.001-07:00

Very Important.

Payment history is another important ingredient in the pricing of a real estate note.

In regards to Payment History, A real estate note is typically classified into 3 categories:
1) Perfect pay history
2) Spotty pay history - but currently Up-to-date
3) Defaulted Note.

That's it.

3 categories.

The most valuable notes are the ones that have a "perfect" pay history.
The fact that they have a perfect pay record usually means that the note holder is very
happy hanging onto the note because the payments come in like clock work...

Often the only time a note holder considers selling their note is when the payments stop coming in like "clock work."

This is often the wrong time to sell your note.

The note payment history issue is this: Your note will be classified into the 3 categories listed above.

...and it will be priced accordingly.

Lower discount for perfect paying notes.
Bigger discound for spotty pay history notes.
Humongous discount for defaulted notes.

Moral: Don't let your note payor miss a payment!

Once they miss a payment (for any reason) it becomes a "spotty" pay note.

Get the most for your notes - keep on top of your note payors.

Most note holders start thinking about selling their note when the payors begin to have trouble making their payments on time...

Looking for a note buyer?

Selling my note. Does it help if I have a balloon date in the note?

2009-05-07T12:32:00.001-07:00

Or, do you like to see notes that have 25-30 years of payments left?

Balloon date or maturity date = good thing.

25 to 30 years of payments remaining = not so good.

Reason: To a note buyer, the YIELD on their investment in the note is what will (in part) determine the pricing of the note.

What is YIELD?

Yield to the note investor is the return divided by the investment.

The quicker the payback the higher the yield to the note investor.

All notes are purchased at a discount from the face value of the note...

Having a balloon date or early maturity date is similar to a previous post about the payment
amount (the larger the monthly payment, the better). It all relates to the quicker the payback on the note, the better yield for the note investor.

Concern: The balloon date or maturity date must be "realistic." If the payor on the note is an unemployed "F" credit borrower, it is not realistic for him to re-finance the note in 2 months.

If the borrower cannot perform, the balloon date is a bad thing...

Confused?

I don't blame you...

Payment amount. What is the payment amount on the note?

2009-05-04T14:52:00.000-07:00

"I have a note that I want to sell. The balance is $89,213.44.

The monthly payment amount is $541.08. Is this a valuable note?"

A: It would be a lot more valuable if the payment amount was $925.

To a note buyer, the yield that is earned on the invested money is a function of
"how quickly are you paid back."

So, the quicker you are paid back, the higher the yield on the note investment.

In the above example, the lower monthly payment amount of $541.08 means it will take
349 months to pay off the entire balance at 6% interest.

Using the same principal balance and interest rate, the loan is paid off in only 132 months at a
monthly payment amount of $925.

The note buyer is paid off over 18 years quicker with the higher monthly payment amount!

Moral of the story: The higher the monthly payment amount, the better for the note buyer. And, the more valuable your real estate note will be, should you decide to sell the note.

Interest Rates. High, Low, talk to me about how the interest rate affects the sale of my real estate note.

2009-05-01T11:59:00.000-07:00

"I love my brother in law. I sold him a piece of property and I have a note with an interest rate of 12.5% This should get top dollar right?"

Another note seller: "I hate my brother in law. I sold him a piece of property and my wife said I couldn't charge anything over 4% interest. She loves her brother. I don't. I assume I am toast as far as selling this note right?"

Interest rates... Like we have learned so far, the interest rate you carry on your real estate note is simply one piece of the big puzzle. There are 12 other factors that determine the "value" of your real estate note to a note buyer.

Obviously, in simple terms: The higher the interest rate you charge on your note the less the potential discount you will incur if you sell your note.

Some people think that a low interest rate note will prevent a note buyer from buying the note.

This is not true.

I have bought many notes with 3 to 5% interest rates.

I have bought many notes with a zero interest rate...

Usually it's a family thing.

A low interest rate simply means that the discount to buy the note will be larger than if the note carried a higher interest rate. The present value of a note with a 9% face rate will always be more than the present value of a note with a 2% face rate...

Moral of the story: A low interest rate note can easily be sold. The note seller will simply be looking at a bigger discount to sell the low rate note (probably should'a thought about that when he was negotiating the terms of the note back when the property sold).

A note with a high interest rate doesn't mean that it's a great note, but everything else being equal, a higher interest rate note is worth more than a lower rate note.

Note buyer. Calling all note buyers...

2009-04-27T06:40:00.000-07:00

I have two notes for sale and I cannot get any note buyer to call me back.

One of the notes is my grandma's. The current remaining balance on it is $2,019.

The other note is one I found on the internet and the current balance on this one is $17 million.

I would like to sell my grandma's note and broker out the sale of the big one.

Why won't anyone call me back on these two notes? What's the deal?

A: The size of the note is another important factor in pricing your real estate note.

There are big notes, small notes and average notes.

The industry average note balance is $53,000.

Once the balance on a seller financed note gets below $10,000, most note buyers will not be interested because the balance is just too low.

Any note over $1,000,000 is usually just too big for any note buyer to take on.

Obviously, there is exceptions to every rule. But, you will have a tough time finding any note buyer that will be able to buy a note that big.

Regardless of the size of the note you are trying to sell, common manners tell me that you should at least get a phone call back. Thanks for your question.

Got a note you are looking to sell? Want a quote? Curious how I would price your real estate note? Simply give me a call: (206) 438-8399

"I am a flipper. I buy the house low, fix it, and sell it quickly and carry the Note..."

2009-04-22T11:01:00.000-07:00

Can you buy the seller financed note on these quick flip real estate deals?

Nope.

Other note buyers might be interested in the quick flip, sell the property with seller financing, and then sell the note off.

I have just never been a big fan of that type of mortgage paper. The default rate is too high for my comfort level.

Putting it another way... I am not interested in buying Notes if the Note seller owned the property for a short time prior to selling the property.

I am more concerned with the "seasoning" of the property ownership than I am of the "seasoning" of the Note.

Let's look at an example:

Ma and Pa Kettle owned the 29 acres and the mobile home that sits on the property for 12.5 years. They decide to move to Florida and sell the property. They owner finance the new buyers and create a 6% interest Note that will be payable over the next 20 years.

I would buy that Note after only 1 payment has been made. The Note "seasoning" need only be 1 month in this case. It's because the Seller/Property "seasoning" was 12.5 years.

In the case of a real estate investor/flipper: Bought the real estate 3 months ago. Fixed it and sold it with owner financing. He created a 9% Note payable over the next 20 years.

I would not be interested in buying this Note. The Seller/Property "seasoning" was just 3 months.

Owned the property for a long time before selling it on owner financing? I will pay top dollar for your mortgage note.

Owned the property a short time before selling it with owner financing? I am probably not your Note buyer.

Now, as always there are exceptions to this rule...

One would be in the case where Ma & Pa past away. The property is inherited by Elmer Jr. Elmer Jr. then quickly sells the property and carries back a Note.

Even though Elmer Jr. only owned the property a short time, I would still be happy to buy this Note because it was in the family for a long time...

Later

I am selling my note. Does it matter where the real estate is located?

2009-03-25T09:57:00.000-07:00

Yes it does.

Desirability. Attractiveness to a potential buyer. It all counts for something.

Question: Would you rather own a real estate note secured by a nice house located
in Newport Beach, CA.
Or, would you rather own a real estate note secured by a nice house in Akron, OH?

Where the propety is located is part of the equation in pricing your real estate note.

A better example in regards to property location affecting the value of a real estate note would be this:

A guy sold 70 acres of land in Lost Springs, WY for $20,000 and carried back a real estate note for $10,000. (he got a $10,000 cash down payment - nice!)

The interest rate is 10% and the borrower is a goold ol' guy.

So, what's the problem?

Lost Springs, WY is "out in the sticks."

Actually, it is way past the sticks.

Lost Springs, WY has a population of 1.

It's nowhere.

1 person lives in this city. He is either very happy, or very lonely.

If our borrower happened to default, we just don't have a lot of potential buyers of the 70 acres...

PS I didn't tell you that it took the seller 4.5 years to sell the property.

I'm selling my real estate note. The payor had a huge down payment, does this matter?

2009-03-23T12:42:00.000-07:00

Yes.

It matters a ton!!!

You sold your real estate. Your borrower put down a huge down payment.

Congrats.

Your note will be much more valuable to a note seller because of the large down payment your borrower paid you when you sold him the real estate.

The cash down payment from the borrower is his "blood" in the deal.

The more blood he has in the deal, the more motivated he will be to keep the property. I like motivated payors on the real estate notes I buy.

A person who put a large down payment into the property, will incur a large
degree of uncomfort if they are thinking about not making their note payment.

Motivated payors keep their note payments current and up to date.

Payors who bought the real estate with nothing down, have zero "blood" in the deal.

Nothing down note payors are no different than renters. Actually, a renter has more "blood" in the deal than a zero down property buyer. A renter has to come into the deal with 1st month, last month, and security deposit.

A zero down buyer comes in with zippity doo dah.

A nothing down buyer will sometimes choose to pay his blockbuster or netflix bill before paying his real estate note.

This is not the case with a payor who put down a large down payment.

Bottom line: Get as big a down payment as possible if you are selling your property with seller financing.

Mortgage Note Buyers, I want to sell my note. Why does it matter what I sold the property for?

2009-03-17T07:11:00.000-07:00

Question:
Which note would you rather buy and own -
A) A $50,000 note secured by a house that sold 3 years ago for $125,000.
B) A $50,000 note secured by a house that sold 3 years ago for 51,000.

Answer:
Equity. Equity. Equity.

Why does a real estate note buyer want to know what the property sold for?

It speaks to the equity or potential "equity cushion" that the payor has in the deal.

The more equity that the payor has in the deal, the less likely the payor will want to
default on the mortgage note.

For a note buyer, knowing the actual selling price paid for the real estate is an indication of the property value at the time of the real estate transaction. Certainly, the property may have fluctuated in value since the sale. But, it is a benchmark as to value at the time of the sale.

Real estate notes that have protective equity (the difference between the note balance and the selling price or current value of the property) are MUCH more valuable than notes that have little to no protective equity.

Again, selling price of the property is just 1 of 13 factors or variables that go into the pricing or determining the cash out value for your real estate note.

I am trying to sell my real estate contract. What can I do to sell it for the most money?

2009-03-13T09:18:00.000-07:00

I get this question a lot.

Typical scenario:

For many different reasons someone sold a piece of real estate and decided
to "carry back" the financing for the buyer of the property
(could be a house, bare land, commercial building, whatever)

Initially, it's kinda fun to be receiving monthly payments from your buyer (also known as the borrower or payor).

But, at some point in this scenario, the note holder thinks, "these monthly payments are nice, but I can't really do what I want to do with these payments that trickle in every month. I need a bigger pot of dough."

Many real estate note holders eventually get to the point where they want to sell their real estate note.

Enter red phone funding the West's largest buyer of seller carried real estate notes.

People always assume or think they can "do something" to make their real estate note more valuable to a note buyer.

This unfortunately, is not the case.

Once your note is created between the property seller and the property buyer, their is very little that can be done to make the note "more valuable" to a potential note buyer.

The value of your note is going to be "set in stone" based on the terms and conditions that where negotiated between the note holder and the note payor way back to the time when the property was sold (at that time, the note was actually being formed and negotiated into existence between the property seller and the property buyer).

All this to say, be careful when you are selling your real estate property. The terms and facts and figures negotiated at the time of the sale of the real estate, will affect forever the marketability and desirability of the real estate note that you now carry.

I sold the property 3 months ago. Will you buy this note?

2009-03-12T11:06:00.000-07:00

Absolutely.
Sure.
Probably.
Well maybe.
Depends.

The fact that you sold the property just 3 months ago would not prevent me from buying the note.

As a matter of fact, I am happy to buy a note after only 1 payment (as long as everything else makes sense).

WARNING: I DO NOT BUY NOTES VIA A SIMULTANEOUS CLOSING.

What we are talking about in this short blog post is the issue of note "seasoning."

Note seasoning or the period of time the note holder has been receiving payments is a buzz word in the note buying industry.

Many people have heard that you need 6 months seasoning of the note or 12 months seasoning of the note before any note buyer would even consider buying the note.

This is not the case for me.

Seasoning of the note is not that important for me - 1 payment is the minimum seasoning I need. But, note seasoning is just one of 13 factors that go into the desirability and pricing of the note.

Note seasoning for me is NOT a big factor. Down payment from the payor is a MUCH, MUCH, MUCH more important factor than the seasoning of the note.

Note seasoning is important in that it shows the history of the payor making payments on the note.

Let's analyze seasoning a little bit...

Most people assume the longer the seasoning of the note, then the note must be a more desirable note.

Not true.

What's better?
1) A note that has 14 months of seasoning on it. Only 3 payments were paid on
time. 2 payments were missed entirely.
OR,
2) A note that only has 6 payments of history, but all were made on time.

Simply based on the seasoning alone, which one is more attractive?

Bottom line: Note seasoning plays just a small role in the pricing of your real estate note. For me, only 1 payment is required to pass the seasoning issue.

There are other note factors far more important than the length of time you have been receving payments on your note.

I want to sell my mortgage note. Does the property type matter?

2009-03-09T09:55:00.000-07:00

Yes.

The type of property you sold to create your real estate note will have a big impact on the "cash value" of your note.

Real estate comes in 64 different flavors:
Single Family House
Commercial Retail Building
8 Unit apartment complex
40 acres raw land
Condo unit in a 355 unit building
1/4 acre buildable lot
Gas station
Movie Theatre
Pizza restaurant
Strip mall
1972 single wide mobile home on 4 acres
Mixed use - flower shop on bottom and 2 unit apartment above
etc.

Not every property type has the same "attractiveness" to a note buyer.

Always remember that a note buyer will always be looking at your note and considering the "worst case" scenario... Which would be a default by the note payor.

Which means the property would now have to go through the foreclosure process and eventually be resold.

Some properties are much more "sellable" than other properties.

Question: Which property would sell quicker and faster?
Propert A) A 40 acre piece of raw land located in the mountains of Wyoming.
Access to the property is by rocky goat trail only.

Property B) A nice 8 year old house in a cute little subdivision just 20
minutes from Seattle.

If you picked property "A" as more sellable, please contact me as soon as possible. I have some land I need to show you.

Different kinds of property will appeal to different potential buyers. A single family home simply has the most potential buyers - therefore is a "more desirable" property type for a potential note buyer.

Are you receiving payments on property you sold?

If you have a question on the desirability of the property type you sold to create your real estate note - feel free to drop me a line...

Note Pricing. I am still trying to figure out how you price or value my note?

2009-03-06T12:00:00.000-08:00

Real estate notes are valued or priced based on 13 factors.

These factors are known as the "Bakers Dozen" of note valuation.

Some notes are structured to be really strong in 4-5 of the factors, but may be very
weak in the other 8-9 variables that determine real estate note value.

It is the "whole" note structure that is taken into consideration when pricing each real estate note.

Let's reveal the 13 factors that will determine the value of your note:

1. What type of property did you sell?
2. When did you sell it?
3. What was the selling price of the real estate?
4. What was the down payment you received?
5. What city, state is the property located in?
6. How long did you own the property prior to selling it?
7. What is the current balance on the note you are selling?
8. What is the interest rate?
9. What is the payment amount on your note?
10. Is there a maturity date or balloon payment date on the note?
11. Describe the payment history.
12. Are the taxes and insurance on the property current?
13. Is the note payor’s credit good, bad or ugly?

The "stronger" your note is on these 13 factors, the more money your note will bring should you want to sell it for cash.

Real estate Notes: Full versus a partial note sale...

2009-03-05T10:06:00.000-08:00

Receiving payments on a real estate note?

Thinking about selling your note to a note buyer?

Most note sellers would rather (if they could) sell the entire note.

Not all real estate notes can be sold. Let me say that differently - Not every
real estate note will have a buyer.

There are basically 2 ways you can sell your real estate note.
(1) You can sell the full note - which mean the entire note is sold off.
This means the note seller walks away with cash from the note buyer and
the note buyer starts receiving the payments from the note payor. The note
seller is cashed out of the note, and the note seller is now out of
the deal completely.

(2) You can sell a partial payment stream of the note - which means that you
are only selling a portion of the real estate note, not the whole note.
For example, you might only sell off the next 4 years of monthly payments.

The note seller would receive cash up front, the note buyer would receive
the next 4 years of monthly payments from the note payor, and then the note
would revert back to the note seller and he would start receiving the
monthly payments again from the note payor.

Which option is better?

It just depends on the wants, needs, and figures involved in a full buy or a partial buy of the note.

Another way to describe the partial vs the full note scenario:

Let's assume you have a pizza (with 8 slices to it) and want to sell the entire pizza. If I want to buy the entire pizza from you, I will pay you for the whole pizza.

But, Let's say I only want to buy 3 slices of pizza.

Since I am only buying 3 slices of the pizza, I am only going to pay you for the 3 slices I get to eat. You get to keep the other 5 slices for your enjoyment.

Real estate notes and Pizza. Mmmm... Mmmm... Good.

I have a real estate note which has a very low interest rate of 4%. Is there a note buyer who will buy this note?

2009-03-04T06:36:00.000-08:00

Yes.

I am happy to purchase a low interest rate note.

The interest rate on the note you are receiving payments on does NOT affect the
ability for a note buyer to buy the note.

A note with ZERO interest rate is easily purchased by a note buyer.

Keep in mind, that the lower the interest rate, then the bigger the discount
will be to sell your note.
example: A note with a 11% interest rate will sell at a much smaller discount than
a note with a 4% interest rate.

Also keep in mind, that the interest rate on the note CANNOT be changed unilaterally by the note holder.

A lot of people think that if they sell their note, the new note holder will raise the interest rate?!?!

The terms of the Promissory Note cannot be willy-nilly changed at the whim of the note holder. (Your bank can't call you up in the middle of the night and say, "Since I am losing money, I am raising your note interest rate to 13.5%.")

So, there are many factors that affect the value of a note - Interest rate is just one factor involved in the value of a note.

A low interest rate will mean the note is less valuable than a similar note with a higher interest rate.

But, a note with a low or even a zero interest rate certainly can be sold.