Real Estate Note

When it comes to real estate note dealing, there is a lot to be concerned with. Whether you have just learned what a mortgage note is, or you have had a great deal of experience buying and selling them, chances are that there is always going to be something that you'll have questions about. Indeed, individuals may have many questions when it comes to their own mortgage, the mortgage note holder, and the seller, but there are some basic principles that one should remember in order to keep everything organized!


1. Know What the Note Is

First and foremost, perhaps the most important thing to remember about a real estate note is to know exactly what it is. Essentially, a mortgage note, or real estate note as the two terms are interchangeable, is a piece of paper or some other type of document that shows how a piece of real estate, housing, or land is purchased. That document will usually list the mortgage note holder, the property buyer, and all the agreements and terms set forth. Usually, the mortgage note holder will be the one to set forth most of the terms, because they are the ones who are providing the cash for the property buyer to secure the property that he or she wants.

In addition, knowing exactly what is contained within the owner financing notes is important for both the property buyer and the real estate note holder. If you are going to buy a property, then the most important issues you should be concerned about is where you will send payments, what date the mortgage payment is due on, and what will happen if you default on a mortgage payment. All these things will be spelled out in the note itself, but reading and re-reading them is important to make sure that you won't get duped in some way or another.

2. Guidelines for Mortgage Note Buyers

On the other hand, if you are a mortgage note buyer, then you should also know what your responsibilities are. The note buyers are very important because they are essentially the ones who are going to be taking over the real estate note in the first place. For example, if a mortgage is held by Company Number One and is about to be purchased by Company Number Two, then Company Number Two should realize that they are the ones who will be in control of the terms, payments, agreements, and details that are within the real estate note itself.

For the property buyer, note holders will often cause confusion, but one of the things that mortgage note buyers should realize is that they should spell out their terms exactly as they want them and give all the details to the property buyer. For example, if the real estate note was purchased for less than the buyer's purchase price for the property, then this should naturally be stipulated. In addition, if any of the important matters are going to be changed, such as the date that the mortgage payment is due, a decrease or increase in the payment, and anything else that is considered important should be reviewed by the property buyer in order to come to a mutual agreement on the whole real estate note!

3. Selling a Real Estate Note

However, on the flip side of the coin, if you are the mortgage note holder and wish to sell the real estate note, then there are also some guidelines that he or she should keep in mind. When dealing with the selling and buying of real estate notes, it is always important to remember that the mortgage note holder will probably rarely ever get the full purchase price for the real estate note itself! This is mainly because the note buyer will naturally want a lower price for the mortgage note in order to realize a profit.

On the other hand, the current mortgage note holder may want to sell the note he or she has because he may be simply getting out of the real estate business. If this is the case, though, then there is probably going to be virtually no downside to the real estate note holder, simply because it should increase the amount of capital the holder currently has. Many real estate professionals already know that selling mortgage notes will pretty much always raise the amount of cash that one has, and this is also considered a big reason why many continue to practice the buying and selling of real estate notes.

4. Obtaining Multiple Quotes

Another thing that the current real estate note holder may want to do if he or she is getting out of the real estate business is to seek out multiple quotes on how much potential mortgage note buyers will pay for the property they are selling. When doing this, however, all the specifics about the property must be included. Some specific items about the property that should be mentioned include what type of property is currently trying to be sold, how much the buyer's purchase price for the house or property was, and the current balance that is owed on the mortgage note itself, as well as the amount of the payment that is usually collected each month!

An important thing to keep in mind is that there are plenty of potential mortgage note buyers out there, because there is a whole market devoted to the buying and selling of real estate notes! Some individuals actually make a profit off real estate notes by bargaining the price and purchasing them at low costs and then selling them for a greater overhead than what they bought them for. If you have ever been involved in the real estate business, then chances are that you know some of the practices that real estate note buyers and sellers do on a regular basis. One should realize that the whole purpose of being in the real estate market is to realize a better profit than what you started with!

5. Property Buyers: Watch Out

If you are currently a property buyer and also someone who owes on a mortgage, then chances are that you already know how serious the business of real estate mortgage notes are. There are all sorts of real estate note buyers and sellers on the market who are simply after your money, but the first thing you should be concerned with is yourself and your family. Some situations creep up where some property buyers don't even realize that their real estate note is switching hands. However, it's important to watch out for shady practices that real estate note purchasers may do in the midst of all the confusion. For example, a brand new mortgage note holder could have easily raised the price of your mortgage by entering into an agreement with the current mortgage note holder. Even though it would seem mandatory to let the property buyer and mortgage debtor know about these practices, sometimes they don't have a clue!

One way to protect yourself from these malicious real estate note practices is to enter into an agreement with your current mortgage note holder to contact you beforehand if he or she decides to sell the mortgage note in the first place. If you have an agreement like this in writing in the terms of your mortgage note, then there is no way they are able to pull the wool over your eyes!

6. Checking Credit Histories

One issue that many real estate note holders don't take into consideration before actually buying the real estate note they are after in the first place is the issue of whether or not the property buyer, which is the person who owes money on the mortgage, will end up in default status or not. However, this is an important issue that one must deal with, and one way to prevent anything from happening is to check the credit of the property buyers. In other words, the real estate note buyer should be aware of whether or not the property buyer is a credit risk. After checking his or her credit, only then should the potential real estate note buyer make any decisions about whether or not to purchase the mortgage note!

However, if the potential buyer of the real estate note doesn't bother to do any due diligence about the client that he or she will be working with, they very well may actually lose out on the whole deal if the property buyer ends up defaulting or missing several payments on the mortgage payment. Of course, the mortgage note holder can easily become a mortgage note seller if he or she realizes that there are too many risks, but checking the credit of the person you'll be receiving payments from is very important!

7. Getting the Most out of Mortgage Notes

There may be a plethora of reasons why you have decided to sell the mortgage note that you currently own. However, if you have found yourself in a situation that makes staying in your mortgage note impossible, then you obviously will want to sell it and get the most for your real estate note as possible. Selling your real estate note for as high a price as possible is the main concern of most mortgage note sellers; however, it may not always be possible to do so, especially if the real estate market has taken a plummet towards low prices.

However, one way to get a high purchase price for the real estate note that you're dealing with is to keep the note beyond the first six to ten mortgage payments. When a mortgage note is kept beyond the first six to ten mortgage payments, the note is considered to be "seasoned." Many times, the mortgage note holder will get a better price if the note is seasoned, so that is one way to increase the sale of your real estate note!

8. Stick to the Agreement

The best thing for any mortgage note holder, mortgage note seller, or even property buyer to do would be to stick to the original owner financing notes that were used in the mortgage agreement itself. There are many benefits to doing so, especially if you are the one paying on the mortgage. Many property buyers don't realize this, but there may be special perks or even a drop in interest rate by making the agreed upon mortgage payments and sticking to the agreement!

For all involved, though, it's important to keep the real estate note the same and up to date, unless there are changes to be made that everyone will agree on. This way the property buyer will not get a raw deal, and the mortgage note holder will get the best deal possible in the end because he or she will be receiving the mortgage payments!

9. Outline the Fees

Last but not least, one thing to keep in mind whether you are the real estate note holder or the buyer of the property is to consider all the fees that are involved with the mortgage note. There may be a variety of reasons that specific fees may be charged. For example, the mortgage note holder may charge a fee for the creation of the mortgage note itself! On the other hand, some of the other fees that could crop up could result from the selling and buying of the real estate note down the line. There are all sorts of hidden fees associated with having a mortgage on a house or another type of property, but understanding all those fees upfront and knowing what you have to pay for and what you do not is very important!

Another important fee, however, that property buyers should be aware of is the fact that there are certain fees associated with buying property that has a problem with the title. That is yet another example, though, of the many fees that could be passed off to the property owner if they aren't paid attention to! All things considered, however, dealing with real estate notes is a very serious matter; it is one that should not be taken lightly, but everyone involved should have equal responsibilities!
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