From Noteholder to Notebuyer: Strategies for Successfully buying and Selling Real Estate Notes

Real estate notes are becoming popular and are important tools for diversifying portfolios. Therefore, you can create a successful business by simply buying and selling real estate notes assets. Typically, notes refer to credit agreements and all sorts of notes acknowledging the existence of a debt. They include personal loans, student debts, and even car financing notes.

They are simply the IOU agreements between the lender and the borrower where the borrower commits to repay the amount stated in the note on a stated date.  Therefore, real estate notes refer to the IOU in which a piece of real estate described serves as the collateral for a loan. A real estate note could be a lien or a promissory note.

Consequently, you can buy and sell real estate notes if you are an investor. It allows you to trade in such notes without managing or rehabilitating properties. Here is the process of selling real estate notes.

Identify the Buyer

The first step in selling a real estate note is identifying the potential buyer. You may sell them to an institution or an individual. Also, you may choose to sell the notes online. This could happen if you target buyers without the time to build a network of lenders and banks. Here, you may identify online exchanges that host buyers.

Negotiate With The Buyer

Once you identify the buyer, you must negotiate and discuss the notes. For instance, they may need to know why you want to sell the notes and your asking prices. If you agree to the terms of the sale, you will need to prepare and sign documents reassigning or transferring ownership to the buyer. Also, record the reassignment with the county clerk’s office where the property is located. 

Pass The Loan Documents To The Buyer

Once you agree on everything, including signing the necessary documents, you must pass all the original documents representing the real estate note to the buyer. This should allow them to verify the amount of the loan and the terms. Also, they will see the payments made so far and when the next and final payments will be due.

Allow The Buyer To Appraise The Value Of The Property

The property secures a real estate note. So it would be best if you allowed the buyer to verify the property’s current value. The property value should cover the balance on the note.

Whereas you may disclose the property’s value, the buyer may opt to hire a professional to appraise the property. Also, they may assess the value by assessing the value of the nearby properties.

Credit Check

The buyer must carry out a credit check before sealing the deal. It helps them check if some foreclosures or bankruptcies are likely to jeopardize their position. To do this, they may need some details and info. So ensure you provide the correct information to help them carry out the checks. 

Receiving Payments

If the buyer is satisfied, the next thing they may want to do is to arrange for finances. And again, they may need supportive documents to help them secure note-purchasing loans. So prepare the necessary documents and avail them when needed. 

As a seller, you are obligated to disclose the full terms of the purchase to the buyer. They also need to know the date the note is likely to mature and the conditions that could lead to foreclosure proceedings.

Final Thoughts

Of course, you will always find investors to buy real estate notes because they have physical assets backing them. The lender is sure to recoup their money if the borrower defaults. Thus, buying and selling such assets is easy and can be a good business for you. All you need is to put the right strategies in place, and you could be in real estate business. Just identify the right buyer, provide the required documents and be ready to sign the necessary papers once you seal the deal.