Mortgage Notes: Tips for Selling to a Private Real Estate Investor

Mortgage notes are legal documents connected to a mortgage loan. It records the promise to repay borrowed funds used to purchase real estate. Also referred to as a promissory note, mortgage notes include specific information regarding the amount of money borrowed, rate of interest and who is responsible for repayment.

Individuals who possess mortgage notes can sell them to mortgage note buyers for a lump sum of cash. There are numerous reasons people choose to sell their notes to a private investor. However, the most common include obtaining funds to pay off debt, medical expenses or finance college tuition. Private investors who purchase mortgage notes will pay cash to the note holder in exchange for receiving monthly payments originally paid to the owner of the note.

The first step to selling mortgages notes to an investor requires providing specific information about the note. The investor will need to know the face value, balance due, interest rate, number of payments made, whether the note is current or delinquent and asking price for the note.

Once the real estate investor has reviewed the mortgage notes for sale, he will make an initial offer. Should you accept the offer and continue with negotiation, you will need to provide additional documents such as current year tax return, pay stubs or income statement, title insurance and amortization schedule.

The next step of selling mortgage notes requires obtaining a real estate appraisal. This can be accomplished by hiring the services of a professional appraiser. Some private real estate investors will cover the cost of the appraisal; however, this expense is usually paid by the note holder.

Occasionally, a "drive-by" inspection may be all that is required. Be certain to specify the type of appraisal required and who is responsible for the cost prior to entering into a contract with a private investor or mortgage note buying company.