Mortgage Note Buyer

Mortgage note buyers need to know many aspects of loan contracts before they jump into buying. A mortgage note buyer also needs to have plenty of cash on hand when deciding to buy a note. Sellers most likely will need cash quickly, so a mortgage note buyer will need to have adequate cash reserves for when the window of opportunity presents itself.

As a mortgage note buyer, you may wish to purchase privately held notes, contracts, deeds and trusts. This may include the buying of homes, commercial property or land. A mortgage note buyer and seller may be interested in simultaneous closings. A simultaneous closing is two separate closings occurring near-simultaneously. The first closing passes the title to the property from the seller to the buyer. At this time, the owner financing - seller financing is created, and the buyer becomes responsible for making monthly payments. After the property sale closes and the associated legalities are recorded, a second transaction occurs wherein the owner financing seller carries back a note that was created during the "first closing".

If you decide to become a mortgage note buyer, you'll need to learn how to analyze mortgage notes, prepare documents, obtain appraisals, secure title work, complete the documents including nonconforming paper and get the note sold. Mortgage note buyers will need to know the ins and outs of full purchases, partial purchases and split payment purchases. Most mortgage note buyers deal with single family residences, mobile homes, condominiums, land and commercial properties.

Mortgage note buyers often work with advisers to the seller such as realtors, attorneys, CPAs, financial planners, bankers, accountants, business brokers and mortgage brokers. As a mortgage note buyer for a business, you'll need to determine the value of a business note. Such factors include the credit worthiness of the payor, the experience of the payor in the business he is buying, amount of money the payor has at risk and the length of time that the business note has been in place. You'll also need to determine the structure of the business note, including payment amount and repayment period and interest rate. Since there are no "standard" business notes or payors, there are no standard amounts to pay for business notes.

Mortgage note buyers need to determine the seller's motivation for selling. Seller carryback mortgage notes and trust deeds are usually sold because the individuals holding them are not in the banking business. Therefore, they don't want the trouble of collecting late payments, and they can use the extra cash for other investments, personal reasons such as college tuition, vacations, purchase of a new car or other reasons.

Mortgage note buyers need to be informed and educated to make the transactions as smooth and seller-friendly as possible. As with other businesses, word of mouth is everything when dealing with this particular industry.