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Mortgage
Note Buyer
(and
passer)
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.
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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.
Fiction:
Mortgage note buyers actually start out in grade school
passing notes to other children. This is how the note passing
and buying process is generally learned. The passing comes
first, then the buying later. And, that's all I have to
say on this subject.
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