Real Estate Agent · Rialto, CA · Member since 2015 · 4 posts · 1 vote
Hi BiggerPockets Community,
Recently a family member approached me about selling a property note for a property that he owner financed a few months back. I have never done that before, I am a Realtor and was hoping that my broker could assist me in the transaction. Unfortunately, he could not provide me with much information because he haven't done too many of them himself. I do have the following questions, but please feel free to add any information that you feel is important. Any help would be greatly appreciated.
1. How do I calculate what the price point should be to sell?
2. Best place to sell notes?
3. How does selling notes differ from other transactions?
4. What materials are needed in the transaction?
5. What are the things I should pay close attention to doing the transaction?
I'm sure there are alot of forum posts about selling notes in here, so be sure to search the forums. Here are my (uneducated) responses, so be sure to get full answers from pros.
1. I think it should be based on what return the buyer wants. You could set an initial price based on something, but it will be negotiated. Maybe start at a 15% return for an investor and go from there.
2. The BP marketplace is a good place. Ask around your area from local real estate investors. I might even be interested for the right price.
3. You'd have to get an attorney/title company involved, but it shouldn't be as involved as a real estate closing since no deed is changing hands.
4. I'm not 100% sure of the question, but there should be some sort of contract and an assignment of note contract, but aside from that, I'd let more experienced not buyers/sellers answer that one.
5. Again, not sure, so I'll leave that one up to the pros. I would like to know the answer myself.
I'm sure there are alot of forum posts about selling notes in here, so be sure to search the forums. Here are my (uneducated) responses, so be sure to get full answers from pros.
1. I think it should be based on what return the buyer wants. You could set an initial price based on something, but it will be negotiated. Maybe start at a 15% return for an investor and go from there.
2. The BP marketplace is a good place. Ask around your area from local real estate investors. I might even be interested for the right price.
3. You'd have to get an attorney/title company involved, but it shouldn't be as involved as a real estate closing since no deed is changing hands.
4. I'm not 100% sure of the question, but there should be some sort of contract and an assignment of note contract, but aside from that, I'd let more experienced not buyers/sellers answer that one.
5. Again, not sure, so I'll leave that one up to the pros. I would like to know the answer myself.
@Account Closed does a fairly good job of answering you questions, but I will add a little more.
1. figure out what yield you or your investor want to make and begin the offering price from their.
2. FCI exchange is a good place to start. I will make you an offer for the note. Private message me or email me and I will go over what I will need to make an offer.
3. Selling a note varies a little from closing on real estate. It will usually be handled by an attorney or an exchange platform like FCI, Paperstac or Loan MLS.
4.There is a mortgage loan sale agreement (MLSA) which is basically the contract to sell the loan, an assignment of mortgage (AOM) which transfers the mortgage, an Allonge which transfers the note, and then the hello letters and the goodbye letters to the borrower. The end purchaser of the note will need to either self service the loan (not recommended) or have a professional service the loan, like FCI or SN.
5. when you are working on the transaction, there are several factors to watch for and we could spend an hour on the topic. Main items I would look for:
- make sure seller is the actual note holder.
-you will want to review the credit file looking at how the loan was structured and the collateral file paying attentions to the chain of title on the AOMs and Allonges.
- review the borrower (1003, w-2, credit score)
- pay history
-verify the taxes and value of the house
There is so much to go over on the DD portion, it is the largest section in our course we teach.
A little on what to expect on pricing- selling notes on a one off basis like this, expect investors to want 12-18% yields, but they will also calculate their offer prices based on the value of the asset and the LTV. Pricing should come in at 75-80% of the UPB if it has had a decent soak in the seasoning pool (6-12 months).
@Richard Allen Thank you for your response. Good to know I wasn't completely off base on my answers. I want to learn more about buying notes as this is something I'd like to do in the future.
