Advice Needed on Selling Note Partial

[Steve Schmidt]

Hello,

I am looking to sell a partial of a note on a property in Colorado.

The property sold in Sept 2023 for $130,000. The buyer put $30,000 down.

The $100,000 note is being serviced by a servicing company in Texas.

7.25% Interest

15 years

PI $912.86

The note is performing. Secured by Deed of Trust.

The property is a manufactured home attached to land in Southern Colorado. The title to the home as been purged. The property passes with a General Warranty Deed. The property was closed with a Title Company. The home is non-owner occupied, the buyer is an investor.

I am looking to sell 2 or 3 years of payments.

I am looking for suggestions where to list the note, or find a real buyer. I have heard of a lot of scams with note buyers, just like pretty much everything else. I did see paperstac in some posts, and will be checking it out.

Thank you very much,

Steve

[Ty Coutts]

Hello, Steve Schmidt, selling a partial note can be a great way to generate some immediate cash flow while retaining ownership of the remaining note balance. Here are some suggestions on where to list your note and how to find legitimate buyers:

Online Note Marketplaces
Paperstac: A well-known platform for buying and selling mortgage notes. It offers a secure and transparent process for both buyers and sellers.
NoteTrader Exchange: An online marketplace where you can list your note for potential buyers.
LoanMLS: A marketplace for buying and selling mortgage loans and notes.
FCI Exchange: Another platform where you can list and sell your notes to investors.

Note Investing Forums and Communities
BiggerPockets: A popular real estate investing community where you can network with potential note buyers.
LinkedIn Groups: Join groups focused on note investing and real estate to connect with potential buyers.
National Note Group: An online community where you can connect with other note investors.

Note Brokers and Buyers
Note Brokers: Engage with reputable note brokers who have access to a network of note buyers.
Local Real Estate Investor Groups: Attend meetings and network with local investors who might be interested in purchasing your note.

Financial Institutions
Credit Unions and Community Banks: These institutions may be interested in purchasing performing notes.
Private Equity Firms: Some firms specialize in acquiring performing mortgage notes.

I hope this give some direction regarding your situation. Feel free to message me with more questions as they come. 

[Alecia Bolton]

There's honestly not a lot of places that specifically cater to partials.  Ty listed a lot of resources for selling whole notes.  I'm not sure if Paperstac does partials.

I sell and buy partials, and it's done through networking, primarily.  There are a few groups on FB that would be good places to join where partials are mentioned.

Have you sold a partial before?  If not, do you know how you would do it as there are multiple ways, some of which are better for investors you don't already have a relationship with.  Do you know what paperwork you need? 

[Jay Redding]

Steve - We would be interested in taking a closer look at this.  Please reach out to me directly.    Thanks

[Jamie Bateman]

@Brett Burky, Paperstac does sell partials, correct? 

[Chris Seveney]

Quote from @Jay Redding:

Steve - We would be interested in taking a closer look at this.  Please reach out to me directly.    Thanks

 I did not even notice you in this picture jay :) 

As others mentioned, finding a partial buyer is hard because person needs to also trust you. You would be better off attempting to sell the entire loan to be honest.

[Lauren Sanford]

@Steve Schmidt similar to @Jay Redding and @Alecia Bolton JKP has been long time buyer of partials.  We actually had a entire note podcast episode dedicated to understanding selling/buying partials.  We can also help sell it if we can't agree to terms.  

[Jay Redding]

@Chris Seveney - Chris - That is because in this picture, I still had a little hair! (Ha! Ha!)

[Steve Schmidt]

Thank you everyone for all the information.

Ty-Thanks for all the places to check. I will check them out.

Alecia-I belonged to a few Facebook groups. There seemed like there were a few that were not legit. I have never sold a note before, let alone a partial. No idea on the paperwork needed.

Jay-I sent you a PM.

Thanks again,
Steve

[Chris Seveney]

@Steve Schmidt

You need some type of partial agreement but if you have never done it questions that come up are

1. Who is paying the partial buyer?

2. Who is managing the loan

3. How are you assigning your interest

4. What happens if loan goes into default - who pays the legal

5. If there is a foreclosure and sold for less than payoff how are proceeds split?

6. Who pays servicing fees?

Those are a few to start

[Alecia Bolton]

Quote from @Steve Schmidt:

Thank you everyone for all the information.

Ty-Thanks for all the places to check. I will check them out.

Alecia-I belonged to a few Facebook groups. There seemed like there were a few that were not legit. I have never sold a note before, let alone a partial. No idea on the paperwork needed.

Jay-I sent you a PM.

Thanks again,
Steve

 @Steve Schmidt 

The FB groups I'm in pay attention to are:

JKP Real Estate Note Investing - run by the great folks at JKP Holdings.  I know there are partial buyers in this group.

Note & Mortgage Investing Made Simple - Matt Kelley is the admin, he's a lawyer out of CA

Creating Wealth Simplified through Note Investing - This is Chris Seveney's group

Note Investing Tools Members - This is run by Tracey Z and Fred Rewey...you might need to be in their network to join. 

There are others, but these ones are definitely info/networking first.

My honest advice is if you haven't sold a note, let alone a partial, selling the entire thing here are on something like Paperstac might be your best option.  Notes are nuanced, and partials more so, and you can really mess things up if you don't know what you're doing.  Several folks on this thread and in those FB groups would be happy to give you advice.

[Brett Burky]

Quote from @Jamie Bateman:

@Brett Burky, Paperstac does sell partials, correct? 

 Not officially but they are on the site. You just have to use custom documents. 

[Marco Bario]

Quote from @Ty Coutts:

Hello, Steve Schmidt, selling a partial note can be a great way to generate some immediate cash flow while retaining ownership of the remaining note balance. Here are some suggestions on where to list your note and how to find legitimate buyers:

Online Note Marketplaces
Paperstac: A well-known platform for buying and selling mortgage notes. It offers a secure and transparent process for both buyers and sellers.
NoteTrader Exchange: An online marketplace where you can list your note for potential buyers.
LoanMLS: A marketplace for buying and selling mortgage loans and notes.
FCI Exchange: Another platform where you can list and sell your notes to investors.

Note Investing Forums and Communities
BiggerPockets: A popular real estate investing community where you can network with potential note buyers.
LinkedIn Groups: Join groups focused on note investing and real estate to connect with potential buyers.
National Note Group: An online community where you can connect with other note investors.

Note Brokers and Buyers
Note Brokers: Engage with reputable note brokers who have access to a network of note buyers.
Local Real Estate Investor Groups: Attend meetings and network with local investors who might be interested in purchasing your note.

Financial Institutions
Credit Unions and Community Banks: These institutions may be interested in purchasing performing notes.
Private Equity Firms: Some firms specialize in acquiring performing mortgage notes.

I hope this give some direction regarding your situation. Feel free to message me with more questions as they come. 

 Unfortunately most of the online note marketplaces listed are long gone.

[Brett Burky]

Quote from @Brett Burky:

Quote from @Jamie Bateman:

@Brett Burky, Paperstac does sell partials, correct? 

We don't support partials I am wrong about this. 

[Joe Yobaccio]

@Alecia Bolton We are looking at selling a partial and most of the educational sites differ on who the Collateral belongs to.   You buy or sell? When you buy,how do you protect your investment, other than the formal agreement?  Do you get put on the note as another Party to the Note?

[Chris Seveney]

Quote from @Joe Yobaccio:

@Alecia Bolton We are looking at selling a partial and most of the educational sites differ on who the Collateral belongs to.   You buy or sell? When you buy,how do you protect your investment, other than the formal agreement?  Do you get put on the note as another Party to the Note?

 This depends on your agreement and whether you are hypothecating the note (meaning you own the note and are borrowing against it) or doing a partial where you are selling that portion of the note and issue a collateral assignment.

When i did partials I did it as a hypothecation where I kept control of the note because those who typically buy a partial are not savvy note investors and if it went into default the first call they would make would be to you.

I know some who let the buyer own it and they would be calling the servicer every week asking about payment or emailing the etc. then if it did not show up they would be calling them.

How you structure it is up to you, just realize there are pros and cons for both

[Jay Hinrichs]

Quote from @Chris Seveney:

Quote from @Joe Yobaccio:

@Alecia Bolton We are looking at selling a partial and most of the educational sites differ on who the Collateral belongs to.   You buy or sell? When you buy,how do you protect your investment, other than the formal agreement?  Do you get put on the note as another Party to the Note?

 This depends on your agreement and whether you are hypothecating the note (meaning you own the note and are borrowing against it) or doing a partial where you are selling that portion of the note and issue a collateral assignment.

When i did partials I did it as a hypothecation where I kept control of the note because those who typically buy a partial are not savvy note investors and if it went into default the first call they would make would be to you.

I know some who let the buyer own it and they would be calling the servicer every week asking about payment or emailing the etc. then if it did not show up they would be calling them.

How you structure it is up to you, just realize there are pros and cons for both

hypo is the way to go.. also the OP might just check with their personal banker if by chance they bank with a small community bank.. NOT a big bank they will say no.. my community bank has done these for me for years and the  rates are ( for me at least) basically maybe 1 point over what they do for MF or other commercial loans.. its a relationship transaction I have found.  Although it seems like the OP is really not looking to get much money 3 years of cash payments on that size loan is what 30k  seems hardly worth the effort.

[Alecia Bolton]

Quote from @Joe Yobaccio:

@Alecia Bolton We are looking at selling a partial and most of the educational sites differ on who the Collateral belongs to.   You buy or sell? When you buy,how do you protect your investment, other than the formal agreement?  Do you get put on the note as another Party to the Note?

 What Chris said.  I do hypothecation and only have the partial purchase agreement as the paperwork.  It is essentially a promissory note/personal loan using the note as collateral.  I know there are some people out there who do this and put an assignment in place to be recorded if the loan defaults.

As with so many things in REI, there are multiple ways to skin the cat, and it has a lot to do with your level of risk and your partial investor's level of risk.

I do teach a 4 hour live class on this.  DM if interested and I'll send you the website link.

[Joe Yobaccio]

@Lauren Sanford  Have you sold or purchased a Partial, but kept the note in your name and used a Collateral Assignment to protect your partial lender?   I'm selling a partial like this: $35k for 128 months of $550 a month at 15%.  I am planning on paying early and will use an Ammortization shedule.  My note is a performing 1st and I plan on setting up the lender with Madison Management so that the payments on the Partial come from the performing loan. But, that sounds like a Loan Partial.   I am not going to assign my full note, but will use a Collateral Assignment. Any feedback?  

[Lauren Sanford]

Quote from @Joe Yobaccio:

@Lauren Sanford  Have you sold or purchased a Partial, but kept the note in your name and used a Collateral Assignment to protect your partial lender?   I'm selling a partial like this: $35k for 128 months of $550 a month at 15%.  I am planning on paying early and will use an Ammortization shedule.  My note is a performing 1st and I plan on setting up the lender with Madison Management so that the payments on the Partial come from the performing loan. But, that sounds like a Loan Partial.   I am not going to assign my full note, but will use a Collateral Assignment. Any feedback?  

No because a collateral assignment is for hypothecations.  Is just what it sounds like, you are borrowing money from a lender and using the Mortgage/Note as collateralize for the loan.  The ownership of the note does not change hands it is used only as collateral.  We had an episode of "Real Estate Note Show" on this topic with Attorney Sean Clemmensen.  

We have sold a partial and kept it our names but only in situations where we were selling the partial to someone we know very closely (such as a family member or very close friend).  In those situations we used our word and just made payments to them.