I want to sell a private mortgage note

[Maureen Hannan]

Hello All,

I would really welcome advice from anyone experienced in mortgage brokering. I hold the note on a home in Arlington, VA. The amount of the note is $420K, and the home is currently valued at roughly $450K. (That is a best guess, from comps and Zillow--I have not yet sent an appraiser out to get a precise, current valuation.) I asked the borrower to give me permission to have a credit check done on him for the purposes of exploring selling the note. He refused.

What does one do when the borrower will not acquiesce to the credit check??? How should I move forward on exploring selling this note?

Thanks,
Maureen

[Tom Goans]

I have financed properties I owned and sold since the 1960s. Additionally, I have bought and sold a huge number of real estate securities over the years. Jon is correct, many times somewhere in the security documents will be a clause allowing to to obtain a credit report. If not, there are ways to play dirty, but I don't recommend this. A content borrower is a good payer.

To expand the scope, have you had a conversation with a financial advisor concerning selling the loan and what it would mean to your finances? At the very least would be taxes. There may be better ways for you to work with this income stream. After all, it is an income stream that you can borrow against or pass on to your heirs.

As a note buyer, the value of a property as suggested by an appraisal or similar method does not mean much to me. There are a lot of lenders with rooms full of thick folders containing appraisals on properties the banks now own. This is why most note buyers discount the amount they will pay so greatly. They are factoring in the possibility they will own the property some day.

Your $420,000 loan would probably bring only about $200,000 if you sell it. You can sell an income stream a year at a time and suffer much less loss.