First note payoff request

[James LaRocque]

Hi All,

I'm relatively new to the world of note investing. I've bought 2 performing notes in my SDIRA. Just today I received noticed from my servicer that the borrower on one has requested payoff.  The servicer needs my approval of the numbers. Everything seems inline with my records which is good.

My question though is, do I need to do anything else after this payoff? Or, do I just collect the money and I'm done? What is the process here?

Appreciate any help.

Thanks.

[Fred Moskowitz]

Great question @James LaRocque, and welcome to one of the fun (an often unexpected) occurrences that happen when you are a note investor.

The main point is that you work closely with your servicer in the coming weeks to coordinate all of the details.

First, you should check the payoff quote to make sure that the numbers agree with your own expectations, and that any outstanding charges such as legal costs or advances that the lender has incurred, are included.

Get clear on how the funds will be received by the servicer and disbursed to the lender, and timeframes for this.

Will the lender or the servicer be issuing the satisfaction/release of mortgage, and who will handle getting it recorded? This will vary based on state and local jurisdiction, so be sure that you work this out with the servicer and you are clear on the process. Remember that if the ball gets dropped on this and there is a problem later on, the liability will come back to the lender. For this reason, we prefer to handle our mortgage satisfactions and releases in-house, when allowed by state law. Some servicers will require that they handle it for you. In any event, make sure that it gets done, and that you have a paper trail showing that it was completed. (I actually discuss this at length in my newest book on note investing)

Happy to discuss with you offline if you have further questions.