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Why Can not Get Full Face Value for the Sale of My Mortgage Note?

There are a number of reasons why you, the seller of a privately held mortgage note which you created when you carried the financing on the sale of your property can not sell this note for the full face value. The main factor however is risk.

Investors who buy mortgage notes are taking on the inherent risk of default. Yes you also have taken on this risk when you carried the financing on this sale and you should have built into the creation of your note and the structure of the transaction certain concessions to lower this risk. However most seller advanced deals take place without the seller of the property building in extra risk protection. This factor is what creates their frustration when wanting to sell their mortgage note.

Since they can not get full value for the sale of the note because the investor wants to make the purchase is most certainly going build in his own risk protection, they may have to take a discount that can bring the overall profit from the original sale of the property well below or even negative to what they desired. Many times the mortgage note holder must get full value or very close to it for the sale of their note, otherwise he / she may actually be taking a loss on the property sale. When they need ninety or more percent in order to realize an overall profit and the note buyer can only offer 73% of face value they may feel as though the potential buyer is trying to rip them off. This could not be farther from the truth.

The potential buyer of the mortgage note has very specific criteria that they will use to valuate your note. The terms and conditions of the note itself, the current market value of the property, and your buyer's ability to pay are the three main factors which will determine the discounted value that lowers the risk to an acceptable level for purchase.

As the seller of a mortgage note you must put the shoe on the other foot and view the potential transaction…

Read More…. by Paul Romero

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The post Why Can not Get Full Face Value for the Sale of My Mortgage Note? appeared first on Note Investing Seminars.

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