Selling Less-than-perfect Notes


Not every note is an ideal note, but that doesn’t mean it cannot be sold. Notes with many different stipulations are still of value to buyers. One such note is a previously delinquent note, or a note with a purchaser who has at one point failed to make a payment for a certain period of time. First National Acceptance Company does not buy notes that are currently delinquent; however, FNAC will buy notes that were at one point in time delinquent if the delinquent payments have been made in full and the purchaser has rebounded by making several timely payments.

Some notes have underlying debt, a situation where the holder of the note (the seller) owes money from the purchase of the property on the note to a bank or financial institution. In this situation, the note can still be sold so long as the debt does not exceed the offer for the note. In other words, if there is less debt than the price that the investor would buy the note for regardless of the debt, the note can still be sold. The note can still be sold if the offer is less than the underlying debt but it would require the note holder (the seller) to bring money to the closing to satisfy the debt.

Some types of notes will not be purchased by institutions like First National Acceptance Company. For example, many investors will avoid currently delinquent or defaulted notes. Another type of note that is often avoided is a second position note. A second position note is an intermediary note between the first position note and the purchaser. These notes are purchased by some investors, but FNAC does not purchase second lien notes.