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Note Seller’s Education

We make selling a note simple, easy and straightforward. You’ll find many common questions and answers for your particular situation right here.

What constitutes a good note?

Before selling a note, it can be helpful to know if the note is worth anything and to understand the principles that govern the value of mortgage notes. For the seller, a good note means a higher price, and for the buyer, a good note means a more stable investment. The quality of a note can generally be determined by a few key aspects: remaining value and risk. First and most importantly, the remaining number of payments on the note and the value of those payments are used to determine the value of the note. If the purchaser were to make all his or her payments, the note would be worth the value of the remaining payments times their value; however, banks and other individuals buy notes at a discount. In exchange for offering a lump sum up front that is smaller than the remaining value, banks offer convenience in exchange for a long-term profit. Additionally, the banks include the financial risk of the purchaser defaulting on their payments into the discounted price. To determine the risk and the extent of the discount, a number of factors are looked at. A large factor in the price of the note is the value of the collateral. A note backed by a valuable property is worth more to the investor because in the event of a foreclosure or repossession, the investor has a better chance of being paid back in full. The credit score of the purchaser is another important tool in determining the likelihood of the note being paid back in full. Yet another factor, called seasoning, is the time the note has been issued for and paid. The longer the history of payments under the current owner, the more likely it is that the purchaser will pay back the full loan after the sale. Many investors require a certain amount of seasoning before they will purchase a note. A well-seasoned note backed by valuable collateral and a lessee purchaser has a history of making payments on time has lower risk associated with it. The ideal note to sell satisfies all of these criteria. A valuable note would have a high remaining balance, valuable collateral, and a purchaser who has a good history of repaying loans and has already made payments on the note for a period of time. These notes can be sold to a number of note buyers accessible through print mail and through the web. To get an exact appraisal for your note, contact a potential buyer and submit a quote.

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.

Different Ways to Sell a Note

Traditionally there are two ways to sell a note, depending on future interest in collecting payments. The more common and well-known type of sale is the full buyout program. Here, the entirety of the remaining note payments are transferred to the buyer for one lump sum of cash, exempting the seller from any responsibility in maintaining the note. The second method of selling a note is known as a partial purchase. In a partial purchase transaction, the investor purchases a certain number of the payments on the note, taking the note over only until these payments are received by the investor. Once the purchased payments are paid, the note holder can choose to sell more payments or to take back the note and continue collecting payments himself. This option is good for those who need a lump sum at the moment but still wish to receive future payments on the note. Additionally, the partial purchase option typically provides the seller with more cash (less of a discount) because there is less risk to the investor as they are only purchasing a portion of the note. Regardless of which program is chosen, sellers need to follow similar steps. To receive a quote on your note, the following information must be submitted: property address, type of property, property sales price, down payment, balance currently owed to you, interest rate on balance owed to you, payment amount, if the loan is delinquent (and if so for how many months), if there is a balloon payment (and if so what is its due date), and if you owe any money on the property. Additionally, one should expect to provide their name and contact information. One 5-10 minute phone consultation will normally provide enough information for investors to present several options. If the offer is accepted, sellers can typically expect payment within 20 business days of closing.

Reasons to Sell Your Note

Selling a note is a decision that is not always right for everyone, but can be extremely useful or profitable for many people with notes. When selling a note, the seller receives a lump sum of cash in exchange for the payments over the life of the note. The method of lump sum payment has a unique benefits that cannot be satisfied with a drawn-out payment plan. The influx of cash can be used to capitalize on an investment opportunity, to pay off any debts or loans, or to accomplish any other time-sensitive goals. Trading a discount of the total note value for cash now is a decision that has benefitted many note holders. Contacting a note buyer and getting a quote is often the first step in deciding if selling a note is the right choice.

How big or small of a note can I sell?

One condition to the purchase of a note is often the balance left on the note. FNAC purchases notes between $20,000 and $ 2 million. These requirements are in place to minimize risk and to make sure that the time spent in the purchase process is worthwhile.

Can I sell a portfolio of Notes?

Some investors are willing to purchase a whole portfolio of notes all together. Selling a portfolio of notes involves a more complex process than the sale of an individual note. FNAC's parent company has a division that specializes in purchasing note portfolios – our Whole Loan Acquisitions Group. How do I know if my package of notes qualifies for a note investor or one that purchases portfolios? Each investor has different standards for portfolio purchases. Contact a note professional at 800-774-3622 to discuss the portfolio and they will quote the package or refer it to our Whole Loan Acquisitions Group.

Mortgage Note Buying Process

First National Acceptance Company is a Direct Mortgage Note Buyer.

Simple, five steps note buying process: 1. Submit a FastQuote 2. Talk with one of our note buyers and receive a cash offer for your note. 3. Accept the cash offer. 4. We will order an appraisal and title. 5. We will fund the transaction and you will receive money in as little as 20 business days. First National Acceptance Company, a subsidiary of First National Bank of America, is the #1 Private Mortgage Note Buyer in America. Submit a FastQuote or call (800) 774-3622 to receive a free cash offer on your mortgage note today! FASTQUOTE

Can I sell an unsecured note?

Unsecured notes are notes that are not backed up by any form of collateral (home, vacant land, etc.). FNAC doesn’t typically purchase unsecured notes, but they can still be bought. They are a much riskier investment and therefore a higher discount should be expected. The individual note will need to be evaluated by the same criteria as other notes.

Can a real estate note in the name of a Trust or an Estate be sold?

If my mom/dad/parents passed away, can I liquidate their note?

There are many different types of trusts, so check if you are a trustee or have the legal ability to sell the property. Notes can easily be sold by the sole trustee in a normal fashion. In a shared living trust, a co-trustee has the ability to sell a property with shared ownership on his own, but some buyers require both signatures. Check with the attorney overseeing the trust for more information. Notes belonging to now deceased parents can be sold, as long as one possesses the legal authority to do so.

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