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.