What Discount Will I Take if I Sell My Note, and Does it Need to Be Seasoned?
This recent email represents fairly common questions that people have when they start thinking about selling a note they now have, or may soon carry back, or who newly stumble upon “the note business”:
Dear Purchasers of Notes/Mtgs.,
1. Does it have to be seasoned? If yes, for how long or how many payments?
Usually some, but not always. It greatly depends on the other factors in the transaction, and whether you’re trying to sell a full, or simply a partial. I occasionally buy notes without any seasoning, while on the other extreme I may need to see 24+ months of seasoning before considering any type of purchase.
2. Do you have minimums and maximums on the dollar value of the note/mtg.?
3. What type of discounts are required and how do they work?
Once in a very rare while, I can pay as much as .90 cents on the dollar, most are in the .60 – .75 range, with some I wouldn’t pay a penny for. There is no standard discount. It all depends on the variety of unique circumstances attending each transaction. The overall discount will be minimized if you choose to only sell a partial, and keep the tail end of the note for yourself.
4. What is the process if I have a note to sell?
Send me the note and security instrument (mortgage or deed of trust) and let’s have a brief phone chat. A brief overview of the transaction is also extremely relevant:
- Type of property securing the note
- Location of the property securing the note
- How long you owned the property before selling it
- Sale date
- Sale price
- Amount of down payment
- Credit score of buyer/payor
I’m guessing you’re asking about this because in your real estate investing business, you may need or want to use owner financing (with the subsequent sale of the real estate note) for either acquisition or disposition strategies, or both? I can usually help structure these types of transactions for maximum financial benefit when I am brought in as a consultant before negotiations are finalized.
For professionals… real estate agents, new note brokers, or investor/rehabbers in the business of doing multiple deals, I provide limited email and phone support to members of Owner Financing Club. People who want in-depth coaching or consulting can arrange that as well.
At Owner Financing Club there are many training videos and some downloadable documents that will help you understand notes and more deeply answer many of the questions you have posed above. You may want to avail yourself of this affordable education (and support) as a way to increase the number of tools at your disposal for investing in real estate.
There is also a fairly new (and free) one-hour video that will help simplify much of this conversation for you: Why Notes, Why Now?
To your success,
Good investing tips about notes and real estate investing.