Frequently Asked Questions
$25,000? - Why should I sell my mortgage note for less than the balance?
- Do you lend money?
- How Much CASH will you give me for my note today?
- I'm a BUYER. How does SELLER financing help me?
- What is a Simultaneous Closing?
- What can I expect when I call or correspond with your office?
Closing FAQ
How much is it going to cost me?
How do I get my money?
How long does it take to get my money?
Why does it take two to three weeks to close?
Will I need to attend the closing?
Who pays the closing cost?
A: A written contract that states a promise to pay and the terms which include the amount, interest rate, and length of time in which to fulfill this promise.
A: There are thousands of individuals across the country who buys notes. Private buyers (Investors) buy notes as investments.
A: No, we have no minimum or maximum, we purchase notes of any size or dollar amount. We love to purchase small notes as well as notes in the multi-million dollar range.
Q: Will you buy second or third mortgages?
A: It depends on how the note was made. The position of the mortgage is not as important as the "loan-to-value" (LTV) ratio. A second or third should be at least 25% the size of the first. If the LTV does not exceeds 80%, we'll buy it.
Q: What does Loan to Value mean?
A: The measure of the security of a given loan. It is calculated by taking the amount of the loan and any senior loans (1st Loan) and dividing that by the property value. The standard "safe" ratio is 80%. All banks use this ratio to determine refinancing for their customers.
A: Yes! We buy balloons too.
Q: Do you buy interest-only mortgage notes? A: Yes!
Q: Will you buy a new mortgage, or does my note need to be"SEASONED"
A: Yes and No. We do buy new mortgages, but in some cases, because of having a note that hasn't been seasoned, it will be less profitable for the seller.
Q: Why should I sell my note?
A: Usually, a promissory note is acquired instead of the cash desired in a real estate transaction. If retained long enough, many notes will eventually pay off. However, late payments, insurance liabilities, tax problems, and foreclosure may soon plague some mortgage note holders. Even when these problems do not arise, many people would really prefer to have their cash now!
Q:Let's say that I'm holding a mortgage with a balance of $25,000. Will you pay me the entire $25,000?
A: The value of money decreases over time: a $100 bill will buy less in ten years than it would today. Because of this, the amount paid will be less than the current balance. The amount depends on the interest rate you charged the buyer, the term of the mortgage, the current prime rate, the value of the property, as well as other factors.
Q: Why should I sell my mortgage note for less than the balance?
A: Simple: The earning power of the decreasing mortgage balance is considerably lower than the earning power of a fixed sum invested at interest. For example, assume that the current balance of the mortgage you are receiving payments on is $25,000 at a 10% interest rate, with ten years of $330.38 monthly payments remaining. The total value to you if you were to receive all ten years of future payments is $39,645.60 (120 months times $330.38). However, if you accepted $22,000 today, and invested that amount in a 9% government bond (or other insured investment), the "simple" interest earned would be $165 per month. Ten years of interest would bring you $19,800, without touching your original $22,000 principal. Adding those up, the total value of your investment would be $41,800, which exceeds the $39,645.60 you would have collected from the monthly payments! Furthermore, if you sell you have a guaranteed income when you invest in insured, fixed rate investments. A mortgage note is only a promise of future payments that may, or may not, appear. [P.S. When a note is paid off, there's no more income. If, however, you exercise the cash now option, your principal and interest could remain with you forever!]
Q: Do you lend money?
A: No, we do not lend money. We only purchase or refer receivables (notes) that are secured by real estate and business notes.
Q: How Much CASH will you Give Me for My Note Today?
A: We will usually be able to give you the cash you need. All notes are purchased at a discount of the remaining balance due. By paying you with cash now or with cash at a later date we can give you the maximum amount. Often, it is even possible to receive the full face value of your note. The value of a note is determined by many factors, such as: type and location of property, equity, type of note, market interest rates, and credit of the payor. Clearly, a note secured by raw desert property will be worth less than a note secured by a single family home. If you call us with a note to sell, we will examine and research it, and then offer you the highest possible price, usually with a variety of options for you to consider.
Q: I'm a BUYER. How does SELLER financing help me?
A: If your're a buyer with a down payment and decent credit, then the world is at your fingertips! As a buyer, you should be working with a realtor who knows how to negotiate a possible seller financing deal for you!
Here are a few of the benefits of seller financing for buyers: avoid the hassles of qualifying for bank financing (this is worth its weight in gold!), low or no points or origination fees, interest rates often as good or better than what you could get at a bank, quick closing, and the ability to customize the loan to your liking.....it's whatever you and the seller agree to. Hire me to help you get your home sold quicker with SELLER FINANCING the choice is yours.
Q: What is a Simultaneous Closing?
A: Simultaneous closings can benefit the buyer and seller. This works great when a seller has the opportunity to sell a property with owner financing since his/her buyer is not able to secure bank financing. You will be able to get the full appraised value as the sales price, which you would not normally get if your buyer could qualify for bank financing. We would then purchase the note from you. You leave the closing table with all your cash and your seller would make all payments to us.
As an example, let's say you have a property that appraises for $100,000 that you would sell for $80,000 if a cash buyer came along. You can sell the property with an owner financed note for the full $100,000 and at closing we would normally be able to pay you in the range of $80,000 at the simultaneous close as described above. Your buyer would buy the property with a note to you that we would buy from you at the same closing.
Q; What can I expect when I call or correspond with your office?
A: We treat every client with the utmost respect and fairness that we expect to receive ourselves. We ensure that all parties involved are happy!
Q: How much is this going to cost me?
A: There is no charge to you, the note holder.
Q: How do I get my money?
A: Before the close of escrow, we will place a cashiers check (or our investor's check) in a trust account with the title company. At the end of closing the title company will express mail the cashiers check to you.
Q: How long does it take to get my money?
A: As a general rule it takes two to three weeks to close on a real estate note, from the time we receive all the required documentation. (Annuities and structured settlements usually require a court appearance for reassignment and take a bit longer.)
Q:Why does it take two to three weeks to close?
A: The reason it usually takes two to three weeks to close is that we must order title reports from the escrow company. Additionally, we must order a drive by appraisal of the subject property, which in many cases is the item that takes the most time to schedule and have completed.
Q:Will I need to attend the closing?
A: No. Our office (or our investors) will close the transaction by sending you a closing package along with easy to follow instructions. We can do all transactions through the mail with Overnight and Priority Mail Speed!
Q: Who pays the closing costs?
A: We generally pay all closing costs and fees.
If you have questions or concerns regarding these FAQ, or any other questions that were not mentioned here, feel free to contact my office (269)873-9898.