...MORE OF
YOUR NOTE QUESTONS ANSWERED

Yes, Preferred Financials is here to help you sell your note and get you cash . Whether selling your note for cash or another reason, you can sell the whole note or just partial payments.

 Why sell a note?

Payments received on a note are an asset that can be liquidated for a lump sum of cash. Of course, notes are sold for various reasons. Often many who hold notes never really wanted them in the first place and feel stuck with them. Collecting the payments can be a nuisance, and the payments seem to disappear to easily. Needs one didn’t envision earlier arise unexpectedly , and  even those  who once wanted notes they created often wish to sell at some point before maturity. Fortunately, a turn in events can lead to the discovery this new opportunity to get cash; allowing you to liquidate your note while allowing us to provide a service with a solution.. Unfortunately, many people collecting on notes are still not even aware that there is a secondary market in which to sell them.

 For whatever reason,. many do not want to wait years to collect their money that could be used to finance medical bills, credit card debt, or perhaps for something more exciting, like a vacation or new car.

 There are those who sell their notes to end concerns about inherent risks associated with holding a note. Liquidating rids them of  concerns  about the ever-changing economy and inflation; or possible payer default leading to foreclosure, a complex and risky process in itself with substantial legal expenses.

Who buys notes?

Buyers of owner financed real estate notes are not usually banks or large institutions, but private investors instead who come from all parts of the country. This is mainly because banks view this type of financing as high risk. Many private loans are given as subprime to borrowers not eligible for bank loans; or perhaps the sold property does not conform to regulations. The good news is that there are those out there who are willing to take on any risk associated with these notes and wait for payments, knowing that they can get them at an attractive discount from the remaining value.

 Investors will want property title to be clear, original documents,  a current home owner’s policy and  property taxes, and to get a completely endorsed assignment chain.

What is the time value of money?

We’ve all heard the cliché “A bird in hand is better than two in the bush”….Well, that same theory goes for the time value of money.  What would you rather have, $50 today or $100 in five years…..of course, you’d take the money today!

You achieve instant gratification and the true current value. Due to inflation, money value does diminish over time; one dollar bought more in the past than it can buy today. Note investors look at the time value of money as the length of time involved to recoup cost and the loss of value over that time period.

 How is a note valued?

A common question is what is my note worth? Well, that depends on the quality of the note you have. Investors require particular criteria when searching for a note to purchase.

 Three main ways buyers consider risks are: 1) time value of money 2) equity in the property and 3) payer credit . Payer credit could be the very hinge that could make or break a sale.   The amount of the loan, term and interest are examined also; a note with a small face value, long term and low interest rate is considered weak (soft) and wouldn’t get the best offers. Interest rate is framework of future profits, down payment on property can show payer determination; low down payment makes it too easy to walk away without too much to lose. Other factors include, how long the note was in existence, position on the note, current balance, particular clauses, property type and condition, etc. etc.

 Another factor is the individual buyer’s amount of tolerance to risk. What about the type of note?…there are balloon notes, 2^nd positions notes, land notes…What about the type of property?…there are single family dwellings, multi- families, mobile homes, etc. etc.  The amount of the loan, term and interest are examined also; a note with a small face value, long term and low interest rate is considered weak (soft) and wouldn’t get the higher bids. And so we see that it depends on the situation at hand when it comes to placing value on a note.

Do I have to sell the whole note?

Often it is best to sell the whole note and let go of all the conditions associated with holding it. A whole note can be sold and you would be relieved of collecting further payments; payments will now be sent to the note buyer. If you wish to retain ownership , you can sell partial payment installments and have the rest revert back to you. Perhaps you only need a small amount of money to achieve a goal, in that case, selling some payments could suffice.  You actually can sell any portions of payments; for example, you can sell the next 2 years of payments, or the last two years of payments. Often just the balloon payment (should there be one) is sold and the amortized monthly payments are kept.

What steps are taken to complete a sale?

The process begins with the note holder completing a form providing the note information.That information is then reviewed and assessed for viability. The provided information will be made available to a nationwide base of  note investors; you pay no listing fees. All accurate and verifiable information is necessary to proceed, and will improve marketability. At this point, an interested note buyer can make a bid, or request additional information from note seller (current payer credit report, recent apraisal, and possibly evidence of titlework) in order to make a purchase decision. You will be presented with  incoming bids. No obligations or transactions take place until principals agree and are satisfied with terms. Once that is achieved, signed agreement papers and original note documents will be submitted and verified.  The note now enters the closing phase. Closing takes place in escrow so to ensure proper endorsements, financial protection and that each party gets what they are entitled to.

Please feel free to call Preferred Financials at  (727) 466-5307 should you have additional questions.

           

                        GLOSSARY
Accrued Interest – Accumulated interest earned or due, but not yet paid.

 Amortized Loan  -  Scheduled payments made over a fixed term so loan will be paid off by the end of the term.

 Assignment – Transfer of one’s right in a legal instrument to another person.

 Balloon Payment – A large final payment due on a note, usually after a partial amortization of the debt through installment payments.

 Blended Interest Rate – In rewriting a mortgage, the blended rate is half the difference of the original mortgage rate and the current market rate of interest; mostly used when an original note/mortgage is not assumable.

 Collateral – Real or personal property pledged as security for repayment  of a loan or other debt.

 Contract – Two or more parties enter into an agreement to either perform or not to perform something.

 Conveyance – An instrument (deed) legally sufficient to transfer title to real property.

 Credit Report – Compilation of one’s credit history, usually requested by a creditor.

 Deed – An instrument conveying title to real property.

 Default – failure to discharge a duty or obligation.

 Discounting a Note – The process of offering a promissory note for less than its current value.

 Equity -  In real estate, the value of interest  a person holds over and above any mortgages or liens on the property.

 Escrow – Money or documents held in trust by a neutral third party; often to assure terms and conditions of a transaction are fulfilled according to instructions.

 Face Value -  For a note, it is the full amount for which the note was written.

 First or Primary Lien– The Mortgage/Deed of Trust or encumbrance first recorded on a particular piece of property.

 Foreclosure – When a court sells a property pledged as security because of default.

 Grantee – The purchaser or person obtaining title to real property by a deed from another.

 Grantor  - The person who conveys title to real property by deed.

 Junior or Second  Lien – A mortgage/Deed of Trust or encumbrance with secondary interest to another previously recorded.

 Land Contract / Contract for Deed – A contract for the sale of real property wherein the seller is obligated to provide a merchantable title after the buyer has paid for the property.

 Letter of Credit – A letter from an institution that guarantees (collateralizes) a debt incurred by a third party.

 Lien – a creditor’s right to take and /or sell a property in the event of a default to satisfy a debt obligation.

 Loan to Value – The ratio of a loan amount given to the value of the underlying property.

 Marketable Title – A title free and clear of liens and encumbrances that might be objectionable.

 Mortgage – A temporary transfer of property to a creditor as collateral for a loan.

 Negative Cash Flow – When the income on something is insufficient to cover all costs of ownership.

 Note – The legal evidence of a debt.

 PITI – Abbreviation for Principal, Interest, Taxes and insurance.

 Power of Attorney – A written authorization to a person to act as agent and perform specific acts on behalf of his or her principal.

 Present Value – Principal balance or stream of future payments discounted to today’s value of money.

 Purchase Money Mortgage -  a  mortgage given to the seller as part or all of the consideration for the purchase of property. A  loan to the purchaser from the seller.

 Reconvey  -When title to real property. usually held by a trustee,is given back to owner when loan is paid off.

 Recording – The act of entering into public record, any instrument affecting title to real property.

 Satisfaction of a Mortgage – An instrument filed in the public records acknowledging full payment of an indebtedness secured by a mortgage.

 Simple Interest – Interest based on the principal balance of a loan with no add-ons. It is not compounded.

 Terms – Setting of the exact way a property will be purchased.

 Title Insurance – When a title company insures or guarantees a good and marketable title. Can be issued to protect the holder of the mortgage as well as the buyer.

 Without Recourse – An note endorsement given to an assignee relieving oneself of any further liability.

 Wrap Around Mortgage – Contract that wraps around an earlier existing financing.

 Yield / Rate of Return – The amount of money returned to you  on an investment. On a discounted note, the  yield is greater than the original interest.