Sell Your Owner Financed Mortgage Note For The Highest Price

Full Video Transcript

Introduction

If you want to get the highest price and most money possible when you sell your owner financed mortgage note, there are a few specific risk factors that actually drive the price. And most note holders have never heard of them.

By the end of this video, you will know exactly what makes a note worth more, including one specific borrower type and a few things that you can do right now to get the highest price when you are ready to sell your note.

The “Unbankable” Borrower Who Isn’t a Weak Borrower

Here’s something shocking. The weakest notes aren’t always from borrowers who got rejected by a bank for being unbankable. Sometimes a borrower who got turned down from the bank may be a business owner or a person with a cash based income who may have excellent credit and real money for a down payment. They just don’t show enough income on paper to qualify with a traditional bank. This is the reason they are considered not bankable.

These borrowers are often happy to pay a higher interest rate to you because seller financing is the only real path to buying a property. If that sounds like your borrower, that’s a strong sign for your note’s value because they’re often willing to pay on time, willing to pay a higher interest rate, and have large down payment, which all make your note more valuable when you go to sell.

Does a Third-Party Note Servicer Raise Your Offer?

A lot of people ask if using a third-party note servicer changes the note buyer’s offer. Honest answer, it’s more about confidence in payment history than increased note value just because you used a note servicer. (Though we always highly recommend using a third party note servicer if you’re not currently using one.)

A note servicer gives clean, verifiable payment records instead of a note seller trying to prove to us payment history through Zelle or Venmo payments on the bank statements. These are very hard to verify that there are even mortgage payments being paid to you.

But clean payment records don’t erase lending risk. 15 documented late payments by a note servicer are still 15 late payments. That means more risk and a steeper discount on your note.

What an RMLO Does — and Doesn’t — Protect

Same goes for using an RMLO at closing. An RMLO checks borrower credit and whether the borrower can actually afford the payment, which is important. But using an RMLO doesn’t protect your note’s value later if you decide to move forward anyway with someone who the RMLO told you has bad credit and can’t afford the payment.

Borrower Credit and Down Payment

Of everything that affects your owner finance mortgage note value, borrower credit tends to matter most. Someone who is behind on their other bills is more likely to eventually fall behind on their mortgage payment, too.

But a strong down payment over 10 to 20% and a track record of on-time payments can somewhat offset a lower initial credit score. Real money down means real skin in the game for a borrower.

Why Owner-Occupied Notes Are Worth More

Here’s something most people never think about. A borrower will let almost every other bill go late before their own home mortgage payment. That is why a note on someone’s primary residence, an owner occupied note, is worth more than an identical note on a rental property, which is non-owner occupied.

What You Can Do Right Now

If your note isn’t quite there yet, start using a third-party servicer if you aren’t already.

Get your original wet ink promissory note organized (not a copy), so that you’re ready the moment a note buyer asks.

Build your borrower’s written consent into your closing paperwork so you can periodically check their credit during the life of the note and especially right before you want to sell.

And know what your property is actually worth by getting a BPO, a broker’s price opinion, to give you an estimate of the property’s current worth because it’s your collateral. So, if its value drops, so does your note value.

Several Risk Factors Working Together

Getting the highest price for your mortgage note isn’t about one magic factor. It’s several real risk factors working together.

If you’re not sure where your note stands, that’s exactly what our free no obligation review is for.

Remember, Moxxie Asset Group is THE source for seller financed note education. Thank you.