THE BUYING PROCESS OF MORTGAGE NOTES AND BUSINESS NOTES

If you’re puzzling over how to sell a mortgage note, you have come to the right place. Selling a mortgage note or selling a business note to AX is a very streamlined process. We have the experience and the know-how to provide you with reliable funding options, delivered in the shortest period of time. This is due to our 10+ years of funding experience on the primary and secondary markets. We pride ourselves on three key factors when submitting a bid on your note:

 

  1. Aggressive Offers and Pricing
  2. Unmatched Professionalism and Client Courtesy
  3. Unsurpassed Knowledge of the Entire Discount Cash Flow Industry

 

The process is actually very simple for the note seller. For your convenience, we included a step-by-step sample of the note buying process below (both mortgage notes and business notes). We also include a description and a “note investor’s perspective” on how a mortgage note or business note is priced when reviewed for purchase by a note buyer. Of course every note buyer’s investment appetite is different, although the underlying mortgage note or business note calculation factors are all the same across the board.

 

HOW TO SELL A MORTGAGE NOTE

  1. Get a quote
  2. Accept the bid (either a full purchase offer or a partial purchase offer)
  3. Submit a Copy of Note and Copy of Deed or Land Contract or Mortgage (depending on the state)
  4. We will perform asset/collateral verification (confirm note’s LTV, borrower credit & get estimate on property value)
  5. Once asset has been pre-confirmed, note seller will need to submit the following documents for underwriting:
    • Settlement Statement or HUD1
    • Proof of Payments Record (bank statements, cancelled checks, etc)
    • Proof of Homeowners/Fire Insurance (include agent name, number, and policy number)
    • Tenant Rental Agreement and Rental Amounts (if rental property or commercial property)
    • Pictures of Property (if available)
    • Escrow Instructions from Origination of Loan
    • Title Insurance Policy (insures existing contract for sale)
    • Copy of UCC1 Financing Statement (for commercial notes only)
    • Copy of 3rd-Party Loan Servicing Agreement (if applicable)
  6. Note seller will review, sign and return (mortgage) note purchase agreement and seller checklist
  7. We will order and pay for a BPO or Appraisal (depending on property type and state property resides)
  8. We receive and approve appraisal
  9. We order and pay for a title search
  10. We receive and approve title as clean (cleared for closing)
  11. We will then schedule closing time and date or close the transaction via FedEX or UPS if desired (seller’s preference)
  12. Receive check or wire transfer

 

This entire process of selling a mortgage note will take anywhere from 15 business days to 35 business days depending on the state/property location, the availability of the local appraisers, the availability of the title companies providing the title search, etc. AX pays for ALL costs associated with the purchase of your mortgage asset, including appraisal, BPO, and title fees.

BUSINESS NOTE BUYING PROCESS

  1. Get a quote
  2. Accept the bid (either a full purchase offer or a partial purchase offer)
  3. Submit a Copy of Note and Copy of Deed or Land Contract or Mortgage (depending on the state)
  4. We will perform asset/collateral verification (confirm note’s LTV, borrower credit & get estimate on property value)
  5. Once asset has been pre-confirmed, note seller will need to submit the following documents for underwriting:
    • Copy of Bill of Sale
    • Copy of Recorded Note
    • Proof of Personal Guarantee (if borrower is a corporate entity)
    • Copy of Lease Agreement (if applicable)
    • Business Financial Statements up to Time of Sale
    • Note Seller’s Tax Returns from Previous 2 Years Prior to Sale
    • All Closing Documents From Time of Sale
    • Copy of 3rd-Party Loan Servicing Agreement (if applicable)
  6. Note seller will review, sign and return (mortgage) note purchase agreement and seller checklist
  7. We will then review and underwrite the transaction
  8. We will clear the transaction for closing
  9. We will then schedule closing time and date or close the transaction via FedEx or UPS if desired (seller’s preference)
  10. Receive check or wire transfer

 

This entire process of selling a business note will take anywhere from 15 business days to 21 business days from front to back. AX pays for ALL costs associated with the purchase of your transaction.

WHEN BUYING A NOTE, WHAT DOES THE NOTE INVESTOR LOOK FOR?

This is something that all (well-informed) seller carry-back note holders should know when selling a note. It all comes down to one major thing for a note buyer – RISK! This is something that a seller should keep in mind when they decide to sell a privately held loan. Risk of non-payment, risk of borrower default, risk, risk, risk. No matter who you decided to sell a note to, any and all (smart) mortgage note investors / business note buyers will first look to the asset’s down payment or equity in the collateral (i.e. – real estate, business equipment, inventory, etc.)

The equity in the collateral determines how sound that loan would be as an investment. The equity determines the loan’s security level. The higher the risk, the less the loan is worth to a note buyer. A good rule of thumb is: the less money one collects as a down payment, the less money the note is worth to a note buyer on the secondary market. The reason being a high loan-to-value (or LTV).

Just to clarify, a poor down payment is 0% to 9%, a decent down payment is 10% to 14%, a good down payment is 15% to 20%, a great down payment is 21%-30% and an excellent down payment is 31% or more.

The very next factor all note buyers look at is the borrower’s credit score (Equifax Score, Trans-Union Score, and Experian Score, also called a Tri-Merger).

Just to clarify, a poor credit score is 600 or lower, a decent score is 601 to 675, a good score is 676 to 720, a great score is 720 to 780 and an excellent score is 780 or higher.

Most note buyers will only go down to a 600 credit score whereas we will go as low as a 525 FICO Middle-Score. After the credit factor, the rest of the note’s calculation will really vary between the buyers.

Here at AX, our note purchase criteria will also included but not be limited to: the loan’s seasoning (payments received, payments owed), property location/ RE market trends, loan payment records, relationship between borrower and seller, loan’s performance, etc. To begin the note buying process online, please click for a free quote.

If you have additional questions about how to sell a mortgage note, or would prefer to speak to a buyer directly, simply call (800) 698-3650.