A question that comes up from time to time with many private note sellers is:
Can I get scammed when selling my private mortgage note?
This is obviously a question that would need to be addressed (and answered) if you are planning on selling your mortgage note on the secondary loan market.
Just to be clear — when I say “selling a private mortgage note,” I am referring to someone who is currently collecting on a debt secured by real estate. This is usually the result of a property sale in which the property seller creates a seller-financed mortgage note and acts as the bank for the next 10, 20 or 30 years (depending on how you structured the note).
I am not talking about people and/or borrowers who are currently making payments to a bank, credit union or institution on a mortgage loan (like Wells Fargo, Bank of America, PNC, etc.), in which you found out that the bank that lent you the money has now sold your loan to third party lender.
- It’s practically impossible to be scammed out of a private mortgage note that you hold, but you can still be taken advantage of if you’re not careful.
- There are protections and procedures in place that ensure you won’t lose a note without getting paid.
- It is possible to lose money on private mortgage notes at a guaranteed rate of return.
The Answer is NO!
Back to the question at hand: The short answer is no, you can’t get scammed if you are only selling a private note to a mortgage buyer on the open market.
Getting low-balled on an offer
Now that being said, getting scammed out of your mortgage note and getting a low-ball offer (or ripped off on a note offer) are two different things.
Anyone selling real estate notes can get a low-ball offer and in turn, get ripped off on note pricing. Let me throw a plug in here — to avoid this issue, you need to work with a direct note buyer, like us at Amerinote Xchange, in order to secure a solid note offer and get the most cash possible for your mortgage note.
Protections and procedures
I will say that after operating in the note buying industry for over a decade, it is impossible for a private note seller to sell their note to a note buyer and get scammed out of their mortgage note. This is due to the simple fact that their are many layers of procedures and protections in place in order to protect all parties. These procedures allow the assignment of a mortgage to take place ONLY if it is properly recorded through the county courthouse and signed off by you, the note seller, thus becoming a legal debt owed to the new owner (which is now enforceable in the case of default).
As a matter of fact, in most cases when Amerinote Xchange buy notes, we actually fund the note sale transaction prior to the final mortgage documents being recorded through the county recorders office, so technically, you are still the owner of the note for about one to four business days even after you receive your lump-sum payment. This is not the case with all note buyers, as some do require the assignment of mortgage to be recorded before the note seller receives their funds.
The real scammers in the mortgage note industry
Now there is an area of this industry where you can get scammed out of money, and that is if someone approaches you to invest your money into mortgage notes at a guaranteed rate of return. If you are thinking about investing in mortgage notes yourself, I would definitely do a little research on the company or person soliciting you. This is where you can get hurt…
If you have any questions about selling your mortgage note or any questions about the industry in general, please feel free to contact me at any time at: 415-295-1401 ext 3 (ask for Abby). Good luck.