A note is a precious asset which may be worth hundreds or thousands of dollars. You owe it completely to yourself to know what a possible note buyer will look for before going in the market. Here are the top 5 things notes buyers will consider before purchasing a note and they are the same things that a note broker will elucidate before he sell a mortgage note quote.
1) Credit of Payer
Credit ratings and credit scores and rating agencies, all are hot topics in real estate world. The scores are completely based on some assumptions and they are dependent on source data being precise. But lower than average score might not make your notes unsalable. Though the score is a starting point, good note buyers look for mitigating situations that cause the scores to be lower. One may be that payor had a severe medical issue happen which caused to over-extend the credit. However, if ever since that time they’ve been steady in their debt repayments and are steady in their mortgage payment, the low score won’t be such an imperative issue.
2) Equity Stake, Payer has in Property
You must have all seen advertisements:”0 percent down, interest only payment for the starting 12 months, get today!” What it describes is a circumstance in which the purchaser has taken 0 percent equity in property. They basically are the renters dressed up as property owners. They’ve no risk in property and will walk away if things get hard. And millions of individuals did that in recent real estate bubbles burst. No note buyers will look at this kind of note. The risks are just too high so they’ll be left holding that note, having to exclude and resell property. Most of the note buyers don’t wish to own their property more than the banks or mortgage companies do; they wish to own the returns stream from mortgage payments.
3) Ability of Payer to Make Payments
If note buyers are looking for long-term income streams from the note, an important factor is evaluation of payer’s capability to make payments. Other imperative factors include job’s stability and mortgage payments as a fraction of full income in deciding the risks involved in holding a note.
4) Property Itself that is Collateral for Note
It seems as a no-brainer; however, the trick is to establish the true worth of the property. The sellers tend to prize their property too highly since they want to justify the worth of the note. The note buyers will be skeptical about this and get an independent assessment done usually. In addition, ratio of equities to the kind of property will also be a factor. Small percentage in well built, contemporary home in good neighborhood will balance a higher equity in single-wide mobile house in a ramshackle mobile-home park out there.
It doesn’t means how “spicy” a note is. It’s a term, which is used to explain how long a buyer is making payment. Along with the equity discussed above, it is another indicator of the risks that the buyers will walk far from property. For a few note buyers, it will be 2-3 months; others may wish as much as six month’s payment history.