Good online marketers know that showcasing their products with great photos and professional copy is key to faster sales and higher prices.

We have found that mortgage notes are very much the same.

When you’ve made the decision to sell your mortgage note or trust deed for cash now, it becomes all about how to make the note more attractive to prospective investors.

It’s true that many of the factors that determine a note’s value are established when the note is created (down payment, interest rate, term, etc.). These factors cannot be changed without the borrower’s consent. However, that doesn’t mean there aren’t still actions you can take now to pump up the value of your note.

Here are some tips for attracting serious note buyers and getting the highest possible price for your valuable asset.

Start Verifying Payments Right Away

Don’t delay … start keeping verifiable track of payments today!

The term “seasoning” refers to a note’s history of on-time payments. The longer a note has been seasoned (i.e., longevity of prompt borrower payments), the higher the value of the note to a prospective investor since the reliability of the borrower has been established.

Keeping a complete and accurate electronic or paper record of the borrower’s monthly payments is crucial to verifying to a buyer that the borrower is reliable. Without this “paper trail,” you have only your word to give concerning the payer’s payment history.

Having verifiable proof of the on-time payment history can make a big difference in note pricing, especially if the borrower has less-than-desirable credit.

Of course, the best way to create a verifiable payment history is to have the note serviced by a licensed third-party loan servicer. However, those note holders who have chosen to self-service their notes can still create verifiable payment histories with some diligence.

Find the Right Buyer for Your Note

Here are two factors that will help you find the best prospective buyers for your specific note.

Property Location

It’s a fact that the same house in different parts of the country can have significantly different market values.

Unfortunately, it’s not possible to pick up a house and move it across country in order to increase its value. However, when selling a note on a property anywhere in the country, you can certainly improve your outcome by “moving” your search for the note buyer.

Many note buyers will consider purchasing notes nationwide. However, a surprising number of investors prefer notes in their own state or county, and will often pay a premium for such notes.

Note buyers in the property’s area are more likely to know state laws and property values, giving them a more accurate assessment of the note’s value. Be smart and look for investors that have a connection to the property’s location.

Note Type

There are many “flavors” of notes out there — residential, commercial, secured, and unsecured, to name a few. Within the residential mortgage industry, notes can be performing, sub-performing, scratch-n-dent, and nonperforming.

Every mortgage note is in some way different from the next. The differences could be in the note’s structure (terms), payment history or borrower’s credit.

It’s important to understand that there are buyers for every type of note, but not every buyer is interested in every type of note.

A fairly common problem faced by seller-financed note owners is the borrower who stops paying on their loan. While this situation is never ideal, it’s important to know that the note owner does still have options. One such option is to sell the mortgage note to someone who has the experience and interest in working out the problem with the borrower. Selling a nonperforming note eliminates the hassle of trying to collect past-due payments and gets cash in your pocket now.

When selling a mortgage note, it’s important to focus on finding a buyer that has experience in buying the type and condition of the note you’re selling.

Timing Your Mortgage Note Sale

You’ve likely heard it said that “timing is everything.” This adage is true in the note industry as well. So, when is the right time to sell your seller-financed note or trust deed?

In the final analysis, the time to sell your note is a very personal decision. If you need cash right now for some pressing need or opportunity, then there’s no better time to sell than now!

However, if you have the luxury to wait before selling, there are a few factors to consider that will likely increase the note’s market value.

For example, waiting to sell a newly-created note until it’s been seasoned for 12 months or more will almost always increase its value. After a year, the note will have an established and verifiable payment history and the buyer will have increased their equity in the property, which makes them statistically less likely to stop paying.

Be Prepared to Move Swiftly

Your mortgage note is a valuable financial asset which means that a certain amount of paperwork and due diligence will be required as standard practice when you decide to sell.

Be sure to have copies of your documents ready to provide to prospective note buyers. Also, locate your original documents (e.g., promissory note, mortgage or trust deed) and store them in a safe place in anticipation of closing on the sale.

While it’s true that being unprepared won’t necessarily devalue your note, it can nonetheless drag out the process and potentially deter otherwise good note buyers. They might begin to wonder if it’s worth the trouble to buy your note.

Do your research and know generally what to expect during the note sale process. Provide copies of the key documents up front to facilitate a smooth transaction and accurate fair market offer for your note.

Striving to attract quality note buyers is a worthwhile and highly-achievable endeavor. Many of the factors that make your seller-financed note more attractive to note investors can also increase the note’s value — it’s a win-win!

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