What are real estate notes and how can you sell them?

Selling a real estate note is a good way to gain a lump sum of cash while still being in control of your property. It means that an investor will take over your mortgage loan and you will be the borrower, paying off your debt in installments to the lender. The upside is that you will still be the owner of your property and have full control over what happens to it. A lender will take over your debt but is not the ownership of your property. Are you interested in selling your real estate note? In this article, you’ll read what a real estate note is, what kinds there are, and how you can sell yours.

A real estate note: what is it?

Real estate notes, also known as mortgage notes, are official documents that are drawn up when you buy a property and finance it with a mortgage. Before you receive your real estate note, you’ll have to go through a screening to see if you’re financially capable enough to pay the mortgage installments, as you will become the owner of the property. Once your mortgage has been approved, you will receive the real estate note.

The real estate note can be sold to a financial investor. Selling a real estate note is completely legal and comes with a lot of benefits for both real estate note buyers and sellers. Sellers will be able to receive a lump sum of cash, while buyers can create a stable source of income. Once the real estate note is sold, the investor becomes the lender and the property owner becomes the borrower.

Kinds of real estate notes

There are two kinds of real estate notes that can be sold or bought: Performing vs. Non-Performing Mortgage Notes. The kind of note depends on the performance of the borrower.

Performing real estate note

Is the borrower making monthly payments and sticking to the arrangements stated in the real estate note? In this case, the real estate note becomes a performing note. With a performing real estate note, investors know that the borrower is able and willing to make monthly payments. Since the buyer will become the lender and will receive monthly payments from the borrower, performing real estate notes will create a stable income for the lender.

Non-performing real estate note

On the other hand, there are non-performing real estate notes. As the name already suggests, the borrower is not performing, meaning they are not making payments towards their mortgage loan. There is a big chance that once the buyer becomes the owner of the property and thus the lender, the performance of the borrower will not improve. However, the return on investment of this kind of real estate note can actually be higher, since the lender might be able to foreclose on the property, and take ownership.

How to sell your real estate note?

Selling your real estate note can be done through a loan and acquisitions specialist that offers a real estate note-buying service. The process is simple: contact the company and show them the real estate note that you want to sell. The company will get back to you with a proposal and it will be up to you if you want to sell it or not. If you decide to go through with the sale, the company will usually conduct a property evaluation to determine the value. Once the evaluation is successful, you’ll receive your money promptly. It’s truly that simple.