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Mortgage Notes

Mortgage notes are used to record the terms of a bank note issued to purchase real estate. These legal contracts document the amount of funds borrowed, interest rate, property location, and contact information for parties responsible for repaying the loan.

Mortgage notes can be sold to cash flow notes buyers or private real estate investors. Many reasons exist for selling real estate notes. The most common include obtaining a lump sum of cash to finance college tuition, pay off credit cards, medical expenses or unsecured debts.

The first step to selling notes is to locate an experienced investor who understands the process. The Internet is a good resource for locating local investors who specialize in purchasing bank notes. Consult with a minimum of three or four investors and ask for client referrals. Conduct research on the investor to determine if they are registered through the Better Business Bureau and hold appropriate business licenses and insurance.

Real estate investors will require specific information regarding the mortgage note for sale. Sellers should be prepared to provide the face value, principal sum, interest rate, number of payments owed, amount of past due payments, and asking price of the note.

After reviewing the note, investors will provide a written offer to the seller. If accepted, sellers typically are required to provide additional financial documents including tax returns, income statements, amortization schedule and title insurance.

Most mortgage buyers require a real estate appraisal of the property secured by the promissory note. Appraisal costs are usually paid by the seller, but some investors will cover the appraisal cost and deduct the amount from the purchase price.

Depending on the circumstances, a drive-by broker price opinion appraisal might satisfy the buyer's requirements. BPOs are an affordable and fast way to obtain property appraisals. When drafting contracts, it is important to include who is responsible for the cost of obtaining real estate appraisals and which type is required.

The final step of selling private mortgage notes involves executing an Assignment of Mortgage. This legally-binding contract transfers all or part of future payments to the note buyer. Mortgage assignments must be recorded through the court and closing costs paid prior to obtaining cash for future payments.

Closing can take place in person or via mail. When mortgage assignments take place in person the seller receives a copy of closing contracts prior to the scheduled meeting. The seller must provide original copies of security documents including deed of trust, promissory note, and contract for deed.

When mortgage notes are transferred the original security instruments remain in the seller's name. The Assignment of Mortgage states the number of payments sold to the buyer. When buyer's purchase partial mortgage notes, a Partial Purchase Agreement is executed. Once terms of partial agreements are met the mortgage reverts back to the original note holder.

As a private real estate investor, I engage in buying and selling mortgage notes across the nation. I am particularly interested in real estate located in Orange County and southern California, Washington, Nevada and Arizona.

If you have mortgage notes for sale and are looking for an experienced and reputable investor, I encourage you to submit information about your note via the "Real Estate Notes and Land Contracts" form at Upon receipt of your information, I will personally contact you to discuss available options.

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Published on December 08, 2009 at 01:46 AM

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