Note Appraisal
The best way to find out how much your notes value or worth is to get a quotation from a professional buying mortgage notes or note appraiser . Be wary of some people who may approach you offering cash for mortgages. Many of these buyers will attempt to give you a low-ball offer, whereas a professional buying mortgage notes will be more competitive with current secondary mortgage money market rates
Notes Value Definition
The fair market value of a note (or any other interest) is the net amount a willing purchaser would pay to a willing seller, neither being under any compulsion to buy or sell and each party having reasonable knowledge of the relevant facts
Another way of asking the question regarding the note appraisal value is to ask "How much of a discount must I take if I sell my note?" All notes are purchased at less than the remaining balance of the note if the whole note is purchased. This difference between the residual balance and the purchase price of the note is the "discount."
There is no standard discount because there are no standard notes or standard properties. Each note is different and each note must be individually researched by the note appraiser in order to determine the highest note appraisal value.
If you do not need all the cash from your note immediately, it is possible to receive 100% or more of the outstanding balance of your note by selling only a part of the payments on our note now.
Considerations in Determining the Notes Value
Knowledgeable buyers of trust deed notes and mortgage notes know there is NO STANDARD discount. Buyers consider many factors in note appraisals to determine the note value. These factors include, but are not limited to:
Seniority: Is the note in first, second, third, or fourth position? Many note buyers prefer senior notes (firsts). A few will consider junior notes (seconds).
Term Of Note: The value of notes that pay over a longer period, seven to 10 years or more, will normally be discounted more heavily than a note that pays off in a shorter period.
Unusual Features: Sometimes notes have no payment at all. A note may accrue interest and be due and payable in a lump sum in a few years. Such notes will often be valued at a higher discount than a note providing for a monthly or quarterly payment over the same number of years.
Senior Loan Terms: When dealing with subordinate notes (a loan with one or more loans recorded ahead of it), the terms and conditions on the first loans are quite important. If a holder of a junior note (for example, a second loan) is forced to foreclose to protect her interest, she may then have to make payments on or even pay off the senior loan(s) to prevent that lender from foreclosing.
Income Producing Ability Of The Property (From Rents): As income is usually produced by an improved property, investors generally prefer notes secured by developed property to notes backed by vacant land. Discounts on notes guaranteed by vacant land tend to be higher than discounts on notes underwritten for improved real estate.
Location And Marketability: Notes issued for city property are generally preferred to a note secured by remotely located property, such as a mountain cabin, or to a note for a special use property, such as a roadside diner, chicken ranch or bed and breakfast inn.
Degree of Safety: Equity is the difference between the current market value of the property and the total debt against the property. Protective equity is what the property owner stands to lose when she fails to make all the loan payments and the note holder must foreclose to protect his investment in a note.
In The Definition of Note Value, Protective Equity And Credit Worthiness Are Probably The Most Important Considerations In Determining The Notes Value.
