It probably sounded like a great idea to carry back a note to help facilitate the sale of your property.
Matter of fact, you might have been told that if your situation changes in the future, you could sell your note for a lump sum of cash.
This might leave you wondering, when is the right time to sell your note?
Does it matter what the traditional real estate market is doing?
What about the stock market?
In the end, you want to get the most amount of money you can from your cash flow. Sure, it is great getting a payment every month, but what could you do with a lump sum of cash today?
Is now the right time? Let’s start with answering just two questions.
What will you do with the money?
You might be receiving $550 a month, but that won’t cut it when you are possibly looking at a bill of $20,000 for college tuition, ongoing medical expenses, or paying taxes.
…And not all ‘needs’ are bad.
You might want the money for something like a vacation, remodel your house or a great investment opportunity.
In any case, the choice is simply what your personal priorities are. There is no judgment on our side. We have seen people sell notes for countless reasons.
If you do sell your note, you just need to be prepared to no longer receive that monthly cash flow. But, it is not uncommon for that tradeoff to be far outweighed by the need (or want) for a lump sum of cash today.
What is my note worth?
Your note’s value has to do with a couple of factors.
The face rate of the note (how much you charged in interest), the value of the home, the amount owed on the note, the buyer’s credit, and how long they have been making payments can all impact the fair market value of a note.
If you have a ‘track record’ that shows the buyer has been making payments to you for some time, let’s say two years, you have what we call ‘seasoning.’ Seasoning on a note is great…especially if you have proof of the payments being made.
Remember, investors are not typically looking to purchase a note with problems. If you have documented proof the buyer pays on time… all the better!
The more equity in the property the better. The likelihood of a buyer defaulting on a note goes down as the equity in the property grows. Who walks away from an asset?!
If, for example, you have a house with a value of $175,000, but the buyer only owes $125,000, the likelihood of the payments continuing is good. And if they don’t, the investor’s investment is well-protected by the additional equity.
You may or may not know the buyer’s credit worthiness in the form of a traditional ‘credit score.’ Don’t worry, that is something we can find out for you AND it is only one piece of the puzzle that can help you get more for your note.
So, is now a good time to sell your note?
- Do you have a need or a want?
- Do you have some ‘seasoning’ on the note?
- Did you write the note at a good interest rate?
- Is there some equity in the property?
Regardless of your situation, there is NO CHARGE to find out the fair market value of your note.