7 Insider Tips You Must Know Before Buying or Selling a Note in Today’s Real Estate Market
Whether the Real Estate Bubble is ready to burst or not, be sure to consider the following essential tips before Buying or Selling that Mortgage, Trust Deed or other Cash Flow Notes …
Did you take back a 2nd mortgage when you sold your property? Perhaps you are collecting payments as part of a structured settlement. Or maybe you’re considering buying a cash flow note or taking back a mortgage.
There are certain things that you simply must know if you currently collect payments, or are considering taking on payments in the near future.
Many individuals buy and sell cash flow notes, including the author of this article. Buyers and sellers of notes will often place classified ads in your local newspaper. Or you can run an ad to buy or sell a note. Anyone interested in getting a good return on their investment dollar is a candidate to buy your note.
The person responsible for making the tax and insurance payments can vary depending on the terms of the mortgage. Before buying or selling a mortgage note, be sure to examine the terms for paying the taxes and insurance. Also verify that the policy is issued for an amount that represents at least the full value of the amount still owed on the note, and that you, as the lender, are listed as the mortgagee on the policy.
Do not let the borrower get into the habit of making payments later than the due date or grace period. Be polite, but insist on promptness. Be sure to collect late fees if the payment is not received on time or within the grace period. Establish a no tolerance policy for late payments. If late payments persist, notify the borrower in writing of the exact nature of the default and proceed with legal action.
If the borrower files bankruptcy and lists you as a creditor you will be notified by the bankruptcy court. In this case, you must stop all collection efforts. Consider hiring an attorney to advice you in this area to avoid legal problems.
If legal action is required, the Noteholder has the right to initiate foreclosure proceedings. Find an attorney in your area with experience in the area of real estate foreclosure. Declaring a loan to be in default and starting the foreclosure process is a serious matter and should be handled by an attorney familiar with the laws in your state.
It is the borrower’s duty to protect and maintain the value of the property until it is paid in full. However, as the lender you should drive by the property on a regular basis to insure that the property is being properly maintained. If the property is in another state, have someone you know do this for you. Deferred maintenance on a property can seriously diminish the value of you loan.
Steve Groom, CRI, CMA, http://www.HomeBuyersMD.com is a full time real estate Investor in Maryland. In addition to buying & selling real estate and cash flow notes, he is also a Certified Mortgage Appraiser. For a limited time only, he is offering readers a FREE copy of the “Note Owner’s Manual”, the essential tool for all note owners or note buyers by calling the 24-hour message line toll-free at 1-800-761-3424, ext. 6 to request it, or get it now at the website above.
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