Sell Real Estate Note at ProTask Funding

Tips on Creating / Selling Notes

Single Family Residences (SFR)

This article is intended to help you understand how a note should be created initially to make it marketable, but secondly what factors will need to be considered by most investors to determine if the note is something they would be interested in buying. The first step is to create the note. The best resource for guidelines on creating a marketable note is the article by Michael Morrongiello entitled Creating Marketable Notes. In this article Michael outlines the major points you need want to consider in creating a marketable note. The article is pretty generic in nature so in this discussion I want to talk about some other factors you will want to consider as well that could end up being problems later when you want to sell the note.

A second article worth taking a look at is on written by Lorelei Steven entitled Divorce Liens on the Family Home, where she discusses factors that would make a note unsalable if it were created in a divorce situation between the husband and the wife.

So far both of these articles are primarily about the creation of notes on single family residences (SFR). The basic information needed by most investors to be able to give you a quote on an SFR is gathered on the page Sell A Note. Some additional information that you should be ready to provide in the comments is:

  • The age of the property
  • The number of Bedrooms and Bathrooms
  • The square footage of the home
  • The square footage of the lot or the dimensions of the lot
  • "Opinions" about the neighborhood, schools, shopping, and community etc.

If the property was purchased as an investment property and is being resold after fixing it up, you will want to to be able to to document the improvements made to the property and have an appraisal done with interior photos.

With any note, in order to do a complete and accurate appraisal of the note, we will need you to supply the following documentation. 1) A copy of the note, 2) a copy of the closing statement or settlement statement, 3) a copy of the trust deed or mortgage loan that secures the note to the property.

How long will it take to sale my note once you have an investor?

It will typically take 2 - 3 weeks to be able to fund the purchase of most notes once we have secured an investor and have received the necessary documentation from you to open an escrow on that purchase. The quicker you can provide that information to us, the quicker we will be able to close the sale of the note, however the more people involved in the sale of the note and the more complex the note, the longer it will take to close the sale of the note.

Other Types of Real Estate Notes and Business Notes

There are numerous other types of cash flows that can be sold. If you have a regular income stream or and investment with a lump sum balloon payment down the road it's very possible that we could help you get cash for that. If you have any questions don't hesitate to contact us. Below you will find some other type of real estate notes and some information on business notes to help you get a general idea of what to expect.

Vacant Land

If the note you are looking to sell is secured by vacant land, this presents a bigger risk to the investor since that property is harder to resale if it was taken back in a foreclosure. Quotes for vacant land will not be as high as for say an SFR that is owner occupied. In addition to the basic information required on the "Sale A Note" page you will want to add to the comments the following information.

  • Number of acres (dimensions or Square footage if it is a lot)
  • What is the land / lot zoned (Residential, Commercial, Agricultural, etc)
  • What is on adjacent land or lots
  • "Opinions" about the neighborhood, schools, shopping, and community etc.
  • "Opinions" about the the potential use of the property

Multi Family Units (Up to 4 units)

Multiple family units up to four units are still considered non commercial. Again these properties securing a note create a greater risk to the investor since they are typically harder to resale to the if the have to be taken back under a foreclosure. Quotes for these notes will not be as high as for an SFT that is owner occupied.

In addition to the basic information required on the "Sale A Note" page you will want to add to the comments the following information.

  • Number of units
  • Number of bedrooms and bathrooms in each unit
  • Approximate Square footage of each unit
  • Approximate Square footage or dimensions of the lot
  • Approximate age of the building
  • "Opinions" about the neighborhood, schools, shopping, and community etc.

Commercial Properties (More than 4 units OR business building)

With Commercial properties there is more information that needs to be supplied if you want to interest an investor in your note. The following is a list of some of the additional information needed.
  • Type of Business (apartments, retail store, gas station, shopping center, church, motel/hotel, etc.)
  • Number of units
  • Square footage of each unit
  • Age of the building
  • How long since significant remodeling?
  • Amenities (swimming pools, garage or covered parking, community center, etc)
  • Number of parking spaces
  • Hazardous materials issues (see additional considerations below)
  • "Opinions" about the neighborhood, schools, shopping, and community etc.
  • What is the total number of square feet of the structures on the property?
  • Describe the structures or improvements to the property.
  • What is the total square footage of the parcel?
  • What portion of the proposed sales price was or will be attributed to Real Estate, inventory, good will, non-competition agreements?
    • In other words, what is the value of just the Real Estate?
  • Does each unit (if more than one) have a separate utility meter?
  • Describe the local competition for this property?
  • What is the present zoning of the property? (i.e., "C-1", "C-2", etc.)
  • Describe the surrounding properties?
  • Describe the general economic condition of the area?
  • Are there any recent income and expense statements available surrounding the property?
  • We will need a couple good quality color photographs of the subject property, what is on either side of it, across the street from it, and street scenes looking north and south from the property.

Additionally consider the following:

  • If the payor is a corporation, did the payor sign personally as well as for the corporation?
  • If possible hazardous chemicals have been used on the property, e.g. a gas station or print shop, have there been EPA phase 1 and phase 2 studies done.

Mobile Homes without Land

Mobile homes present a problem since they are like car and depreciate rather than appreciate. Mobile homes naturally create a bigger risk for investors since they they depreciate in value. Mobile homes can be moved so a single mobile home sill most likely not be interesting to an investor. However if you have a portfolio of mobile homes then an investor might be interested. Periodically there will be investors that will buy a note on a single mobile home without land.

In addition to the basic information required on the "Sale A Note" page you will want to add to the comments the following information for each mobile home.

  • Make, Model and Year of manufacture
  • Double or Single wide
  • Number of bedrooms and bathrooms
  • Dimensions
  • Approximate Square footage or dimensions of the lot
  • What type of Mobile Home park
  • Average age of other mobile homes in the park
  • Are there there pave streets and curbs or unpaved roads.
  • Amenities in the park, i.e. swimming pool, park, community center, showers, etc.
  • "Opinions" about the neighborhood, schools, shopping, and community etc.

Business Notes

Business Notes present a larger risk to investors since many business fail in the 1st 5 years. Investors may still be willing to purchase business notes but quotes will likely be lower. If the business being sold has equipment that was included as chattel / security as part of the sale, you have a better chance that an investor will be interested. Typically an investor will want to see a 30% down payment on the business.

Some of the basic information required to be able to evaluate the note will be:

  • Type of Business
  • How long has the business been operating
  • Why was the business sold
  • What experience does the note payor have in running this type of business
  • How much was the business making the last two years before it was sold
  • is the building owned or leased
    • If leased what are the terms of the lease
  • Hazardous materials issues (see additional considerations below)

Additionally consider the following:

  • If the payor is a corporation, did the payor sign personally as well as for the corporation?
  • If possible hazardous chemicals have been used on the property, e.g. a gas station or print shop, have there been EPA phase 1 and phase 2 studies done.

Don't hesitate to contact us so that we can help you understand and find a buyer for your note.