How To Price Mortgage Notes in 3 Easy Steps

What is a fair price for a cash flow note in today’s market? Here are 3 easy steps that brokers and sellers can use to receive pricing before they sell a note.

Are you a property owner considering a seller carry-back to sell a property faster?A seller already receiving payments from the buyer on property sold?A cash flow broker helping people sell a note?

These situations leave many wondering how to determine the true value of an owner-financed note. The future payments on a note, deed of trust, mortgage, or land contract can be sold to an investor for a lump sum of cash today.

Even if a seller does not want to sell the payments it makes sense to obtain a quote or appraisal on the present value of this future cash flow once a year. After all, this is usually one of the holder’s most valuable assets.

Fortunately it is easy to obtain a free evaluation in these three easy steps:

Step 1 – Gather Copies of DocumentsThe first step is to gather copies of the documents. The primary documents utilized in the quoting process are:

• Settlement Statement

• Mortgage (Deed of Trust, Real Estate Contract etc)

• Promissory Note, and

• Payment Record

Hopefully copies are easily accessible with the originals located in a safe deposit box or other secure location for safekeeping. If a seller later decides to sell the payments then the investor will ask for a few other documents plus the appropriate originals at closing. But for now these copies will be reviewed for an accurate quote.

Step 2 – Complete the Quote Request Worksheet

The Quote Request Worksheet, also known as a Mortgage Submission Worksheet, is a simple single page form. This intake form summarizes the transaction with most of the information obtained from the document copies. It includes details on the property type, buyer, repayment terms, and current balance.

To request a free download of the Quote Request Format in PDF file format click here

Step 3 – Submit to Funding SourceThe third step is to submit the worksheet and the document copies to an investor for pricing. Depending on the investor this might be submitted via email, fax transmittal, or an online submission process.

Most note buyers will provide a free no obligation quote within 24 hours. The quote is generally good for 30 days and is subject to due diligence, which includes review of the title, appraisal, insurance, buyer’s credit, and other underwriting items. The more information an investor has up front the fewer “subject to” items they will include with the evaluation.