Cashing in on Private Mortgages

Did you know that there is a marketplace for private mortgage and business notes? A marketplace with billions of dollars of private paper that investors want to buy! Why should you want to know about this? First, it represents an opportunity to make additional money. Secondly, it affords you the opportunity to offer your clients a service your competition does not.

You can be an active full time participant in this market or just handle the notes that will occasionally come your way from your normal real estate and mortgage activity. About 10% of the real estate transaction made involve some kind of private mortgage. The are even higher for business sales. Many transactions would not take place at all unless the seller was willing to carry back a note. And sooner or later, many of these people may want some or all of their money.

This is where you come in. Note holders typically, not knowing where to go, will call their local banker, mortgage broker, realtor, accountant, etc., looking for advice on how they can sell their mortgage. Most of these people don't know where to sell these notes. They aren't aware of company's like mine that are actively looking to buy.

Not only do companies like mine purchase existing notes, but we can also help by buying private notes at closing. This makes some undoable deals doable. The end result: More money in your pocket and a reputation for doing the undoable.

Unlike conventional financing, payouts on private mortgages and business notes can be structured to fit the cash flow needs of the note seller. Furthermore, the note seller can get an accurate estimate of the current value of his note in today's market should he choose to sell it. This allows your client to decide if they want to cash out now, get some money now and some later, or knowing what the value of the note is now, decide to hold on to it.

Let's go back to the already existing note. Assuming your in contact with a note holder looking for cash now, what do you do and how do you get paid? Well, first and very importantly, find out what the note holder needs now. Someone holding a $250,000. note and needing $50,000. now does not need to sell the whole note to get what he needs now. This is important for you to know to structure a win-win deal for all concerned.

Next you want to collect the necessary facts and documents. You need to know:

1. Type of property (SFH., Commercial, Land, etc.) Is it owner occupied.
2. Property address
3. Copy of Closing Statement
4. Copy of note and mortgage
5. Credit information on payors
6. Is the note current?

As to what's in it for you, this is negotiated between you and the note buyer or seller. So the fee is yours to determine. You need to keep in mind that an excessive fee can be a deal killer. If you have a situation in mind, you can contact us for suggestions at SuccesMstr@aol.com or by calling (954) 755-4422. Traditionally my company would pay a referral fee to the party bringing the deal to us.

You should understand that when a note or a portion of a note is purchased, it is always purchased at a discount. The usual question is what or how much is the discount. The answer is: it depends. What it depends on are the parameters such as property type, down payment, note terms, payor credit, etc. The documentation provided usually makes it possible to make an accurate offer subject to due diligence. In next month's article, we will provide more information.

Neil Rothman
F & M Funding Corp
(954) 755-4422 (phone & fax)
SuccesMstr@aol.com