Selling a note

12 Replies

I have a performing note backed a large multifamily property that I generated. I have had it less than a year so not much seasoning. It is around 80% LTV with an interest rate in the high 5s, fixed for 20 years. I'm considering selling the note and have worked with some companies in the past.

Question to all you note buyers/sellers - what would you recommend as the best forum to get top dollar for selling your note? Websites, Companies and links would be greatly appreciated.

My friend who does a lot of note buying and a little selling uses websites. There are a couple of them, one of them is FCI Exchange I know.

I heard in Arizona that performing notes are running around 60% of the UPB.

My 2cents,

Joe Gore

@Ellis San Jose   I do have a professional servicer collecting. What kind of % of UPB can I expect to receive. I understand there are a lot of variables but I'd like to understand the range I can expect.

@Joe Gore  Yes I always read people buying performing notes in the 50-70% range but whenever I look at loanmls everyone is asking well over 90% of UPB. 

@Serge S.,

You might be able to get 90% if it is season for more than two years, and you guarantee one-year payments.

Joe Gore

Expect to take a discount to at least an 8%+ yield. Unless you are willing to sell a partial. 

UPB doesn't hold a lot of importance in my book, I pretty much ignore it.  The true value of the underlying collateral is more pertinent.

Good luck

If you are planning to sell your note to a professional note investor, you are going to get market price. If you are a little more creative and look outside the established note market, you might be able to monetize your note better by selling to a less savvy note buyer or one who has less access to paper investments. Also consider bartering or swapping all or part of your note for something that you want more.

I would suggest selling just the front end payments.  The backend is where you really get hit hardest by the discount.  Sell 5 years to an investor with an option at the end to buy the next 5 years, etc. (or 7 years, or 4 etc.).

What type of property class is the apartment complex?

How big is your note?

What type of DSCR do the asset have?

Did you make it non-recourse?

The 20 year term and only 20% down may work against you a little bit depending on the property strength. Depending on some of those answers the discount could be minimal though. MF CRE paper does not innately carry deep discounts as the collateral is sought after highly. 30 year fixed is in the mid to low 5% at par.

You will want audience with institutional buyers if you have a well written deal.  They do not take machetes out when pricing.  There is a chance you can hunt for PAR to 95%.  If you have some defects in your file you still could land up north of 90%.  

I would not recommend any of the sites for that type of trade.  Loanmls would be better suited than FCI and LoanMarket is not generally playing with commercial paper.  The audience on those is not conducive to good bids on your type of asset.  At your rate you need an institutional buyer who can afford your rate.  Predominantly, that will mean picking up the phone and calling on potential counter-parties to see if they are in the market.  Websites do not market your asset and nobody will care more about your asset than you.

I am told you call sell a note for cash today and you do not have to wait for the stream of payments. When you sell a note you are able get a lump sum of money to even buy a new home. At this is all they do. You can actually sell a note to them.

If you own a note, you can sell it for cash %% of the UPB, but 1st and 2nd non performing or performing notes are as cheap as used underwear at the goodwill store.

Joe Gore

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