Safety Tips for Selling Your Mortgage Privately
Selling a private mortgage is a great way to turn a long-term investment into immediate cash. Instead of receiving long-term monthly payments, you can receive the majority of that payment at one time. However, some deals are better than others, so here are some safety tips to ensure that you get a good deal when selling your private mortgage.
- Never send the original document to the funding source. You should only send your documents to a title company that is licensed and bonded at the time of closing. The actual note is just like an original bond and is worth real money, do not give it to anyone prior to receiving funds. With a promissory note, whoever is holding the note is entitled to receive those payments. If you have given the original note to someone else, you are basically stuck working with them. It would be like giving someone a 100 dollar bill and then hoping they would give it back if you needed it in the future.
- Only work with actual funding sources. Anyone who can’t give you a quote over the phone at the time the information is being taken, is not an actual funding source and is a broker. Avoid working with someone who says the process will take 30 days or longer, because actual funding sources should be able to have the deal done within seven to ten days.
- Don’t sign any contracts that have penalties or commissions that have to be paid in the event that the deal does not go through. A lot of these contracts have clauses which charge a 1% penalty if they can’t end up buying the note. Be sure that if they can’t fund the deal for any reason, you don’t owe them any money. Work with companies that will send the note back if they can’t go through with the deal.
- There should be no upfront money paid for any reason. Do not pay for an appraisal or other upfront expenses, that is not standard or customary in the industry.
- Do not give out the social security number of the payer to everyone who asks for it. Only give that information out after you’ve found a funding source and signed a contract. Brokers will ask for the Social Security Number, run a credit check without a contract, and that check will hurt then hurt the payers’ credit score. If the number was given out to ten brokers that all ran credit checks, that would greatly hurt the credit score and could make the deal more difficult to complete.
- Never send the original document to the funding source. You should only send your documents to a title company that is licensed and bonded at the time of closing. The actual note is just like an original bond and is worth real money, do not give it to anyone prior to receiving funds. With a promissory note, whoever is holding the note is entitled to receive those payments. If you have given the original note to someone else, you are basically stuck working with them. It would be like giving someone a 100 dollar bill and then hoping they would give it back if you needed it in the future.
- Only work with actual funding sources. Anyone who can’t give you a quote over the phone at the time the information is being taken, is not an actual funding source and is a broker. Avoid working with someone who says the process will take 30 days or longer, because actual funding sources should be able to have the deal done within seven to ten days.
- Don’t sign any contracts that have penalties or commissions that have to be paid in the event that the deal does not go through. A lot of these contracts have clauses which charge a 1% penalty if they can’t end up buying the note. Be sure that if they can’t fund the deal for any reason, you don’t owe them any money. Work with companies that will send the note back if they can’t go through with the deal.
- There should be no upfront money paid for any reason. Do not pay for an appraisal or other upfront expenses, that is not standard or customary in the industry.
- Do not give out the social security number of the payer to everyone who asks for it. Only give that information out after you’ve found a funding source and signed a contract. Brokers will ask for the Social Security Number, run a credit check without a contract, and that check will hurt then hurt the payers’ credit score. If the number was given out to ten brokers that all ran credit checks, that would greatly hurt the credit score and could make the deal more difficult to complete.
Comments (3)
Do mortgage note buyers traditionally buy non-performing notes, or do they buy performing notes as well? What percentage of the outstanding principal is the norm?
Dawn Anastasi, over 12 years ago
Though I understand the intent of the article is to determine the best possible outcome for a note seller, the message to a newbie note broker is "Don't bother." Correct?
Tim Dailey, over 12 years ago
This is really good information, Jerry Remien . Thanks for writing this up. I honestly know very very little about mortgage buying and selling - so I appreciate the insight!
Brandon Turner, over 12 years ago