Note buyers will pay cash for your notes.  The amount they will pay will be less than the balance due.  The difference is referred to as a discount. The amount of the discount will vary depending on several factors explained below. Each Note Buyer uses its own formulas and criteria to determine the value of a note.  But all Note buyers will assess the risk associated with the note and the yield they will receive from the note.

Time Valuation of Money:

This is simply the concept that $1 is more valuable today than it will be years from now.  Or what you could buy 15 years ago with $1 is a lot more than what you can buy today with $1.

 

The Equity in the Property:

This is mainly determined by the amount of the down payment that your payer made.  The higher the down payment, the higher the equity and  the lower the risk associated with the note.

Type of property:

Is it owner occupied or vacant? Most buyers will prefer occupied properties as opposed to vacant. Vacant properties carry a higher risk.

The Credit Score of the Payer:

Since the Note Buyer is going to carry the debt owed by the payer, a payer with a good credit score will reassure the note buyer and increase the value of your note.

The Payment History:
The more payments have already been received, the higher the value of your note.  If your payer has already proven that he was responsible on making payments, the risk associated with the note is reduced.  It is also a plus if the payments have been made on time.  A default situation will affect negatively the value of your note.

The Position of the Note:
A first mortgage is less risky than a second mortgage.  Some Note Buyers will only consider notes in first position. 

There are many other factors that come into play when assessing the value of a mortgage note. Each note buyer will have their own way of running their numbers and their own level of risk tolerance. This is why it is important to submit your note to as many Note Buyers as possible. This is where we can help you.