Note Freedom Provides Nationwide Valuation Appraisal Services for Secured and Unsecured Promissory/Mortgage Notes. If you need a Valuation Estimate or an Appraisal of today’s cash value of your secured or unsecured notes, for the purpose of Estate Planning, Income Statement Preparation, Balance Sheet Preparation, or any other purpose we invite you to contract us today.
Why would you need a Note Appraisal?
- Estate Planning
- Wanting to sell for a Lump Sum of Cash
- A Note in an estate being probated may need to be appraised
- Notes Invested in a pension/profit-sharing plan may need annual valuations.
- A client may be receiving payments from a personal injury settlement.
- Perhaps one party in a divorce settlement accepted a note as his or her share.
- When a client needs to sell part or all of a note for cash, he or she may want an independent source to set a price on a note.
What Would Affect my Notes Value?
Understanding the factors that go into determining a notes value is important because if you property set up your seller financing transaction ahead of time you will not only save yourself a lot of headaches, but it can also save you tens of thousands of dollars when you go to sell the note. When looking at a note to determine it’s value there are a number of factors to consider. Below are 6 basic categories of elements that are used to evaluate the quality of a note.
1- What Does Your Buyers Credit Look Like?
Understanding the value of a note starts with your Buyer. The Borrower’s creditworthiness is a legitimate concern with the majority of the Seller Financed Transactions. That’s because borrower underwriting has been seriously inadequate. Many sellers don’t even request a credit application when negotiating with the buyer. Worse, some sellers market specially to low credit/no credit candidates. Before offering credit to anyone, make sure they are capable of paying you back. A Note Professional uses common sense due diligence to help homeowners evaluate a potential buyer.
2- What is the Loan to Value (LTV) of your Collateral?
Year’s ago it was only sub-par properties that were candidates for seller financing. Today this is not the case. Seller financing is being offered on all property types in all neighborhoods. There are some properties that can only be sold with Seller financing. When determining a notes value it is important to understand the true value of the property compared to the note/mortgage that is against the property. The lower the loan to value (LTV) the more valuable the note. Investments in different property types vary, but as a general rule of thumb, most investors will not consider going above 75% of the properties value.
3- How much was the Initial Down Payment?
The Down Payment that a buyer makes says alot about the overall quality of the note. This is where the buyer has their “skin” in the game. The higher the better. We want the buyer to have something to lose if they don’t perform. Now, the down payment does not make or break anything in and of itself. As long as there are additional redeeming factors a low down payment can be overcome, but never use that as an excuse.
4- What Are The Terms Of Your Note?
The terms of a note help to determine it’s value because these outline all the defining pieces of the transaction and tell us when and how the loan is to be repaid. The Terms also help us to understand the return on investment that is possible with this seller financed transaction. For example, if the transaction is going to be completed in 7 years verses 30 years. That makes a huge difference. Properly structuring a note ahead of time will save you tens of thousands of dollars.
5- What Initial Paperwork Was Done?
Paperwork is our specialty. We love to see a seller financed transaction that is properly papered. Unfortunately, most are not. This is because most sellers and most real estate professionals do not know or understand what they should be doing when putting together a seller financed transaction. One of our goals in this industry (as a Seller Financing Professional) is to help standardize the practice of seller financing so that every transaction is handled properly from the initial determination of its suitability as the financing method, through the many steps of the process, to the post-transaction communication with the seller. This includes gathering all pertinent information, evaluating findings, arranging due diligence, presenting sound advice, and following every necessary procedure to the letter.
6- What Is The Payor’s (Buyer’s) Payment History?
The Payment History helps us to determine what the payor will do in the future. A lot of poor initial underwriting can be overcome with a strong payment history. On the flip side, a weak payment history shows a lot as well and means that your note will probably only be worth a fraction of what you were hoping for. This is why understanding how to maintain your note after the sale is another important aspect to determining a notes true value.
Hopefully by now you can see both the value of seller financing today and also the need to make sure that it is done correctly. When done right, seller financing can be a great tool to helping solve your real estate problems. Getting the advice and guidance of an expert in the field of seller financing cannot be overstated, especially when handling something as valuable as your property. If you would like a Fair Market Value of Your Real Estate Note, Click on the Link Below.
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