If You Are Receiving Payments on a Note or Trust Deed Secured by Real Estate, You Could Receive a Lump-Sum Cash Payment Instead.
Are you receiving payments on a private real-estate note, mortgage, or trust deed? Would you rather receive a lump sum of cash right now?
Your future stream of payments may be worth more today than you think. Maybe holding onto your note has become more of a problem than you expected. Maybe you just need or want cash for a special purchase. Whatever the case, there are investors out there who are eager to purchase your note for CASH!
In this type of transaction, the investor pays you a lump sum of cash, and then they begin receiving the payments made on the note. You should not expect to receive the full value of the note's outstanding balance. For example, if you hold a real estate note which has a $60,000 balance, an investor will probably offer you $45,000-$55,000 for the note. This difference between their purchase price and the remaining balance becomes their profit when the note is paid off over time. It is their reward for assuming the risks involved with the note: payor default, inflation, etc.
The actual value that an investor may offer you for your note depends on many factors: What is the note's outstanding balance and remaining term? How many payments are left? What is the interest rate? Is the interest rate fixed or variable? What property, if any, serves as collateral to secure the note? How reliable is the person who is making the note payments? What is their credit history? How long have they been making payments? Etc., etc., etc.
An investor purchasing a note is in essentially the same position as a bank making a loan. You probably asked many of the same questions when you issued the note in the first place -- perhaps as seller financing for real estate you sold, or in a similar transaction. Before an investor buys a note, he or she wants to be as certain as possible that the note will be paid.
The transaction itself should be structured much the same as a real estate transaction, for the protection of everyone involved. The sales agreement should be in writing and reviewed by your attorney. Many note buyers will open an escrow with a title agency or similar third party, especially if the note is secured by real estate. Again, this protects everyone involved.
How do you find a buyer for your note? There are many note buyers and investors around the country and the world. For local buyers, check your local newspaper's classified ads. You may find investors advertising that they purchase real estate notes, lottery or similar annuities, and other payment contracts. You can also search the Internet for investors -- but you should be extremely wary when dealing with people whom you cannot meet face-to-face. (You should, of course, be cautious no matter who you are dealing with, but even moreso when dealing over the Internet.)
Selling your real estate or similar note can give you immediate access to a significant amount of cash, while at the same time removing the hassles of collecting monthly payments, worrying about default, and so forth. Once you have a buyer and an agreed-upon price, the transaction should be fairly quick and straightforward.