What Questions Will A Note Buyer Ask Me?

Let's say you are carrying a note for the first time. You just discovered that a market exists where professional note investors will buy your note. You learn they buy notes at a discount, but you are intrigued nonetheless. What should you know?

Most note investors use their own cash and hold their notes till term. So, right off the bat, if you have had your note for a few months or maybe one year, remember that a note investor is looking long term - 10, 20 maybe 30 years. And, he has options. So, why should he deploy his cash with your note?

Buyers are no different than any other business person. Their experience - successes and failures - will drive their process and decision making. But in talking to you, some will ask a few key questions and then let their due diligence drive them. Others will ask many, varied and detailed questions, some of which you may not know the answer to. Bottom line, their funds are at risk, and they will reach their own comfort zone before hitting the SEND button for your wire transfer.

Let's assume the property securing your note is a home - not land or a commercial building or a business. Here are some key areas you should be prepared to discuss:

The Property

• When did you buy the property?
• Was this your home or an investment property?
• How much did you pay for the home?
• Can you provide receipts for any renovations made?
• How would you describe the neighborhood?
• Are property taxes current?
• Is hazard insurance current? Are you listed as Payee on the policy?

The Buyer

• How did you find your buyer?
• How much do you know about him?
• His occupation? How long?
• What is his credit history?
• Would he have qualified for a conventional mortgage? If YES, why seller carry? If NO, why?
• Who lives in the home with him? Their relationship to him?
• What kind of car does he drive?

The Terms

• Is the sales price equal to, greater than, or less than market value? If More or Less, why?
• If the down payment is small, why did you agree to accept it?
• How does the note interest rate compare to current mortgage rates?
• Did you try to negotiate the shortest note term possible?
• Who drafted the note - an attorney or local Title company?
• Is there a balloon payment? If yes, how confident are you your buyer will make the payment when due? If he can't, how will you handle that situation?
• Do you collect the payments or do you have a 3rd party servicing company?

You may be asked just a few of these questions, you may be asked way more. Be prepared to discuss your situation in an honest, non-judgmental and professional manner.

Hope this helps you prepare. Feel free to contact me at dennystanz@verizon. net with any questions you may have.