So, you have finished the offer process and decided on a Buyer. What are the next steps and how long do you have to wait until you get paid? What should you do to speed up the process and make the closing as smooth as possible?
INTRODUCTION
You have decided on a Buyer and have signed the purchase agreement. The next steps require you to provide the buyer with more information and confirm all details regarding the Note. Once these are completed, the final step is closing and finally receiving your payout! In this article, we will go over all these steps to finalize the sale of your Note!
DUE DILIGENCE-SELLER
During this time, you will be required to provide a wide range of information about your Note. The following are the normal items that will be requested or you should prepare.
Questionnaire – This questionnaire can cover information such as your contact information, borrower information, ownership clarification, property improvements, who collects monthly payment, and closing preferences.
Proof of Payments – While basic, this step is critical for the Buyer to understand the Borrower and their payment patterns. If you use a servicer, they can provide a payment report. If you collect payments, then you will need to provide 3rd party proof of payment. Examples range from copies of checks, bank statements, or cash receipt coupons. This proof of payment should show that the borrower has been paying in the grace period for a minimum period of 6 months and preferably 12 months.
RESPA Compliance – This is a federal requirement and has to do with how many Notes you created in the same year the Note was created. If you created more than three Notes, the government requires you to register and complete more forms. Most Sellers we work with do not fall into this category. (To learn more, read Are there Lender Regulations for Seller Financing? )
Document Collection – During this step, take the time to find all documents associated with the original sale and provide copies to the Buyer. The key item that will be required at Closing is the Original Promissory Note. If you cannot find he original, let the Buyer know at this point. In most states, a Lost Note Affidavit can be created to replace the lost original.
DUE DILIGENCE-BUYER
After the Purchase Agreement is signed, the Buyer will start a much deeper dive into your Note. This effort will confirm information that you have provided and also look deeper into both the Borrower, the Property and the Terms.
Appraisal – An outside firm normally does the Appraisal to access the value of the Property. The Buyer is most interested in knowing that the property value will cover their investment in case of default. If the appraised value is less than the purchase offer, then the deal is “underwater” and the Buyer may walk away or adjust the offer price.
Purchaser Interview – In this step, the Buyer will introduce themselves and work to confirm information about the terms, the payment history, and the Borrower. Remember, the Buyer and Borrower will have a long-term relationship, so it is important that they both understand each other.
Final Underwriting – During this step, there is a final review of all the information provided to check if there are any issues that need to be investigated or reviewed. This is the last step before Closing.
CLOSING
Title Preparation – Buyer can use in-house, local, or national title companies to close your deal. During this step, paperwork will be prepared and you may be contacted with questions (i.e. where to close, how do you want paid, are you married, more than one person signing etc.).
Document Review– Once title is complete, they will provide you with an opportunity to review all documents. Most Sellers go to the bottom line and make sure the final amount matches the offer. We do recommend that you take the time to review all documents (normally an assignment, an allonge and any closing statements). It is always good practice to have any legal documents reviewed by a professional experienced with Notes.
Actual Closing – On closing day, make sure you bring the Original Promissory Note. You will need to go to your agreed upon location for closing. Make sure you bring necessary ID and all people that will need to sign. After signing, make sure you get a copy of all documents. We recommend to get both a paper copy and an electronic copy sent to your email.
Payment – Depending on your type of payment, you will walk away with a wire receipt or a check (note most closing require a wire into a bank account). If the closing is in multiple locations or state requirements, you may end up getting paid within the next few business days.
Summary
Congratulations! You have successfully sold your Note and have the cash in the bank! You have made it from the start of the offer process to having money in the bank! We hope this article has helped you understand the complete process and how to successfully sell your Note!
The normal process ranges from 4 to 8 weeks. The process can vary between buyers and unforeseen issues that may come up. We strongly recommend using a Note broker to help you through the process to help you sell your Note at the highest price and with the least amount of effort on your part!
Connect with Peak Notes
Why not set up a meeting with a Peak Notes specialist to discuss selling your Note and getting a top dollar offer! Meetings are brief, cost nothing and can give you more insight into how you can maximize your investment potential!
If your property is located in Florida, please click on this link and set up a meeting with John .
If your property is located outside of Florida, please click on this link and setup a meeting with Karen .
DISCLAIMER-Peak Notes is not an accounting or legal firm and the recommendations above are best practices and observations from our years working with notes. Always consult a licensed professional for both accounting and legal issues.