Are you interested in getting the absolute best price when selling mortgage notes?
Payment histories can help you to get top dollar by increasing their value!
It is very important that you keep accurate records of the payments that were received on a mortgage note so you know exactly how much money the buyer still owes. The added benefit to this is it helps to establish a clear record of the payment habits. if you can present a clear and verified payment history to a buyer, you can increase the value of the mortgage note. You can keep track of the payments made on a seller financed note in one of two ways, outside service or seller direct.
Professional Outside Mortgage Note Servicing
The easiest way to handle the servicing of the mortgage note is to let the professionals handle all the details. The third party servicing agent is responsible for receiving all the payments and keeps track of the outstanding balance and then sends any monies to the seller. They are also responsible for sending out the 1098 Mortgage Interest Statement and make certain to secure all original documents in case they are ever needed.
Collecting Payments the Do It Yourself Way
If the seller decides that they want to do all the details, they will have to follow these important steps:
1. Place all original documents, including the original mortgage note, into a safe deposit box.
2. For each check or money order that is received, copies will have to be made and kept in a secure place. Cash is not a preferred method of payment because a paper trail con not be established.
3. Once payment is deposited, a copy of the bank record should be kept on file.
4. Keep a detailed spreadsheet or ledger showing all payments received and dates deposited.
5. Responsible for calculating principal, interest, late fees, and balance. Using an amortization schedule can help with the process.
6. Send out the annual statement and the 1098 Mortgage Interest Statement to the buyer.
7. Make certain real estate taxes as well as the insurance on the property are all being kept current. Setting up an insurance escrow can help with payments. Buyer pays 1/12th of the annual balance into a reserve every month.
8. If there are late payments, collection letters will need to be sent. This includes lapsed insurance and late real estate taxes.
Why Does a Note Buyer Want a Payment History?
When an investor is considering purchasing a mortgage note, the payment history is a tool that they use to help determine the value of that note. Timely payment histories can significantly increase the value of that note. This is why it is important to either have it verified by a third party or that you keep exception records to prove the numbers are accurate. Sellers who do not follow the steps above have difficulty in selling the note because the buyer simply can not verify the information. Rather than try to go on memory when submitting information to the buyer, protect the mortgage note value by setting up a payment tracking method here today.
