There are several factors that are considered when selling a real estate note:

Time Value of Money

Your Real Estate Note will never be worth more than it is today.

A dollar just doesn't go as far as it used to and of course we all know money doesn't grow on trees.  The fact is money decreases in value over time. Today you can buy less with a $20 bill than you could 20 years ago... In 1989 the Average Price for new car $13,350.00 1 gallon of gas 97 cents (those were the good old days). That's the reason why a lump sum today is worth more than payments 20 years from now it's called the time value of money. It's also the reason why the payments from your note are discounted, a payment received 10 years from now does not have the same buying power the cash you receive today has.

Market Conditions

As interest rates fluctuate the stock market and other investments yield (rate of return) also fluctuate.  Real estate notes are long term instruments and are also affected by interest rates. Here is an example:

You own an 8%, 30-year real estate note. Interest rates are down and are hovering around 4.5%. Your note is appealing to investors, because it is offering a return bigger than the return at prime rate.

If interest rates shoot up, there is a point where other instruments will be more appealing to investors than real estate notes. In this case, the value of the real estate note could go down, and your 8% note would not be as appealing as it was before.

The opposite could also be true. An 8% note would suddenly be more appealing if the interest rates go down to 2%. However, this is a general rule, as there are other factors, which would also need to be considered. Market conditions matter.

Credit record of the Payor

The credit history of the payor could affect the value of your real estate note considerably.  For example, if your payor had good credit three years ago, but has been unemployed or has some collection accounts on credit cards, possibly tax liens etc. the credit rating may now show a very low credit score.  Even though the payor may be making timely mortgage payments, risk has now become a significant factor for any investor interested in purchasing the note.  The note would go down in value.  The opposite may also be true if the payor has improved their credit rating, your note may be more valuable than you think.

Loan to Value

Loan to value is the single most important aspect of your note. Real estate values are cyclical, markets go up, markets go down and frequently property sellers offer seller financing to attract buyers. Selling with little or no money down  is appealing to many buyers and may help sell the property sooner.  This might work in markets that are continually appreciating, if the property values decline your payor is more than 100% loan to value. In today's market many home owners owe more than their property is worth.  We have a solution if you have the flexibility, give us a call or drop us an e-mail, we look forward to working with you.

Why Not Consider A Partial Purchase?