Whenever you sell something, you always want to get the best price for it right? So let’s say you are going to sell your car and buy a new one. More than likely you would wash and detail the car to get it to look it’s best for your buyer. So it only makes sense that if you are selling your note you would want to know what factors influence the price of your note.
The first place to start is with the payer’s credit score. If the payer has a good credit score and has made regular payments on your loan, this adds value to the note. The more regular the payment stream, the better the note’s value will be to a buyer.
Next up would be the interest rate . The higher the interest rate of the note, the more it will be worth. Obviously it needs to be a fair rate for the home owner, but a lower rate will decrease the worth of the note. If you don’t have a good pay history, the interest rate becomes immaterial.
Seasoning is the number of payments that have been made on the note. This factor can be a double-edge sword. As the investor, the higher the number of payments that have been made the safer you will feel as an investor but the more payments that have been made will decrease the unpaid balance on the note and lessen its worth.
The length of the note also plays a part in its value. The shorter the term of payments, the more valuable the note is to a buyer. There is less chance of something happening to your investment of your note if the time span for repayment is shorter. Also, a shorter term is not affected by inflation as much as a longer term.
Clarity is the last item to look at with your note. The quality and having a clearly drawn paperwork will bring more value to a buyer then a note that is convoluted and confusing. Keep your notes simple and you will be rewarded in the long run.
As you can see there are many things that affect the value of a note when you are ready to sell. Keep your eye on these factors and you might get paid more in the end.
If you have a note you would like to sell, contact us here and we would love to talk to you about it.