The short answer to this commercial note buyer question is essentially no. That doesn’t mean that all residential mortgage buyers will buy a commercial note. Some just don’t like commercial property notes, but for those that do, the note buying process is pretty much the same as for residential notes.
There are also investors who commercial note buying specialists. We work with several. They don’t even advertise. I have one investor who likes private mortgage notes on income properties and therefore generally offers a much better price for a note than other commercial note buyers.
I was working with a note holder wanting to sell a mortgage note recently. Th original date was in 2007 so it should fetch a good price all other things considered. As I was gathering his docs, he told me that the buyer has been paying cash. Unfortunately, that’s a red flag. Turns out the borrower has been paying cash since day 1 except for the last 3 months. I had to break the bad news to him that his note effectively only had 3 months of seasoning, which will lower the value of the note. So if you’re holding an owner financed note, please be sure and make your borrower either pay by check or at the very least a money order and keep copies of each payment. You might even want to deposit the money separate from any other deposit just to be sure you have a great payment record. You’ll put more money in your pocket when you sell the note to a private mortgage buyer.
I get quite a few questions about whether someone can sell a home with owner financing with an existing mortgage. The answer is a definite maybe. Sorry for my weird sense of humor but since every state and every mortgage lender has different laws and rules, it’s impossible to give a definitive answer for everyone. However, I will say this. For most states and many lenders, you can issue what is called a Land Contract. You should check with an attorney and possibly your mortgage company before going this route. A land contract or what some call a contract for deed doesn’t transfer title but allows someone to minimize or even eliminate the burden of a mortgage payment by receiving payments from the buyer to offset their mortgage. You can even sell a land contract to a land contract buyer or private mortgage buyer as long as you get enough money from selling a land contract to pay off your existing mortgage. In some cases your mortgage company might let you do a small second if you are just a bit short if you have good credit and a great pay history. It never hurts to try.
