If you don't want to completely give up receiving a stream of income from your mortgage note but would like access to some immediate funds, you can consider selling a portion of the mortgage note in a partial sale. This means that both you and the mortgage buyer will retain ownership of the note. Depending on the amount you're looking to receive from the sale, the payment history of the note, and the reliability of the debtor, you'll be able to negotiate different deals with a mortgage note buyer. Here are three clauses in the sales contract you'll need to look at when coming to an agreement on the terms and conditions of the sale.
The Right to Sell the Remaining Portion of the Note
Once you have sold a partial portion of the mortgage note, both you and the mortgage note buyer are technically entering a partnership. As a result, the mortgage note buyer will have a say as to whether or not you can sell your remaining portion of the note at a later time to another buyer. To protect yourself in the future and to give yourself the freedom to liquefy your portion of the mortgage note as you please, make sure that there is a clause in the contract that specifies that you can do whatever you like in the future with your portion of the note. This may include selling it to another buyer or even transferring it to someone else's name.
Most mortgage note buyers will request that you include a provision that will allow them to have some say as to who the buyer will be if you decide to sell your portion of the note in the future. If this is the case, make sure that the provision is not too strict and that there is some leeway for you to work with. To protect your own interests, you might want to include a provision that will allow you to buy out the buyer's portion should the partnership not work out.
The Responsibilities of Both Parties in the Event of a Default
Another important aspect to consider when selling a partial portion of the mortgage note is the responsibilities of all parties involved should the note be defaulted upon. This will include whether you will have the option of buying the buyer's portion of the note back. This clause of the contract should also specify the length of time that both you and the buyer will have to make a decision should the note be defaulted upon and whether the property in question can be sold or liquefied without the permission of one party.
The process involved with dealing with a default should also be carefully outlined. Make sure you fully understand what your role and responsibilities are.
The Type of Payment to Be Made
When selling a mortgage note, you have two options. You can either have payments be redirected to the buyer until the value of the portion sold to the buyer is paid off, or you can choose to go with a split partial, which means that each payment will be split between you and the buyer. In most cases, you'll get a worse deal with a split partial, as the buyer will have to assume more risk.
Selling a partial portion of your mortgage note may be a better option than a full sale; however, the terms and conditions involved in the sales contract of a partial sale tend to be more complicated and complex. It's crucial that you spend some time reviewing the terms and conditions with a lawyer before signing on the dotted line.
To look into selling a mortgage note, call companies like Nine Tails Inc. to find the company that will give you the best deal.Share