The Market Value of a Note

The market value of an owner financed mortgage note is defined as the maximum cash price a note holder can sell it for in an active and competitive marketplace. Fortunately for note holders, an active and competitive market does exist for privately held notes. Online research will produce a large number of companies that purchase private mortgages. Of these, there are a handful of experienced and reputable companies that you have an opportunity to do business with. We recommend that note holders contact multiple note buyers before deciding who to conduct business with.

The factors that note investors consider when evaluating a note for purchase are detailed below.

  • The type of property securing the note. Everything else being equal the market value of a note secured by a single family residence will be higher than a note secured by land or commercial property.
  • The size of the cash down payment made at closing.
  • The property’s current market value and the amount of owner’s equity the borrower has in it.
  • The interest rate on the face of the note.
  • The number of monthly payments remaining on the note. The time-value-of-money dictates that shorter term notes are valued more highly than longer term notes.
  • The current level of interest rates. With market interest rates still near historical lows the market value of a private notes has never been higher. If/when mortgage interest rates begin to rise the market value of fixed-rate mortgage notes will react inversely and begin to fall.
  • One of the most important factors in determining the market value of a note is the strength of the borrower’s credit score. Everything else being equal, the higher the borrower’s credit score is the higher the market value of a note will be.

Note holders exploring the option of liquidating their mortgage note should reach out to several note investors for information. A few calls should be sufficient to establish exactly what your options are. To help establish the market value of your note call The Mortgage Buyer at (800) 618-2485, contact us via email, or complete our online submission form.