2/3/2020- What is the Value of my Real Estate Note?

One of the things that people want to know often is how to determine the value of a real estate note.   A few weeks ago, I got a call from a friend who wanted the same.   I spent several minutes asking him questions about the note, and I suspect he was impatient with all my questions.   Just as it  takes a little investigation to determine the value of a piece of land or a house, so it takes a little investigation to determine what is the value of a home.    Here are some of the things that I will want to know about in trying to determine the value of a real estate note>

THE PROPERTY-  Tell me about the property.  Where is it located?   Is it in a growing, stable, or declining neighborhood?   How many bedrooms and baths does it have?   What is the BPO on the property?

THE BORROWER-  What is the credit score of the borrower?  Do they have a job or source of income?    Do they pay in a timely manner?   Information about the borrower is critical in determining the value of the note.

WHAT IS THE BORROWERS’ SKIN IN THE GAME?-   What size down payment did they make when they bought the property? 

 SEASONING-  How many payments have they made on the note (also referred to as seasoning)?  

 WAS THE BORROWER QUALIFIED FOR THIS NOTE OR LOAN?-     Dodd-Frank federal regulations require that a person buying their primary residence should be qualified by a registered mortgage loan originator.     Did you have the borrower qualified?   That can influence the value of the note?

THE PAPERWORK-  Are the taxes paid up to date?   Is the property insurance current?  Are their liens and judgment on the property?    Do you have the loan serviced by a third party loan servicer?  These can affect the value of a note.

What is the value of a real estate note?   My general answer is that “it depends” on these factors. Best wishes in your real estate pursuits.  May it be a great year.-   RLW