Mortgage buyers refer to real estate investors and investment companies that purchase real estate notes, land contracts, deeds of trust, and mortgage notes. Noteholders may sell real estate contracts in whole or in part for a lump sum cash.

Noteholders assign future payment rights to mortgage buyers through Mortgage Assignment contracts. The document records the amount of future payments transferred to the buyer of the note and describes the terms of the sale. When partial payments are sold, a Partial Purchase Agreement is executed. Both types of real estate contracts must be registered through the court to be legally binding.

When property owners assign partial payment rights, the security documents remain in the name of the mortgagor, but ownership rights are transferred to the mortgage buyer. Once the terms are met, ownership rights revert to the original holder of the note.

For example, John Doe owns property valued at $200,000 and requires $50,000 in cash. Mr. Doe has entered into a retrospective mortgage from the seller that generates $1500 per month in income. He would have to sell 34 payments to a mortgage buyer in exchange for a lump sum payment of $50,000.

John Doe records the allocation of payments through the partial purchase agreement. Once the final payment is issued to the mortgage buyer, ownership rights revert to Mr. Doe.

Actual payment amounts may vary based on rates assessed by the mortgage buyer. Some investors charge a percentage of the funds advanced, while others assess a flat fee. Property owners should check with multiple investors on cash flow notes to get the best deal.

While most mortgage buyers are reputable, it is crucial that homeowners do research before assigning future payments. The Internet is a good research tool, but noteholders should also check with the Better Business Bureau and state licensing board to make sure the mortgage buyer is in good standing and has the proper business licenses.

Sellers who have never worked with mortgage buyers should take the time to learn how the process works. Participating in online real estate networking groups or joining local real estate clubs is a good way to get information. Networking groups also provide referral opportunities to reputable mortgage buying companies.

Mortgage buyers will require specific information about the real estate note. At a minimum, buyers will require the balance due on the mortgage note, interest rate, note status (current or delinquent), asking price, and lien holder contact information.

Please note that buyers generally require a current real estate appraisal. Most are satisfied with a broker price opinion appraisal, but some require a traditional property appraisal. The type of appraisal, along with who is responsible for the cost, should be discussed before entering into a contract.

There are numerous reasons why note holders need to sell real estate notes and land contracts. The most common include paying off high-interest loans, raising funds for college tuition, or acquiring money for investment purposes. Regardless of the need for cash, noteholders must carefully weigh the pros and cons of assigning payment rights to a mortgage buyer.

Once the legal contracts are executed and signed, and the documents are filed through the court, the transfer is complete. The overall process normally takes 30-45 days to complete. It is always best to enlist the help of a real estate attorney to ensure that the documents are legally binding and properly recorded.