Why do people sell a real estate note? That is a question put to me recently when I spoke to a group of people at a real estate investment group. If notes are so great, why would someone want to sell one? That is a valid question. The short answer is that the specific reason is as different as the people who sell a note.
Some people sell a note because that is a part of their business model. I recall a phone conversation some time ago where a person called wanting to sell their real estate note. They had purchased and rehabbed a house… owner financed the property to an occupant… and now were seeking to sell the real estate note a few weeks later. I declined their offer because it did not fit my note buying criteria. There are some persons and companies who are in the business to buy and sell real estate notes. That does not mean that the note is good or bad; it is simply a part of their business model.
There are others (participants small businesses or individuals) who want to sell their real estate note because they want all the money now. As is depicted in a television commercial about a company that buys annuities and settlements, sometimes people want all their money now. Sometimes, people want their money now for good things in their life such as buying a second home… taking a dream vacation… or helping their children or grandchildren. Other times, a person or small business want their money now because of bad things happening in their life: to pay for health care… a death in their family… or declining health. One of the things that none of us have is a crystal ball to see into the future. While we can make plans, none of us make will happen down the road in the next 10 to 30 years (for the term of a note).
This can present an opportunity for the note-holder to get their money now. It also can present the opportunity for the note-buyer to possibly get a good performing note at a discount. Best wishes in your real estate pursuits.- RLW