Note Due Diligence

note due diligenceA note buyer will perform an investigative process known as note due diligence prior to making an offer to purchase your mortgage note.  The buyer is making a financial investment by purchasing your note. Therefore time and resources will be invested to confirm (that is, audit) all material facts regarding the sale, plus anything else deemed material to the sale.  The buyer (investor) will verify the material facts related to purchasing your note to determine whether it fits his return requirements, risk tolerance, income needs and asset goals.   While it sounds complicated it really isn´t, but it will help your negotiation position with the note investor if you are prepared for this process.

Note Due Diligence

What are the “material facts” that a note investor will investigate?  The majority of this are the documents that you likely already have in your possession once you completed the seller financing process.  However, if you inherited the mortgage note, you will likely need to do some additional work to get the note support documents in order.

Listed below are the documents that a note investor will require from you as part of the note due diligence process:

  • Mortgage, Real Estate Note or Deed of Trust
  • Property Sales Settlement Statement
  • Promissory Note
  • Real Estate Tax Payment Status
  • Hazard & Fire Insurance Policy
  • Title Insurance Policy
  • Additional Seller property debts and payoff statements
  • Property photos
  • Payment history of Borrower and current balance

Listed below is additional information that a note investor will investigate as part of the note due diligence process:

  • Credit Status report of the note Borrower
  • Current property market evaluation
  • Property inspection or drive by visit
  • Borrower interview or Estoppel letter
  • Other special needs

Conclusion

After completing this process the note investor will present you a note purchase and sale agreement.  You should review this agreement to determine whether the note investor is assuming all or part of the costs related to the note due diligence process.   Note that this investigation involves varies parties with their associated costs.  These costs will be reflected in the note offer.

Please call us at (888) 213-3383 to help establish the market value of your mortgage note or Contact Us via Email.

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