No one enjoys being sick. It’s not fun and life just becomes harder.
The same goes for an unhealthy real estate note.
Luckily, your real estate note isn’t susceptible to colds or flu. In fact, keeping your seller-financed note in good health is mostly within your power. So, here are a few tips to…
Keeping Your Real Estate Note Healthy
While it’s important to set-up a note for success from the very start with a solid payer, good down payment, and affordable terms, the effort doesn’t just stop at creation.
Staying Current
While you are no longer in charge of the physical property, it doesn’t mean you can just wash your hands of the responsibility of taxes and insurances.
In fact, aside from delinquent payments, lapses in real estate taxes and property insurance account for the largest causes of defaulted notes.
So, check-in and make sure your buyer is on top of it!
Set the Record Straight
You may hear the term “lien” or “second lien” thrown around. In this case, a lien is another loan taken out for the same property and the number dictates order and priority.
Say your buyer takes out an additional loan against the property. How do you ensure that your lien takes priority and is paid off first?
You validate lien priority with Title Insurance.
This will establish your lien status in comparison with future loans. Should the buyer take out another loan, this keeps your real estate note healthy and a priority.
Keeping the Original
While most states record the lien document like the Mortgage or Deed of Trust they usually do not record the Promissory Note. That means it is up to you to keep track of the original, signed mortgage note.
Why?
Imagine losing it and having to re-approach the buyer to re-sign.
Hopefully, they just accept it and re-sign, staying truthful to the original agreement. But, what if they have decided they want to change something? What if they have already missed payments and are close to default?
Keep your real estate note healthy by keeping track of the original!
Staying In Touch
It’s a common fact that people are more likely to stay truthful and positive towards people they are in contact with. So, in order to ensure clear lines of communication make sure to stay in regular contact with the payer.
In addition, with an already open line of communication should the buyer hit a financial road bump they are more likely to make contact on plans for repayment, making severe delinquency less likely.
Healthy From the Start
Once negotiated and signed, the terms of your real estate note are set for the duration of the term, unless all parties agree to something different through a modification.
So, make sure to set the terms that make you comfortable and give your real estate note value. This also sets you up for success should you ever want to sell your note in the future.
Keeping your real estate note healthy is up to the seller as much as the buyer.
While you cannot control when the buyer actually makes that payment, you can control and monitor other aspects that help safeguard the standing of your real estate note.