You have now gone through the adventure of putting your property up for sale at the right price, you found a buyer for your property with a decent down payment, maybe not very good credit, and you’ve been through the milestone of selling your property with seller-financing. Payments on the new note are coming to you in timely fashion. But as always, life happens and you need the money now!
You’ve finally found us, and we’ve given you an offer you’re interested in and you’ve accepted our offer. You’ve now signed our commitment agreement and the due diligence process is moving smoothly full-steam ahead.
Complications
But then we inform you during the due diligence process that, due to the borrowers’ very weak credit, we would like to chat by phone with your payers to find out what issues led up to the weak credit and to get a feel for their intentions to continue paying on the Note in timely fashion. We will also indicate that we will need their SSNs in order to set up the servicing of the account. In some cases, we may need the instrument you are selling to be converted to a more customary Mortgage and Promissory Note.
Scenarios
It is often at this point that the outcome of this transaction will take one road or another. We have often seen all of the following scenarios play out:
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The seller somehow misplaced or threw out the borrower’s contact info
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The seller failed to get the buyer’s SSN at time of the real estate closing
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The payers have found out that the note they’re paying on is being sold to a company and they won’t cooperate.
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The seller gets frustrated with the payers and threatens them.
First off, it’s critical that you hold on to your borrowers’ contact information, because you don’t know when you might need to reach out to them. And besides, this information is required when you sell your note because it becomes part of the closing file.
Also, it’s advisable to request the payers’ SSNs while you have leverage and are selling your property to them. Once your real estate transaction is complete, you will be at their mercy to release this information to you. The SSNs are very important because they will be needed to set up the servicing of the account after the purchase of the Note.
Payer Responses
Payers sometimes resist or are unwilling to provide this information, in which case they may have to sign an Authorization to Pull Credit form. But some borrowers become very anxious and become silent and unresponsive to the seller when they find out the Note they’re paying on is being sold.
Seller Do’s and Don’ts
But you will somehow need to find a way to get their cooperation, especially if the instrument being sold needs to be converted to a more customary Mortgage and Promissory Note (this sometimes may be required) and will require the payers’ signature. At this point you can reassure the payers that their mortgage terms and monthly payment amount will remain the same.
If on the other hand you get frustrated and threaten the borrowers (this does happen), they may retaliate by shutting you out entirely, knowing that as long as they continue to make timely payments on the note you can’t touch them. You will then have reached a "dead end" and may never be able to sell your note.
Your borrowers are a key piece of this puzzle! Foster good dealings with them, and you will stand a better chance of them cooperating with you if you decide to sell this note down the road.
