Note Investing FAQs

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NOTE INVESTING FAQs

WHAT IS NotesDirect?

NotesDirect.com is an online trading platform where investors of real estate Notes and REO properties can:

Search assets available from multiple sellers
Place a purchase order on one or more notes
Close the transaction electronically

WHAT EXACTLY IS A REAL ESTATE NOTE?

A real estate note is a debt instrument also known as a promissory note. It is an obligation to pay backed by real estate as collateral.

A Mortgage or Deed of Trust is recorded to secure the lien against the property. A Real Estate Contract or Contract for Deed may also be used as an alternative financing method.

WHY OWN THE NOTE INSTEAD OF THE PROPERTY?

Owning property for investment comes with the headaches of being a landlord. When you own the note, you become the bank leaving the responsibility for taxes, insurance, and the 3 T’s (tenants, toilets, and trash) to the property owner.

CAN THESE NOTES BE PURCHASED IN A RETIREMENT ACCOUNT?

Absolutely! Flexibility is one of the great advantages of this investment. Notes can be bought inside or outside of a retirement account.

In fact, a vast majority of private investors take advantage of the tax savings offered through a Self-directed IRA, ROTH, Solo 401k, or SIMPLE plan. The purchase is coordinated through your account administrator using their Direction of Investment (DOI) form and process.

HOW DO I TAKE OWNERSHIP OF A NOTE?

The terms of the purchase are spelled out in the Purchase and Sale Agreement (PSA). At closing, the Promissory Note is endorsed to the investor (also referred to as an allonge). An Assignment of the Mortgage or Deed of Trust is also executed and then recorded at the county courthouse. These documents are provided for the investor through the NotesDirect platform.

WHAT TYPES OF NOTES ARE LISTED FOR SALE?

NotesDirect is a listing service for:

1st and 2nd position loans
Seller financed notes (including Contracts For Deed)
Performing notes
Non-performing notes (NPN or NPLs)
Real Estate Owned (REO)

HOW DOES THE SEARCH FOR NOTES WORK?

Think of NotesDirect as an MLS style listing service for private mortgage buyers! You can search cash flows for sale based on:

Asset Type
Property Type
Lien Position
Last Valuation
Current Unpaid Principal Balance (UPB)
Interest Rate
State/County

You can further sort search results by listing price, listing date, and location

I HAVE HEARD THE TERMS “PERFORMING” AND “NONPERFORMING” NOTE, WHAT IS THE DIFFERENCE?

Performance refers to how well the payor has been at keeping payments current on the note. Assets are divided into three main categories for search purposes as follows:

Performing Notes – payments are either current or less than 120 days delinquent.
Non-Performing – payments are delinquent by 120 days or more.
REO – the property was already foreclosed for non-payment and is now Real Estate Owned (REO). The property, not the note, is being sold.

HOW DO I SET UP MY NOTES DIRECT ACCOUNT?

The setup process involves three phases:

Phase 1 – Complete the sign-up form on the home page of this website.

Phase 2 - You will be sent a registration code to login to the portal. During your initial login you will need to:

Complete the account registration details (contact information, profile settings, purchasing entities, and preferences)
Complete the Non-Disclosure Agreement

Phase 3 – The account is reviewed for approval. You are notified via email with a link for full access. You can now start searching, reviewing, and purchasing notes.

Due to the in-depth and sensitive nature of the search data, including complete due diligence files, this is a manual review process, which can take up to 2 business days. If you have not heard back during that time, please double-check your spam folder and then contact us at [email protected].

WHY ARE THERE EXTRA STEPS TO VIEW NONPERFORMING NOTES?

While the purchase of a non-performing note has the opportunity for greater profit it also has a higher level of risk. The payor is behind in making the required payments so that collection efforts will be necessary. This can include working with the payor to establish a new payment plan, modification of the note, and/or foreclosure proceedings.

It is important that an investor has prior experience in working with non-performing or REO assets before taking on this higher level of risk. If users are uncertain in this, they can default to viewing just the performing assets during signup.

DO I HAVE TO HAVE A SERVICING COMPANY ONCE I BUY A NOTE?

Yes, NotesDirect.com uses best practices when it comes to servicing notes. This assures a smooth transfer of payments and compliance with any applicable loan servicing requirements. You will be asked to indicate your preferred servicing provider for collecting payments when placing an offer.

WILL I BE ABLE TO PERSONALLY REVIEW ALL THE DOCUMENTS?

Absolutely! We are big believers in thorough due diligence and help streamline the process by providing access to the existing collateral file via CSV and PDF downloads. The collateral file differs by asset type but will generally include:

Note Information (dates, repayment terms, etc.)
Property Information (address, type, description)
Servicing Information
Payment History
Document Copies (Note, Mtg/DT/Contract, Assignments, Closing Statement, Endorsements/Allonges, Modifications, etc.)
Title Report or Prior Title Policy (if any)
Prior Broker’s Price Opinion (BPO)

WHEN CAN I PLACE A PURCHASE ORDER?

Once you have performed your preliminary due diligence and are satisfied with the asset, you can place a purchase order. NotesDirect is a non-auction style format with the purchase price clearly indicated. The seller is given two (2) business days to respond to your offer.

HOW LONG WILL I HAVE TO CLOSE?

Once a purchase order is accepted the buyer is required to close within 10 calendar days. During this time you will need to complete any final due diligence, execute the Purchase and Sale Agreement (PSA), and send funds to closing.

CAN I CANCEL AN OFFER OR PURCHASE ORDER?

Yes, we want you to be satisfied with your selection. You may cancel an offer at any time before executing the PSA. Go to My Account and identify the asset in your Offers & Purchase History section, then select Cancel Offer under the available actions at the right of the page.

CAN I SUBMIT A BID?

Each asset has a set purchase price. The platform is not an "auction" or "make a bid" platform. The only time sellers will review a counteroffer is when a potential buyer submits due diligence findings for review that may warrant a reduction in price.

HOW DO I SEND THE MONEY WHEN I BUY A NOTE?

Funds are sent via wire transfer to the seller using industry standard procedures and documentation.

WHAT ROLE DOES NOTESDIRECT.COM PLAY IN THE TRANSACTION?

NotesDirect serves as a third party facilitator for the transaction. We work to ensure that both buyer and seller are responding promptly to keep the transaction moving. We also monitor the closing to ensure each party receives appropriate documentation of the sale.

WHAT IS THE COST TO USE NOTESDIRECT.COM?

There is no cost to gain access to the system to view and search assets as a retail buyer. Should you decide to purchase an asset, there is a flat $750 charged per asset at closing.

ARE THERE OTHER LEVELS OF ACCESS?

Yes, in addition to the free retail access there are also various levels of wholesale access. These membership levels are designated as Titanium, Platinum, or Diamond. For more information contact us at [email protected].

CAN BROKERS USE THIS PLATFORM?

The platform was designed to directly connect note holders with private investors. The one thing we require of users is that they are the decision maker and ready to make the investment once the purchase request is submitted. While we fully support a broker's role in the note business we believe that opportunity is going to be on the wholesale sourcing side rather than our retail platform. We are not wanting the notes shopped to investors but rather investors to login and view the transaction through the website. There is also an NDA that outlines our process during the registration.

WHERE CAN I LEARN MORE ABOUT INVESTING IN NOTES?

There are many great resources available for note investors. Our Video page and NoteSchool.com are great places to start learning more.

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