Episode 49: Selling the Note

Most note investors focus on the resolution — but knowing how and when to sell the loan itself is what keeps your capital moving and your returns compounding. In this episode, we break down the two types of note sales and what drives the price on each one.

🔍 What you'll learn:

✅ Why reducing uncertainty is the single most impactful thing you can do before selling a non-performing loan

✅ Why active litigation on a loan hurts your sale price — and why fresh non-performing loans command more from buyers

✅ How seasoning a reperforming loan for six to twelve months of consistent payments maximizes what a buyer will pay

✅ The tradeoff between institutional buyers who move fast and self-directed IRA investors who pay more

✅ Why velocity — recycling your capital quickly — matters as much to your overall return as the profit on any single deal

This program is for informational purposes only and should be independently verified before taking action.

Transcript

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Welcome to the show, where you'll learn how to invest in mortgage notes, the savvy real estate investor's secret weapon to create cash flow without tenants and property acquisitions for pennies on the dollar. My name is Robert Haitha, founder of Picknotes, and my mission is to make note investing ethical, profitable, and accessible for you. In every episode, we're democratizing the industry to put these powerful Wall Street assets into the hands of mainstream investors like you. So without further ado, let's get into this show where you're in good hands with my AI clone. Let's go. This program is for informational purposes only and should be independently verified before taking action. Not every note investment ends with a borrower resolution. Sometimes you sell the loan. It might be by design. You bought a non-performing loan specifically to get it reperforming and flip it to a cash flow investor. Or it might be out of necessity. You need to recapitalize, put your money back to work, or exit a situation that is taking longer than your timeline allows. Either way, knowing how to sell a loan well and what moves the price is an important part of your overall note investing toolkit. Let's start with selling non-performing loans, because that is where most investors find themselves when they decide to exit before a resolution is complete. The honest truth is that if you buy a non-performing loan at retail pricing and try to sell it at retail without doing anything to it, you are likely to break even at best. The way you create value on a non-performing loan sale is by reducing uncertainty. Every unknown that a buyer has to price in is a discount off what they will pay you. Every answered question adds value. The simplest and most impactful things you can do before selling a non-performing loan are to order fresh due diligence. Pull an updated title report, a current credit report, and a skip trace. If you know the senior lien status, whether the first mortgage is current or delinquent, document it and present it clearly. A second lien sitting behind a confirmed current first mortgage is worth considerably more than one where the senior status is unknown. You did the work. That work has value. Package it and present it to your buyer so they see exactly what they are getting. One important note on timing avoid selling a non-performing loan that is already in active litigation. Once a foreclosure has been initiated, the new buyer inherits all of the complexity and the open questions that come with it. A process already underway, an attorney they may not have a relationship with, and uncertainty around where things stand with the borrower. Fresh non-performing loans that have not had any legal action started give the next investor a clean slate to work from and they will pay more for that. Selling reperforming loans is a different and often more deliberate strategy. Once you have worked a non-performing loan through a modification and the borrower is making consistent monthly payments, you have created an asset that a different class of investor wants. The passive cash flow buyer. These are people who want a predictable monthly income stream without the work of managing a non-performing resolution. You did the hard work. Now you are selling the result. The key to maximizing your resale price on a reperforming loan is seasoning. Most institutional reperforming loan buyers want to see at least six months of consistent payment history before they will purchase. That track record tells them the modification is holding and the borrower is stable. If you can get to 12 months of clean payment history, before you sell, you will often command a better price. The modification agreement terms also matter. A well-structured modification with favorable interest rate, appropriate term, and clear documentation will price better than a cobbled together payment plan with loose paperwork. When it comes to where to sell, you have a few options. The trade-off is that they will price your loan at a yield that works for their fund, which may be tighter than what you could get from an individual investor. Self-directed IRA investors, on the other hand, will often pay more because they are looking for a specific type of passive return, and they are not subject to the same yield requirements as an institutional fund. The trade-off is that there is more process involved. The IRA custodian has to sign documents. The investor reviews everything carefully, and the timeline is longer. More work, better price. Velocity matters in this business. The faster you can recycle your capital, buy a non-performing loan, resolve it, sell it reperforming, and put that money back to work on the next deal. The higher your overall internal rate of return will be across your portfolio. A deal that earns a strong return but ties up your capital for three years competes poorly against a deal that earns a slightly lower return but closes in nine months and lets you deploy that capital two more times in the same window. Next time we are going to look at loan servicing, what a servicer does, how to choose one, and what the difference is between a full service plan and a performing only plan. Thanks for sticking around to the end, and thank you to my trusty Robot and the Fix Notes team for putting together another episode. If you want to learn more and hang out with the real not AI version of me, join our free school community at school.com slash fixed notes. That's s k o l dot com slash f I X N O T E S. In the meantime, we'll see you in the next episode.