This takes knowledge of what the market will bear at the current time for the type of property and note terms. The investor also needs to consider Loan-to-Value Ratios, the type of property and the marketability of it, and his own cost of funds. We will inform the investor of the price and yield for which we can sell a particular investment.
We will obtain an evaluation of value and pictures of the collateral. If the property is local, Investors should look at the property, as well. Looking at what other similar properties in the immediate area are currently selling for is a good way to determine value. If the property is out of the area or out of state, we generally have a Real Estate Broker provide pictures and evaluate the property. The value should be compared with the investment amount. We do not recommend investing over 80% of a financeable property’s value (Loan-to-Value Ratio) and not over 70% on land. In the vast majority of investments, these ratios are even lower.
During this process, the investor finds out the quality of the investment offered by verifying the represented facts through documentation, which include the following:
Title Report: This is necessary to provide a record of existing liens that apply to the collateral property and also to provide insurance of the recorded document’s position.
Signed Letter of Verification: This document verifies the balance and terms of the contract and is signed by either the collection agent or the purchaser of the property.
Credit Report on Buyer: We check the current credit on every Buyer.
Pay History of the Buyer: A record of the timeliness of the Buyer’s payments.
Evaluation of the Subject Collateral: Drive-by pictures or appraisal.
Insurance Binder: This is obtained when there are valuable buildings as part of the collateral. The investor is named as the Loss Payee at closing.
Copies of the Contract or Note: This includes closing statements and underlying contracts (if applicable).
Documents must be prepared and recorded that will legally transfer the seller’s interest in the instrument being purchased. We generally prepare these documents. The title insurance company will make the determination whether the transfer document is acceptable and insurable, before recording.
Following the transfer of the interest, the recording of the document, and the availability of recording numbers, the transaction should be funded. We provide the investor with closing statements and original documents.