Mortgage Appraisal is Key
Investors should view seller carry financing as a bank. Does the yield on the note have a positive or negative cash flow? As an investor looking at their portfolio, the higher yield equals more money returned.
A mortgage appraisal, like a home appraisal, is an opinion generated by the consultant based on current market conditions. When dealing with a mortgage appraiser, bring all paperwork from the sale, including the note, closing statement (HUD-1) and a recent home appraisal. Each appraiser is different in the information required, so do ask what is needed. Some appraisers will not accept 2nd position notes, unless they are wrap-around notes.
After meeting with you, the appraiser will evaluate the note. Just like real estate agents look at comps for selling the home, the appraiser will contact a range of mortgage companies and compare your note to their rates, based on the information the home seller provided. Normally, this process can take from 5-10 business days. After evaluating the mortgage, a letter of appraisal and report is generated. A category system for the evaluation. The categories are superior to inferior.
During the final meeting, for example, I will inform clients on the position of the note, disclose the sources for the evaluation, and give recommendations. An added portion of the appraisal report is a "Note Value" section. During the evaluation process, I will contact note buyers and brokers on the "value" of the note. Each note will have a note value, in the event a client needs to sell the note.
The use of this service is not free. On the whole, be prepared to spend between $200 to $ 500 per evaluation, or up to $ 2,500 per portfolio of five or more notes.
A good investment strategy should include an appraisal of you notes. As an investor, your ability to generate an income is how much yield you are receiving from your invested properties. Using the services of a mortgage appraiser is a key tool to your investing future.
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