One of the considerations when buying and selling mortgage notes is knowing the current value of the home. After all, the property is the collateral and knowing its true value will greatly affect how much an investor will pay for a note.
Historically this process was a bit easier, when everything was in an “up” market. But with property values still on the downside or just recovering, it is often difficult to put a (safe) number on it. At least one that everyone agrees on.
Although there are excellent programs on the Internet that help the average consumer to get an idea of value, they are not always accurate. The actual value of a property can be determined in a couple of credible ways.
Often, note investors get what they call a “drive by” appraisal or valuation.
Usually performed by a licensed appraiser, the report will include other sales or comps in the area. The main difference is a “drive- by” evaluation does not require the appraiser to have access to the interior of the property. The appraiser actually drives by and takes pictures from the street for the report.
Some investors are using what is called a Broker Price Opinion (BPO) – an evaluation based on the advice of a real estate agent or broker. They are often very similar comparable to a “drive by” and at a lower cost but do not follow the strict guidelines of a certified appraiser.
The note buyer may even require a full interior appraisal to get comfortable with the value. This might be the case when there are substantial improvements to verify or there’s concern over the property condition.
The actual approved or preferred method will be up to the individual investor. While they are buying the mortgage note and not the property itself, the value is still important in deciding risk, investment to value (ITV), and the price they will pay to purchase the remaining payments.
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The information provided in this article is for general educational and informational purposes only and does not constitute legal, financial, investment, tax, or professional advice. Note Servicing Center, Inc. is a licensed loan servicer and does not provide legal counsel, investment recommendations, or financial planning services. Reading this content does not create an attorney-client, fiduciary, or advisory relationship of any kind. Nothing in this article constitutes an offer to sell, a solicitation of an offer to buy, or a recommendation regarding any security, promissory note, mortgage note, fractional interest, or other investment product. Any references to notes, yields, returns, or investment structures are illustrative and educational only. Past performance is not indicative of future results, and all investments involve risk, including the potential loss of principal. Note investing, real estate transactions, and lending activities are subject to federal, state, and local laws that vary by jurisdiction and change over time. Before making any decision based on the information in this article, you should consult with a qualified attorney, licensed financial advisor, certified public accountant, or other appropriate professional who can evaluate your specific circumstances. Some articles on this site include hypothetical stories, examples, and scenarios created to illustrate concepts and demonstrate the types of situations Note Servicing Center, Inc. handles. Any names, companies, properties, and circumstances in these examples are fictitious or have been anonymized to protect confidentiality, and any resemblance to actual persons or entities is coincidental. These examples do not describe specific clients and do not guarantee any particular outcome. Some content may be created with the assistance of generative AI tools and may contain errors or omissions. While we make reasonable efforts to ensure the accuracy of the information presented, Note Servicing Center, Inc. makes no warranties or representations regarding the completeness, accuracy, or current applicability of any content. We disclaim all liability for actions taken or not taken in reliance on this article.