Most noteholders only own a single promissory note. Often, they became noteholders reluctantly—selling their property with seller financing because traditional buyers couldn’t secure financing. If that sounds familiar, you’re not alone. Many noteholders aren’t aware of the steps needed to protect the value of their investment. At Quickity Closers, we’re here to help. Below are the key areas every noteholder should understand to safeguard their financial interests.
Insurance: Your First Line of Defense
According to the Insurance Information Institute, homeowners faced an average of $50,315 in claims from fire and lightning damage between 2012–2016. As the lender, you must ensure the borrower maintains adequate insurance on the property.
- Require proof of a full year’s coverage at the time of sale
- Verify the coverage amount protects your interest
- Ensure you’re listed as the Loss Payee to receive updates on policy changes or lapses
The National Association of Insurance Commissioners warns that the cost of natural disasters is rising due to climate change. If your borrower lets their insurance lapse, you may have the right to force-place insurance—a policy you purchase to protect your investment. Learn more about force-placed insurance and how it works.
Taxes: Don’t Let Liens Undermine Your Note
Property taxes take priority over all other liens—including mortgages and deeds of trust. If your borrower fails to pay property taxes, the state can auction the property to the highest bidder. According to Nolo, lenders are often notified before such auctions and may have a redemption period to pay the taxes and penalties.
The finance site Zacks notes that penalties can reach up to 24% annually. To protect your investment:
- Monitor property tax payments
- Advance funds to cover delinquencies if needed
- Seek reimbursement from the borrower
Defaults: Prevention Is Better Than Foreclosure
The Mortgage Bankers Association reported a 5.17% delinquency rate for mortgage loans at the end of Q4 2017. If your borrower misses a payment for 30 days, they’re considered delinquent.
- Stay in regular contact with borrowers
- Work with them to catch up on payments
- Avoid foreclosure when possible—it’s costly and time-consuming
Foreclosures can also lead to property damage from disgruntled borrowers. Having a clear plan and communication strategy is essential.
Conclusion: Let Quickity Closers Help
Owning a promissory note comes with responsibilities—from monitoring insurance and taxes to managing defaults. If you’re tired of the hassle and risk, Quickity Closers can help. We offer fair, no-obligation cash offers to purchase your note and relieve you of the burden.
📞 Call us today at 1-855-784-2511 or fill out the form on this page to get started.
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