NJ Commercial Real Estate ONLINE

 by: Robert Pomerleau

The single most common mistake that a note holder makes when creating a note is that they fail to check their buyer’s Credit Report. It seems so simple, but it is worth repeating "Most people fail to check the credit report of their prospective buyers!!" Can you believe this? Just by doing this one simple step can save you a bunch of money now and in the future.

How so? First and foremost by checking your potential buyers credit score can help resolve your worries of your buyer’s ability to repay their future debt to you. Heck, I don't know of any bank that would not check the credit score of any one of their customers seeking a mortgage. So why shouldn’t you?

The second benefit of checking your buyer’s credit score is what if you should ever decide to ever sell your real estate note, trust deed, or owner financed mortgage for all cash? By knowing your buyers credit score would not only benefit you now, but it would also make your real estate note more valuable in the future.

Here's why. The first thing a promissory note buyer/investor is going to require to sell your note is your payer’s credit score! Your buyer’s credit score is paramount to how much money you will ultimately receive for your real estate note. Of course the higher the credit score the less risky it is to a perspective promissory note buyer, thus making your note more valuable to them and ultimately you.

So, just what is an acceptable credit score concerning a real estate note? That is entirely up to you, but if it was my note I would not accept a score of less than a 550. The credit score counts for 40 percent of a total of 100 percent in rating your real estate notes value. So whether you are creating or selling your real estate note it pays to get your buyers credit score in more ways than one.