What Types of Notes Do We Buy?

If you're a property owner who has provided seller financing, you've created a valuable asset: a mortgage note. But what happens when you need liquidity? That's where we come in. At Harvey Capital, we buy seller-financed notes, providing you with a lump sum of cash. However, not all notes are created equal. This article will give you a transparent look into what types of notes we actively seek, which ones we consider on a case-by-case basis, and which ones typically fall outside of our buying criteria.

The Core of Our Business: What We Actively Buy

Our primary focus is on well-structured, low-risk notes that offer predictable returns. These are the types of notes we can typically evaluate and fund quickly. If your note falls into one of these categories, there's a very high chance we can make you a competitive offer.

• First Lien Seller-Financed Notes: This is our bread and butter. A first lien note means you are the primary mortgage holder, and in the event of a default, you are first in line to be repaid through foreclosure. This is the most secure position for a note holder and, therefore, the most attractive to us. We are always looking for first lien notes.
• Notes on Residential Property: We specialize in notes secured by residential real estate. This includes single-family homes, duplexes, triplexes, and fourplexes. These properties are generally easier to value and have a more predictable market, making them a stable investment for us.
• Notes on Commercial Property: While residential is our focus, we also purchase notes on smaller commercial properties. Think small office buildings, retail storefronts, or mixed-use properties. These notes often have strong borrowers and good terms, making them solid investments.
• Notes on Manufactured Homes with Land: We will purchase notes on manufactured homes, but only when the home is permanently affixed to land that is also part of the collateral. This is a key distinction, as a mobile home on a rented lot is considered personal property, not real estate, and carries a different risk profile.

Case-by-Case Evaluations: It's Worth a Conversation

Some notes have a few more complexities. That doesn't mean we won't buy them, but it does mean we need to dig a little deeper to understand the risks and potential. If your note is in one of these categories, don't hesitate to submit it. The worst we can say is no, and we can often provide guidance or a referral.

• Second Lien Notes: Unlike a first lien, a second lien (or junior lien) means there's another mortgage that gets paid back first in a default. This makes them inherently riskier. We do buy second lien notes, but we evaluate them very carefully. We'll look at the combined loan-to-value (CLTV), the borrower's payment history on both loans, and the terms of the first lien. Learn more about first vs second lien notes to understand the difference.
• Land Notes: We consider notes on raw land (with or without improvements like utilities). The key factors for us are the location of the land, its zoning, and its potential for development. A parcel of land in a growing area with utilities already in place is a much more attractive investment than a remote, inaccessible plot.
• Notes with Late Payments: A borrower who has missed a few payments isn't necessarily a deal-breaker. We understand that life happens. We'll want to understand the reason for the late payments and whether the borrower is back on track. A history of late payments will impact the price we can offer, but it doesn't automatically disqualify the note. For more details, see our article on selling non-performing notes.
• Notes with Balloon Payments Due Soon: A balloon payment is a large, one-time payment due at the end of a loan term. If a note has a balloon payment coming due in the next 1-2 years, we'll want to assess the borrower's ability to make that payment, either through refinancing or by selling the property. This adds a layer of uncertainty we need to account for.

What We Typically Don't Buy

To save you time, it's helpful to know what generally falls outside our investment criteria. While there are always exceptions, we typically pass on the following types of notes:

• Unsecured Notes: These are personal loans with no property as collateral. The only recourse in a default is to sue the borrower, which is a long and uncertain process. We do not purchase unsecured notes.
• Notes on Mobile Homes Without Land: As mentioned earlier, a mobile home on a rented lot is considered personal property. The laws governing repossession are different and more complicated than real estate foreclosure, so we avoid these.
• Notes in Active Litigation: If the note is currently the subject of a lawsuit (for example, a contested foreclosure), we will wait until the litigation is resolved before considering a purchase.
• Notes with Less Than 6 Months Seasoning: "Seasoning" refers to how long the borrower has been making payments. We like to see at least a six-month history of consistent payments. This track record gives us confidence in the borrower's ability and willingness to pay. If your note is brand new, we may ask you to wait a few months before we can make an offer.

When in Doubt, Submit Your Note

The most important takeaway is this: even if your note doesn't fit neatly into our 'what we buy' category, you should submit it for a free quote anyway. It costs you nothing, and the process is simple. We'll review your note's specifics and let you know quickly if it's something we can purchase. And if we can't, we have a large network of other note buyers and may be able to refer you to someone who specializes in your exact type of note. Our goal is to help you find a solution, even if it's not with us. To get started, learn more about how our note buying process works.