I am not sure why the Bank would prefer an assignment to a pay off. I cant imagine that there is an accounting distiction. My guess would be that it is just some office politics. In any event, an assignment would be preferable to a payoff for your viewpoint. Ask the title company for the necessary paperwork to release the mortgage from the property. But dont cancel the note. Depending upon your agreement and your relationship with the debtor, you may want to pursue them for the money owed in the note. It is probably worthless at present, but maybe in 4 years the debotor will win the lottery.
Banker Says Yes to Note Purchase Not to Payoff - Posted by ToniCox-NJ
Posted by ToniCox-NJ on August 08, 2000 at 21:30:19:
Am I missing something here?
I’m working with a local bank for a note payoff from a property that I took over subject-to. I’m selling it right away and negotiated a short-sale with mortgage holder (or so I thought).
Banker now tells me she’s selling the note and wants me to buy it, but all I want is to pay it off - for the same amount we previously agreed upon. What’s the difference to the bank? Am I missing something here? Why is she insisting on this? How would I close with my buyer?
Any suggestions, comments, insights? How do I insist on the bank taking the payoff instead?
SOP for most banks in a short sale situation dictate that the bank receive 100% of the net proceeds from any sale.
From your description of the deal, it sounds as if there will be proceeds disbursed to you from the closing with your buyer. This makes approval of the short sale impossible for the banker.
The way around this is for the banker to sell you the note prior to your closing with the new buyer.
The bank can justify selling the at risk paper at a discount, what they can’t justify is being part of a transaction where they take a hit, and the owner (you) simultaneously walks away from closing with a check in hand.
If you don’t have access to the funds needed to buy the note in advance, try to structure the assignment with an escrow that coincides with the closing with your buyer. You can still use the proceeds of the sale to fund the assignment and subsequent release of the note, you just do it in two seperate transactions.