Note Professor Newsletter

For the note to be clearly understandable there are certain requirements that the note must contain. Here are a few:

1. The exact amount of the note (Yes, I have seen notes without an exact amount)

2. Origination date (This is the date the note is signed)

3. Date of first payment (You will be surprised at how many notes do not contain this. Without knowing this, how to you determine the balance)

4. Date interest begins (Often this might be different from the origination date)

5. Interest Rate. (This is usually in an annual figure, although the payments are monthly) If you do more than 5 seller financing notes in a year, you will have to comply with RESPA and TILA. (If you do not know what these are, I suggest you talk with your attorney. You do have an attorney, don't you?)

6. The amount of the payment (You would be amazed at the number of notes I have seen that does not have this figure in it.)

7. Name of payors (Yep, I often get notes where the payors are not identified)

8. Name of the payees. (Again, often poorly drawn notes do not list who payors should pay)

9. Frequency of payment (Monthly, quarterly, yearly, hourly) Hey, don't laugh at hourly? Are getting the point?

10. Location of payments (MUST HAVE THIS.) Where is the check to be sent? If you move, be sure to tell the payor. This can really cause problems when the payor sends his check to your old address and you have not informed him.

11. Due on sale clause (Even if you have the due on sale in your mortgage or deed of trust, also have it in the note. The note is your contract. The deed of trust is your security instrument. For example, say the note did not have a due on sale, but the deed of trust did. Which one prevails if your payor sells the property subject to?)

12. Dates of balloon and exact amounts (Be sure to spell this out completely. Sometimes it can get real sticky when the balloon is due, and the payor finds out he must make a monthly payment and the balloon payment.) For example, if you say $1000 a month for 36 months, at which time the entire note become due and payable, this means the payor must make the $1000 monthly payment, and the balloon payment in month 36.

These are the basics that all notes should contain. Check over the notes you have. Do you find all of these?

You can learn more about how to structure notes by signing up for THE NOTE PROFESSOR'S class on THE ABCs NOTES and OWNER FINANCING that I will be teaching in March. Because of the in depth instruction, this year we have spread the seminar out over 3 Wednesdays, staring March 15th. All class will begin at 7:00 P.M. Not only will you learn how to use a financial calculator with ease, but also you will learn clauses you MUST HAVE in your notes, and clauses to avoid that will trap you in the future. To register for this seminar, go to www.DFWREIN.com. The NOTE PROFESSOR NOTEBOOK is included in the price of your educational seminar. SEATING IS LIMITED. Be sure to sign up early. Last year some had to be turned away at the door. I will be teaching with a HP10Bii financial calculator. Be sure to have one when you come to class.

FOR UNDER $200, YOU WILL BE LEARNING THE SAME BASIC INFORMATION THAT COST THOUSANDS FROM "GURUS"

As the usual disclaimer, you should contact professional legal and tax experts when dealing in notes or real estate.

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As always, if you have a question, be sure to send it in. It is from your questions that I get my topics.