The Note that Nearly Got Away.
A real estate co-heart of mine had a note he had
purchased several years ago,
when he lived in another state. Since he was now
in Texas he
decided to sell the note in order to utilize the proceeds
on a new real estate endeavor, and of course,came
to me to
buy the note . I immediately began my earnest and
research on his note, and contacted the original title
in the other state . I
soon found out that, unknown to my friend, the note
had been lost by the original seller and somehow a
lien had been issued. My problem solving skills
immediately into play and I found a title
company to research the situation and go about
recovering the original
note and reissue the deed of trust. However during
this time we found out that the payor was in
bankruptcy and the property was held by the court. So
I had to contact the payor and encourage him to obtain
release. The wheels of the court moved
slowly, but I was optimistic and during this time, I
appraisal of the property approved. The release of the
property was finally granted.
So with all the 3 P's ( paper, payor and property) back
in financial and legal order I
was able to buy a partial of the note (60 payments)
with an option to buy the last 60 payments within the
15 months. Another H&P Capital Investment
If you have a note to sell Click here for more information
TILA (Truth In Lending Act)
Part of the Consumer Protection Act which is
implemented by the Federal Reserve Board through
Regulation Z. Provides for disclosure of loans. If you
owner-finance more than 5 properties to home
owners within a calendar year, you must provide these
home owners with
a TILA form. Contact
me, and I will be glad to email
Note Professor Notebook
If you have not attended a Note Professor "How To Get
Rich with Notes" class, be sure and purchase the
Note Professor Note Book manual to enhance your
knowledge of creative real estate
financing and note selling.
Click here for more information.
Seasoning and Selling your Note
Last month we covered the closing of some sub
prime markets, and how this affects selling a
This month I want to talk about several of the
asked questions I have been receiving lately ,
outline for you how to structure a note to
Question "If I get seasoning, will this make my
The answer is
"sometimes" for mainly two
#1 if you get a good down payment.
Equity in the
property should have increased after one year.
#2 and when your note has seasoned for
approximately one year, your note is going to
Question "When will seasoning
NOT increase the
value of my note?"
#1 when the buyer puts nothing down (NO EQUITY)
#2 has a sub 600 credit score
#3. ESPECIALLY WHEN TWO OR MORE OF THE
ABOVE ARE COMBINED.
Contrary to what some guru's tell you, this note is still
not worth maximum value. Think about it. You have a
house worth $100,000 with a $97,0000 loan, and the
payor has a credit score of 550. In six months or so
you still have a 97% LTV, and in all probability,
payor still has a 550 credit. What has changed?
Nothing. Why is it worth more now than 6 months
ago? The answer is "it is not worth more". If
owner financing to hold the paper for income,
I do not
want to discourage you from using notes as an exit
strategy. But if you are planning on taking back
prime paper, with little down, and expecting to sell
for maximum value after only six months, you are
going to be very disappointed.
By the same token, if you plan to sell your note in
future, you need to
Structure the Note to Sell, as well as have all
information needed to get maximum value.
#1. you should have a credit application filled out
completely. (If you do not have one, contact
me, and I
will send you one).
#2.Have as much down payment as possible.
more down, the more money in your pocket.
reverse is also true)
#3.Make the terms realistic. In today's market,
9.% for 20 year to 30 years. Short term balloons ARE
NOTE going to enhance the value of your note.
#4 Keep good records. If you are paid by
copies of the checks. If you are paid in cash, get
money orders and make copies. This will make
verifying payments much smoother.
lower the credit score, the more verification will be
needed. If you would like a record keeping form,
me and I will send you one.
Question "But Professor, all you are telling me is,
have a buyer with a low credit score and not much
down, you will not buy the not and if I had a good
buyer with a lot of money down, I would not have to
owner finance in the first place" .
This is true to a large extent. What I am trying
is do not try to substitute note buyers for sub
lenders. These sub prime loans are being locked out
because they did not perform, and certain real estate
markets are going flat. Do not expect a note buyer to
make the same mistakes.
Question"What do I do if I have a hard money loan,
and need out, but the only buyers are sub prime
This is where owner financing might solve your
problem. Look for REBHABBERS BAIL
OUT, for a solution, in next months newsletter.
Note Professor Newsletter Archives to the
October 2003 issue review the series of
to Structure a Note to Sell at Closing".
Remember, if you want to sell
your note, or
discuss a specific transaction, do not hesitate to
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