Selling Your Note at Closing
Last week a veteran real
asked me how to purchase notes at closing
without being considered a lender and actually
funding the deal.
To buy a note or sell a note, contact me at www.hpnotes.com
The term "simultaneous closing" is really a misnomer
when referring to a seller selling his property using
owner financing, then immediately selling the note.
Let's first clarify that knowledgeable Note Buyers
do not fund real estate purchases for several
reasons. Two of the most important reasons are:
1. Note Buyers do not want to be classified as lenders
and be subject to SEC and Banking regulations and
2. The Note Buyer does not want to be subject to usury
laws that govern lenders.
To make sure we do not fall into any of these
categories, we make sure first there is a closing on
the purchase of the property. This means the warranty
deed is signed by the seller, the note and deed of trust
are signed by the buyer, hazard insurance is issued
making the property seller a loss payee, and
mortgagee insurance is issued in the property seller's
When the purchase and closing are completed, the
Note Buyer will then purchase the note. In a nutshell,
this means the property seller, which is now the legal
note holder, will endorse the note and assign the
deed of trust to the Note Buyer. The Note Buyer will
then inform the insurance company to be added to the
hazard insurance as the mortgagee loss payee. The
mortgagee insurance will also pass to the Note Buyer.
There is often confusion at title companies, even with
when note "simultaneous closings" are in the closing
The confusion comes when there are underlying liens
on the property. >From a title company's point of view,
they are not going to insure title, not to mention issue
a mortgagee insurance policy, when the underlying
lien has not been paid. What is the solution?
Once you know the process of what is really
happening, the closing is really quite simple. The
solution is to write the contract to where the seller is
selling the property and wrapping the underlying note.
The title company closer can then close the sale and
transfer the property on the wrap. This means the
warranty deed has been signed, as well as the note
and deed of trust has been signed. The Note Buyer
will then purchase the wrap. When purchasing the
wrap, the underlying lien will be paid off, and the seller
will receive the balance.
For illustrative purposes, let's assume a house sells
for $100,000 with a $50,000 first lien. The purchase
contract states that the owner will finance the
$100,000 purchase price, and wrap the $50,000
underlying note. Let's say the Note Buyer will
purchase the $100,000 note for $80,000.
At closing, the buyer signs a note and deed of trust.
The seller signs over the deed. The sale of the
property is complete. Now the Note Buyer will
purchase the $100,000 note for $80,000. With the
proceeds, the $50,000 underlying note is paid, and
the seller receives the $30,000 balance.
Now everybody is a happy camper. The seller got his
equity, the buyer got a house, the Note Buyer got a
quality note, and most importantly, the title company
can justify transferring the property without using the
Note Buyer's money to do it.
Bear in mind, there are some who believe this
transaction is really just a loan in disguise, and will
not purchase the note until a month later. So as usual,
be sure to check with competent legal and tax
If you have questions about structuring notes, or know
someone who wants to sell
a note let
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An increase in the volume of money and
credit relative to available goods and services, which
usually causes a general rise in prices.
Food For Thought: As you can tell, a rise in prices
does not cause inflation, but rather inflation causes a
general rise in prices. Why? Because as the Federal
Reserve Board creates money and expands credit, it
diminishes the purchasing power of the dollar.
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 buying and selling.
Owner Financing Notes Education
Tom's Speaking Schedule
November 14, 2007, Wednesday, 6:30 PM
ROUND TABLE:12 Tables 12 Local
Crowne Plaza Hotel
7800 Alpha Road
635LBJ/Coit & Alpha
Dallas , Texas.
Click here for more information
November 28 2007 , Wednesday,
POINT COUNTER POINT
DFWREIN offices Stemmons and Valley View, Dallas
Arnie Abramson and Tom Henderson join forces
again for a special presentation of their views on the
real estate investing market, where it is today and
where it is going tomorrow. Learn how to profit and
survive in any market condition with single or multi-
family strategies. Arnie and Tom are seasoned
investors with different strategies and opinions, yet
both are able to survive and profit in any market
condition. What "key Indicators" do they use to
determine their strategies? What are their "secrets" to
success? Tom will be covering "business cycles"
myths and the nature this down turn is taking.
Call (972) 671-7346. for more information