Archive for the 'Selling Your Note' Category
Note Seller Finds Note Buyer Blog - Petitions Queen
July 3rd, 2008 categories: Seller Financing, Selling Your Note
The whole “Note Queen” idea was sort of an accident . . . a mere nickname in the office that somehow stuck. Instead of
fighting it, I created a brand around it. Most people merely smile (or smirk) when I call myself the Note Queen, so I was really surprised when one “note buyer blog” Googler found me and stepped right up on stage.
Her email made me laugh right out loud (LOL, in modern language, in case you don’t have teens).
“Call me! I don’t want to be ripped off by weirdos on the net . . . Save me My Queen!!!!! I have a note for sale now and would like the help of Note Sale Royalty
I have been jerked around by a note buyer pretending to be a principal and I am not happy.
Oh: Price was $240,000, DP $48,000, loan is $192,000 6.5% 30 yr amort./10 yr balloon.
We want to sell it now as we decided to get another house and want to make a large DP. The home was free and clear and we have had it for 8 years or so in the family.”
After I stopped laughing, I picked up the phone and we had a really great conversation, and even now she’s gathering all the paperwork I asked her for so I could help her get cash for her note:
- Note
- Deed of Trust
- Credit report of buyer
- Appraisal
- Title policy
- Escrow opening instructions
- Escrow closing statement
I also sent her a 1003 (loan application) so she could have the buyers fill it out, as she had not done this prior to closing escrow.
One of the first things I did was congratulate her on a very well-structured note: 20% down payment, great credit score, ten year balloon. Her attorney was proficient at structuring a good seller carry back note, so even though this is a “green” note (little seasoning: only one payment received so far), she will get the maximum price the market will bear.
Related Reading:
- I want to carry paper, please help me create a valuable note
- If I Carry Paper, How Much Will I Get Each Month?
- How Does the Market Determine the Discount I Take on My Note?
| Discussion: No Comments »
With or Without Recourse? Clarifying the Endorsement When You Sell a Note
June 12th, 2008 categories: Note Holder Tips, Selling Your Note
You should practice safe recourse, or at least be aware of the risks if you don’t. When I buy a note, I need to have the note properly endorsed to me, very much like a check is endorsed from one person to another:
“For value received, pay to the order of Little Johnny Cakes,” signed and dated by the note seller. This is written on the back of the note, or on a separate piece of paper that is then permanently attached to the note (an allonge). But there’s another aspect to the endorsement . . .
After identifying the new owner of the note, it should say “with recourse” or “without recourse.”
June 12, 2008
For value received, pay to the order of Dawn Rickabaugh, with recourse.
Sigmond Seller:_____________________________________
With Recourse:
If the endorsement includes the words “with recourse,” it means that the note seller is guaranteeing the note. If the Payor doesn’t make the payments, the note seller is agreeing to make the payments to the keep the note buyer whole.
If I’m the note buyer, then I would want the seller to agree to a recourse loan . . . that adds another layer of protection for me. If a seller is willing to endorse “with recourse” it probably means he is expecting the note payments to keep coming in, and is not hiding some known problem with the note.
Without Recourse:
A note sold “without recourse” means that the note seller doesn’t have to be on the hook for the money if the payments stop coming in.
If I’m the note seller, I would probably want to sign “without recourse.” I don’t want to take a big discount and then have to guarantee the note payments as well. It’s a point of negotiation between buyer and seller.
The silent endorsement: if nothing is mentioned about recourse either way, guess what? The note is sold with recourse . . . that’s the “default” setting. Sellers are often unaware of this, so it can become a point of contention if the note buyer all of a sudden starts demanding payments 2 years down the road when a problem arises.
It’s just better to discuss it and establish it clearly within the endorsement on the back of the note. As always, it’s best to consult with an attorney to understand the complexities and variations in your state.
Related Reading:
- How to Endanger the Sale of Your Seller Carry Back Note: Lose the Original
- Insist on Insurance When You Create a Seller Carry Back Note
| Discussion: No Comments »
How to Endanger the Sale of Your Seller Carry Back Note: Lose the Original
June 5th, 2008 categories: Note Holder Tips, Seller Financing, Selling Your Note
I guess you can always say the dog ate it, or a tornado snatched it into the sky when you were in Nebraska visiting Aunt Dorothy and Uncle Toto, but the truth is, you may not be able to sell your note if you can’t produce the original.
The original note is the “green stuff,” it’s the currency, it’s “the thing you’re selling.” A copy just won’t do! The original John Henry (signature) of the Buyer/Payor, even if it’s not very attractive, fluid or sophisticated, is the silver lining in your paper.
And it kind of makes sense, doesn’t it? Would you be able to pay your mortgage by sending in a nice copy of your check to Bank of America? Or Bear Sterns, or Lehman Brothers? (OK, maybe the last two . . . they’re used to losses these days and probably wouldn’t notice).
If I’m buying your note, I want to be the legal holder of the note, so I need:
- the original note in my possession
- the note properly endorsed to me (”For value received, Pay to the Order of Dawn Rickabaugh, with recourse” and it must be signed and dated by the Note Seller)
If the original note is in my possession, and is properly endorsed to me, then I am a holder-in-due-course, which gives me some substantial protection should any legal issues arise.
Right now I am working with a probate attorney in Los Angeles who is liquidating an estate holding a $500,000 seller carry back note, secured by a commercial property in Redondo Beach. I was able to offer the estate more than the Payor on the note was offering.
When I last spoke with the attorney, he said all the beneficiaries/heirs were scrambling to find the original note. No one knew where it was. Perhaps the escrow company still has it in their file, but they really need to find it, or things get a lot more complicated.
Do yourself a favor, when you carry back paper: keep the original note, deed of trust, Buyer’s credit application (1003) and credit report all together in a very safe place. And keep a very good payment history to be able to prove that you have a performing asset.
- I’d Like a Professional Note Appraisal
- I want to carry paper, please help me create a valuable note
- If I Carry Paper, How Much Will I Get Each Month?
Like what you’ve read? Why not sign up to receive future posts by email?
Leave a comment or ask a question!
Related Reading:
- Other Note Holder Tips You Might Want to Know About
- How Does the Market Determine the Discount I Take on My Note?
| Discussion: 4 Comments »
