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.