In the Business of Owner Financing and selling notes the Gold in paper is often overlooked or not given the proper attention that it deserves. What might you ask is the Gold in the paper? The answer is the Original Promissory Note, sometimes referred to as the Real Estate Lien Note. Without that Original note document there is no GOLD and if there is no GOLD then your ability to turn it into CASH diminishes greatly.
When the decision has been made to use Owner Financing to facilitate the sale of real estate, documents are created. The importance of these documents to the seller(Note Holder) can be thousands of dollars . All to often, after several payments have been made on the note, note holders decide to sell their note and do not have the GOLD in the paper, the ORIGINAL signed Promissory Note Document. Yes it is easy to find a copy but the ORIGINAL is what is needed. Investors will not serve up a lump sum of CASH if they know the original exists somewhere out there.
When a note holder decides to sell their note and cash out of their monthly payments the PROMISORY NOTE DOCUMENT is what is being SOLD. If you don’t have the original note then what do you have to sell? That is like you go to buy a car with cash in hand and the seller of the car gives you a picture and tells you the car is in Boise. Often is the case that a home seller will us a real estate professional like an attorney or title agent to prepare all the necessary documentation and to record it with the county, a very good practice. The issue comes up several months later when the note holder goes to sell his or her note and assumes the real estate professional has all the needed documentation. The real estate professional will have copies of the documents on hand and that is helpful but rarely will they have the GOLD document you are looking for.
The GOLD in the Paper is Sound record keeping and the other part of the equation , Sound accounting of the note. Note holders often have contacted The Texas Note Company wanting to sell their note. One of the items we need is a payment history of the note to verify the payments have been received and on time. Often is the case that the note holder has a difficult time proving that the payments were received, why? The reason is that the note holder deposited the payment into their personal or business account along with other deposits that made it difficult to decipher, even a bank deposit report does not help because none of the deposited amounts match the regular payment on the note. There are a couple of suggestions that we make to note holders. First open a bank account only for the note so all the activity in that account is relevant to the note, mainly the deposits. Secondly, If accounting is not your gig get a Loan Service provider to collect the payments and provide the proper accounting and reporting. The Texas Note Company provides this service, we are also a Loan Service Provider, give us a call.
When a note holder has made the decision to sell his/her note the time in which you reach the closing table is determine by two things. First the length of time is takes to do a title search on the property which is out of your hands. More importantly is how long it takes you to track down the documentation, especially the Original Promissory Note and Deed of Trust, that is 90% of the battle.
Every note sale is different in some respect, even as far as the documentation is concerned. Here is an extensive list of documents in our most recent note purchase.
- Original Promissory Note
- Deed of Trust
- Warranty Deed
- Original Closing Statement / HUD-1
- Purchase Agreement between buyer and seller
- Texas Residential Policy of Title Insurance
- Purchaser’s Closing Statement
- Seller’s Closing Statement
- Payment History Affidavit by seller
- Dwelling declarations
- Evidence of Hazard insurance with seller designate as mortgagee
- Payor’s Social Security Check
- Property Tax Status
Here at The Texas Note Company we are real estate professionals that specialized in owner financing strategies and techniques. If you are a real estate note holder and interested in selling your note or would like to determine the value of your note on the secondary market visit us at http://texasnoteco.com