Armstrong Capital Newsletter

December 2010

Jeffrey R. Armstrong

President of Armstrong Capital

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Hello again! I hope you had a wonderful Thanksgiving!   Just a few more weeks until winter officially starts and I for one can’t wait for the ski slopes to get some snow!  At the end of the year quite a few note holders usually need to get their hands on some extra cash and I hope you are getting your share.

A lot of brokers have been coming out of the woodwork and trying to sell us paper that we, in our little niche industry, will not buy.  Not that you can't, it's just that the note buyers in our industry buy very specific types of notes.  The notes we are talking about are “Purchase Money Mortgages” because of the fact that when we buy a Purchase Money Mortgage we are a “good faith Purchaser” and a “holder in due course.”

          So why is it that in our little niche that our investors and funding sources only buy the Seller Carryback notes that are these “Purchase Money Mortgages”? As a review, it has to do with the differences between negotiable instruments and contracts and the definitions of being a “good faith purchaser” and a “holder in due course”.  Basically when we buy a note the payor must pay us even though they may have some grievances, arguments or even litigation against the seller of the note and cannot offset their compensation from the note itself.  This month I just want to define some terms and the documents that we purchase.   

            The Note states the repayments terms of the loan including the term, interest rate, payment amount, start date and end date.  This Note might be called a Promissory Note, a Real Estate Lien Note, a Mortgage Note, etc., but no matter what the name, it is still the Note.

            The Note is secured to the property with a Security Instrument.  This Security Instrument might be called a Deed of Trust, a Mortgage, a Land Contract, an Indenture, etc. but no matter what its name, it secures the Note to the property.

            The Note is the “paper” that we are buying and is not recorded.  The Security Instrument is recorded in the county courthouse of the subject property and lets the public know that there is a Note attached to the property.

            There is also a document that shows the transfer of the property from the seller to the buyer.  This is called the Grant Deed and is called so because the seller is “granting” the property to the buyer for consideration (money) and the ownership of the property transfers from the seller to the buyer. This document is called a Grant Deed, a Warranty Deed, a Warranty Deed with Vendors Lien, etc., but they all “grant” the property from the seller to the buyer and the ownership transfers.  Grant Deeds and such ARE NOT the “paper” we are purchasing.

            I hope that explanation helps you understand better of which “paper” we are actually trying to purchase from the note holder’s that contact you.

Keep marketing, it’s going to work! TWITA!

            Happy Holidays!

Jeff Armstrong

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Jeff Armstrong is President of Armstrong Capital and was the Editor of the NoteWorthy Newsletter from 2006-2008. A current practitioner in the seller financed note business since 1991 he is a member of the Million-Dollar Club, a Master Broker/Buyer, visiting instructor for the American Cash Flow Institute, Instructor for Nouveau Riche and the author of several best selling industry books.  Visit www.secretsofpaper.com to learn about upcoming workshops and events and  go to www.armstrongcapital.com and click on "Note Brokers" for answers, articles and information about his Master Buyer services and how Armstrong Capital can help you succeed. He can be reached by calling 800-845-3055, faxing 818-865-2323, e-mail jeff@armstrongcapital.com.

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