 President's
Corner
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 contact us to get 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.
Remember, Success Demands
Action! Keep on marketing, it’s
going to work! TWITA!
Happy Holidays!
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