Basics of a note-Clarification - Posted by Rob day (NH)


#1

Posted by phil fernandez on November 11, 1998 at 17:11:11:

Rob,

It has been my experience that the note buyers require as much paper work as a bank would if they were lending you the money to purchase a property.


#2

Basics of a note-Clarification - Posted by Rob day (NH)

Posted by Rob day (NH) on November 11, 1998 at 13:28:44:

Folks,

I have been reading about notes for a little while now and i am trying to figure out some things about them. I understand that they are mostly sold at discounts. The scenario I would liek to pose would be this. If a seller wants cash instead of a note, but is willing to create one and sell at a discount, I am assuming that I would need to figure my analysis on the face value of the note. If that is the case then why would happen to the difference in a tax scenario.

example:

I create a note for 100k, sell it on the open market for 80k. The seller gets the cash. My payments are based on 100k. What happens to the 20k from a tax perspective?

Second question I have is regarding the transaciton. I knwo note buyer’s usually require an appraisal (do they hire the appraiser), and what closing costs are associated with these types of closings? Additionally what kind of paper trail does the buyer of the property have to have for downpayment etc. Do note buyers require as much informaiton as some lenders? Is there a formal application?

If the buyer of the property is helping hte sellers to create notes and paying on the higher rate cash flowsI would assume that the buyer of the property has to do a concise cash flow analysis.

Thanks,

Rob Day