Notes - Posted by Sean
Posted by Sean on May 24, 2000 at 18:05:22:
There’s nothing really complicated about it. The first thing you need to understand is what a note is.
Suppose that you go to your brother (let’s say his name is Bob) and ask him to loan you $500.00 and you agree to pay him back $50 a month for 10 months. He agrees, but he wants you to put it in writing. So you write down on a piece of paper, “In consideration of $500.00 I agree to pay to the order of Bob $50 a month for 10 months starting on June 1, 2000.” This piece of paper is called a note.
Now let’s suppose that Bob runs into some financial problems. Let’s say the IRS comes around and tells Bob that he owes them $400 and he better pay up. So Bob approaches you and asks you to pay a little faster. Unfortunately you don’t have the money so you can’t.
So Bob comes to me and offers me the note. I agree to buy it for $400.00 so I give Bob $400 and he writes on the back of the note “Pay to the order of Sean.”
I then bring the note to your door and knock on it and show you the note. You see that it’s the original note and that your brother Bob wrote on it to pay to me. So you now know to send all future payments to me.
That’s basically what’s going to happen in your situation. The Seller of the property is going to get a note from you agreeing to pay a certain amount of money, plus interest with regular payments, etc.
He will then turn it over to a note broker. That note broker will check up on you – pull a credit report on you, make sure you work somewhere, etc. He’ll also check up on the property – get an appraisal, go look at the property, talk to the neighbors, etc.
When all of this is done he’ll have a package of paperwork that he’ll submit to an institutional investor like American Note. They’ll review the documentation and decide how much the note is worth.
Once they buy it off of the seller you’ll be sending your payments on the first note to American Note and the payments on the second note to the Seller.