Posted by John Behle on December 08, 1999 at 15:48:05:
The documents are very simple. Since you are going to have real estate as collateral you just create a standard Trust Deed and Trust Deed Note or Mortgage (if that is what is used in your state).
You can either write the loan that way to begin with - or cancel the “installment contract” from the water company or whoever - and create a Trust Deed and Note
Of course, it is best to write it right to begin with. Never buy a bad or less than desirable note hoping to change it, but it only upon condition of changing it. Never cancel the first note until the second is signed.
Be aware of the payor’s circumstances. Cancelling an existing note and writing another will make it a new note in the eyes of the court and a bankruptcy within the next 3-4 months (one year if it is a relative) can result in the transaction being set aside. You then become an unsecured creditor instead of a safely secured mortgage owner.
As an additional sales point on collateral conversion situations, we sometimes make much more attractive terms available and point out that it may be tax deductible if secured by their home.