Posted by David Butler on December 01, 2005 at 19:49:14:
In Reply to: notes posted by nick on September 25, 2005 at 18:04:48:
If you want to "use a note" to buy a property, you have several scenarios to work with - the most obvious being:
1) make an offer to property seller, contingent upon the seller "carrying back" a note for all, or part of the financing. Then you can offer to find a buyer of that paper for the seller, if he is demanding cash out of the deal. Seller gets the cash, note buyer gets the paper, note Payor (you in this case) makes payments to note holder, regardless of who that is.
2) You purchase a note at discount (using your own money, or a lender's money if you have access to third party financing) - then trade that paper to the property seller (providing he is agreeable to that approach) at a higher value than you paid for the paper.
Using your numbers here for example, you might purchase a $70,000 note, for $56,000. Then you find a property seller who will accept that note as payment for his property, or the equity thereto. Here, if the property seller was selling property for $62,000, you could argue that you are giving him a great deal, in that you are trading him a note with a $70,000 balance remaining due on it.
At the same time, you are in effect only paying $56,000 for that same property (due to the fact that you purchased the note for only $56,000, then traded it for the $62,000 property).
Again, if you use that approach, you get the property, and the property seller gets the note you bought. He will receive payments on that note, according to its terms and conditions. BTW... that note is a contract between the payor, and the original beneficiary of the note. All a new holder gets if accepting that note, is the right to receive the payments the Payor originally agreed to, at the rate and terms agreed to.
Not sure if that answers your question here (?), but hope it helps either way!
David P. Butler
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