Selling a Note? Do you have the Original?

Land Of The Lost Real Estate Note

I get a call at least once a month from someone looking for a quote on a Real Estate Note that can not provide us with a copy of the Promissory Note. As a general rule we always require a copy of the note along with the Quote Request Form, prior to making any quotes. I have had many Note Brokers become indignant with me because we won’t give quotes on notes when we aren’t provided with a copy to study. Most note holders understand why we would want to see the note in order to give a quote. The reason why we read through the Promissory Note is so that we know all about what we are actually trying to buy. Also, note buyers are required to have a signed copy of the note in possession in order to legally pull credit on the borrowers. It is next to impossible to get a REAL quote on your note, when the so called Note Buyer has not pulled credit in advance. The quote will always, always, always be subject to credit and it is guaranteed that you will start getting nickled and dimed to death, once the credit comes in.

If you are a Note Holder that does not have a copy of the Note, that is the least of your problems as you are going to need the Original Promissory Note, in your possession in order to actually close on your note sale and get the money. You Can’t cash a copy of a check and you are not the holder in due course, if you are not holding the original note. You are required to give the Promissory Note back to the payer, singed off on as paid in full, once they have paid in full. If you are in a situation where you need to foreclose you will need the original Promissory Note to present as evidence in your case. Your rights may be limited if the judge finds that you are not the holder in due course.

So what do you do if you don’t have a copy of the Promissory Note? If you are a Note Broker, you ask the Note Holder for a copy and present it with your Quote Request. If you are a Note Holder who can’t find the original Promissory Note, there are several places to look before giving up. Start with the professionals that executed the transaction. If your note is being serviced by a third party, the first place to start looking is with the loan servicing company. If the servicing company doesn’t have it then check with the Title Company or Attorney that closed the transaction. If these folks do not have the original note, check with the Realtor that handled the transaction. In a case where no professionals were used, or when they are not of any help, you are going to need to do some digging in your files and safe deposit box. When all else fails, ask the note payer(s) if they at least have a copy. I have actually seen a few transactions where the payers had the original note given to them by mistake at the closing!

While I have seen investors that will accept a replacement note, they will certainly lower the purchase price for the extra risk involved. In all cases finding the original Promissory Note and presenting a copy to the investors along with the quote request, will be worth your while. Keep digging to find that note and good luck!