To make your note more valuable for note buyers, or for that matter have any value at all, notes must be specific. Vague wordage on notes might make the note worthless, unless modified. For example, a Realtor brought me a note in his "portfolio" and wanted to know its value. Here is the way the note was drawn up. "Payor will make monthly payments with 10% interest for ten years". Did you notice that there is no mention of when the payments start? Are the payments interest only? Do the payments include principal and interest? Does it state what the payment will be? These are just a few questions that are unanswered. You might think no one would create a note this shabby, but it happens all the time. I am revisiting this article because in the past two months, I have seen several notes that were drawn up incorrectly, and BY ATTORNEYS.

For the note to be clearly understandable there are certain requirements that the note must contain. Here are a few:

1. The exact amount of the note (Yes, I have seen notes without an exact amount)

2. Origination date (This is the date the note is signed)

3. Date of first payment (You will be surprised at how many notes do not contain this. Without knowing this, how to you determine the balance)

4. Date interest begins (Often this might be different from the origination date)

5. Interest Rate. (This is usually in an annual figure, although the payments are monthly) If you do more than 5 seller financing notes in a year, you will have to comply with RESPA and TILA. (If you do not know what these are, I suggest you talk with your attorney. You do have an attorney, don't you?)

6. The amount of the payment (You would be amazed at the number of notes I have seen that does not have this figure in it.)

7. Name of payors (Yep, I often get notes where the payors are not identified)

8. Name of the payees. (Again, often poorly drawn notes do not list who payors should pay)

9. Frequency of payment (Monthly, quarterly, yearly, hourly) Hey, don't laugh at hourly? Are getting the point?

10. Location of payments (MUST HAVE THIS.) Where is the check to be sent? If you move, be sure to tell the payor. This can really cause problems when the payor sends the check to your old address.

11. Due on sale clause (Even if you have the due on sale in your mortgage or deed of trust, also have it in the note. The note is your contract. The deed of trust is your security instrument. For example, say the note did not have a due on sale, but the deed of trust did. Which one prevails if your payor sells the property subject to?)

12. Dates of balloon and exact amounts (Be sure to spell this out completely. Sometimes it can get real sticky when the balloon is due, and the payor finds out he must make a monthly payment and the balloon payment.) For example, if you say $1000 a month for 36 months, at which time the entire note become due and payable, this means the payor must make the $1000 monthly payment, and the balloon payment in month 36.

13. Make sure the payments and interest rates are correct. DO NOT RELY ON YOUR ATTORNEY OR TITLE COMPANY!! I say this because I am working on two note right now where the interest rate is 0, because the note holder's attorney did not bother to ask. I am working on another note where the payment is wrong in the note. Both are causing undue headaches when the note holder tries to sell his/her note.

These are the basics that all notes should contain. Be aware!!! Check over the notes you have. Do you find all of these?

If you have any questions about how to structure notes, or have notes to sell, Contact Me.

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THE FIRST THANKSGIVING and ECONOMICS

A valuable lesson in economic systems can be learned from the First Thanksgiving. For the most part, we are taught the Pilgrims landed in America in 1620, and had a harsh winter. However, with the help of the Indians teaching the colonists how to plant corn, in 1621 the colonist .had a plentiful harvest, where they invited the Indians for a feast.

Not quite true. While there was a feast in1621, the feast was to "celebrate" only a successful hunting party, not a plentiful harvest. In fact for the next couple of years, the colonists almost starved to death. How could this be in a land so rich in natural resources. A look at the economic systems employed by the colonists will give us the answer.

Governor William Bradford, the leader of the colonists, describes in detail in his book "Of Plymouth Plantation", that because of religious reasons, the Mayflower Compact set up a system of socialism as a way to organize production and distribution of goods. It just seemed like the "Godly" thing to do was to take all the production from hunting, fishing and planting and, place it in a pool, and then "share and share alike". The results were not pleasant. Instead of harmony, harsh words, anger, resentment were the results when workers could not enjoy the fruits of their labor.

From "Of Plymouth Plantation":

" --the young men--did repine that they should spend their time and strength to work for other men's wives and children without any recompense. The strong --had not more in division--than he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labors and victuals, clothes, etc-- thought it some indignity and disrespect unto them. And the men's wives to be commanded to do service for other men, as dressing their meat, washing their clothes, etc., they deemed it a kind of slavery, neither could many husbands well brook it."

More importantly, because no one wanted to be forced to work for the benefit of others, the colonists almost starved. William Bradford, reported that the colonists went hungry for years, because they refused to work in the fields. They preferred instead to steal food. He says the colony was riddled with "corruption," and with "confusion and discontent." The crops were small because "much was stolen both by night and day, before it became scarce eatable."

Governor Bradford saw the system of "from each according to his ability, to each according to his needs" was not working. In the spring of 1623, Bradford changed the system. A plot of land was given to each family. However, what was produced on the land was the family's to keep. Any excess could be traded as the families saw fit. The same went for hunting and fishing. What were the results?

From "Of Plymouth Plantation"


"instead of famine now God gave them plenty,"--"and the face of things was changed, to the rejoicing of the hearts of many, for which they blessed God." Some will say the abundance was just by chance. Governor Bradford had a different recollection as evidenced by his remarks, "any general want or famine hath not been amongst them since to this day." What is not mentioned is in 1624, so much food was produced that the colonists started exporting corn.

So when you are with your family giving thanks for your loved ones, and enjoying the beginning of the holiday season, take time to remember also the reason we are celebrating this holiday instead of remembering a tragedy, was a change from a socialistic economic system to a free market system. Another example of free markets working, while socialism fails.

HAPPY THANKSGIVING

If you do have a comment or question, please Contact Me.

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