About four times a year I come across note holders who have very valuable notes. The payors have good credit, there is substantial equity in the property, and the terms and interest rates are above average. The stage is set for the note seller to receive a large lump sum in cash, while at the same time, the Note Buyer will acquire an above average note. This rosy scenario quickly deteriorates when the note seller cannot find the original note, or worst, when there is a mistake on the note in some form. These situations can at best cause lengthy delays in the note buying process, and at worst, kill the deal if the payors will not cooperate in rectifying the situation.

This frustration can be prevented with a simple Document Correction Agreement being executed at the time the note is created. In a nutshell, the Document Correction Agreement states that in consideration of the seller's taking back a note, the payor agrees to replace or correct the lost, misplaced, misstated or inaccurate documents within 10 days of request. Failure to do so could result in a default, or the payor being liable for all damages or losses, plus court and attorney fees, if the payor refuses to cooperate. Of course in the case of a lost note, the payor would be indemnified should the original note "pop up" at some future date.

While this document is not a guarantee the payors will cooperate should a defect in the note's wordage is later discovered; it goes a long way to make the payors aware there could be consequences for their failure to correct a mistated or lost note.

A case in point was a note seller who contacted me about selling her note. The note was perfect in almost everyway, EXCEPT the legal description on the deed of trust was incorrect. (HINT: When taking back a note, make sure the legal description on the warranty deed and deed of trust match EXACTLY, as well as the legal description is correct) When I explained the deed of trust needed to be corrected, the note holder said "No problem". However, it would have been a problem if the note holder had not obtained expert legal advice to require the borrowers sign a Documentation Correction Agreement. At first the borrowers were reluctant to make a deed of trust modification. However when the note holders reminded the borrowers of the correction agreement, the borrowers quickly became cooperative when faced with a $74,000 law suit. (This was the purchase price of the note)

To summarize, when taking back a note, be sure to have your attorney include a Document Correction Agreement. Sometimes a correction agreement clause is simply added to the deed of trust. Contact a competent attorney to find out the specifics. Having a document correction agreement in some form can simplify your life should you loose your original note, or later find inaccuracies in wordage of the note. Just a little tid bit to prevent future frustration. Hope this helps.

If you would like to get on our list to be the first notified of our next workshop, please CONTACT ME.


If you have a topic you want me to discuss, simple drop me a line. It is from your feed back that I get my topics. I look forward to hearing from you.

Copyright © H&P Capital Investments LLC. All rights reserved

If you have not attended a Note Professor "How To Get Rich with Notes" class, be sure and purchase the Note Professor Note Book manual to enhance your knowledge of creative real estate financing and note buying and selling.

"I got your news letter. It was great, purchased your (Notebook) and it was awesome. I used your renter technique and it worked also. I am getting 41% return thanks to your expert advice. I have spent hundreds and not able to do any thing thru other gurus" Gary W. Garland, TX

"It blew me away what a powerful tool notes can be. Lots of great information, worth every penny! Highly recommended."
Jeff C. The Colony/Investor

"Your manual is short and straight to the point, it's rare to buy something today that gives you your money's worth. Thank you" Stephan B. Phoenix, AZ

You will learn at least one new usable concept to increase your profit in buying or selling notes and real estate.
Tom Henderson, author

By popular demand, THE NOTE PROFESSOR NOTEBOOK is now available in easy, downloadable E- book form for a the low, affordable price of $39.95. Other products are also available, including HOW TO MAKE OBSCENE PROFITS with SMALL MONEY, and GUIDE FOR SECOND LIENS. There is also a FREE download of CHECK LIST FOR OWNER FINANCING. Simply go to the NOTE BUYERS STORE. I can think of nowhere that you can find such information packed products at such incredibly low prices. We are still working out the bugs, so if you have any problems, be sure to contact me.

FREE Real Estate
Note Newsletter and archives
click here to subscribe and view the archives of past information packed issues. And be sure to forward this newsletter to a friend that would have an interest in Owner Financing and Real Estate NOTES.

Politicians, the news media, and even some economists will often tout the GDP (Gross Domestic Product) as means to measure the "health" of the "economy". I put both "health and "economy" in quotations because an economy is not a living, breathing individual, but rather dynamic interactions of individuals exchanging values. Nonetheless, the GDP is the "accepted" measurement that defines our economic expansions and recessions. For example, two consecutive decreases in the GDP is by definition a recession, while we are told increases in the GDP represents "economic growth". We are hearing now how the economy is "growing" because GDP is growing.
Bovine scatology!

The GDP is no more a measurement of the "health of an economy" than calorie intake defines a food's nutrition. Let's examine the definition of GDP to discover how the myth and fraud of GDP is being perpetrated on us. There are three different measurements of GDP.
1. The expenditure method
2. The income method
3. The value added method.

You would think the three measurements would coincide, but this is not the case. In fact, the income method and the value added method will often show a "shrinkage" in the economy, where the expenditure method will declare, "Rejoice. The economy is growing". Since politicians mainly use the expenditure method, this is the method we will examine in this issue.

GDP = private consumption + gross investment + government spending + (exports − imports)

Let's use New Orleans after Katrina to illustrate one way the GDP will give false signals as to the "growth of the economy". For example, let's take one single family resident that was destroyed by Katrina as a model. Let's assume the house was worth $150,000 and was completely destroyed. Either with insurance, the owner's private funds, or government subsidy the house is rebuilt. Did not the GDP just increase by $150,000 because of the spending to rebuild the house? But did "the economy" grow? Not really. Before Katrina hit, there was a functioning house. After Katrina destroyed the house , $150,000 worth of resources were diverted to replace this house. While it is true the house has been rebuilt, "the economy" is no better off. The economy did not "grow" because both before Katrina hit and after Katrina hit there is still only one house. In fact "the economy" actually shrank because the $150,000 resources expended to rebuild the house could have been use to produce other goods. To illustrate further, next time your car needs to be repaired and you have to spend $200 to repair it, ask yourself, "Did MY ECONOMY grow or shrink"? Are you not now $200 "poorer", but have nothing NEW to show for it. There was NO GROWTH in your assets, but the fact you spent $200 means the GDP increased. This myth is taught in Bastiat's "Broken Window Fallacy". In other words, wars, natural disasters, or man made disasters do not cause an economy to grow, any more than having to repair your car causes your wealth to grow.

To simplify matters and for the sake of brevity, I am going to combine public consumption (PC), gross investment (GI) and "government spending" (GS). Remember CONSUMPTION CANNOT EXCEED PRODUCTION, and GOVERNMENT SPENDS ONLY WHAT IT EXTRACTS FROM PRODUCERS. I hope by now it is becoming obvious when government takes your money and uses it for "stimulus packages", cash for clunkers, government jobs, corporate subsidies, financial bailouts, and all wealth redistribution programs, although the GDP is increasing, the "economy" is not "growing". In fact the "economy" is shrinking because government is extracting resources from productive endeavors, and transferring these resources to those who produced nothing. It is a form of consuming without producing. For example, if the government takes $100 out of your pocket, and transfers $30 to me (they have to keep $70 to pay for their labors), the politicians will tout the $30 I spent and the $70 the government spent as proof the economy is "growing" because GDP has increased by $100. Yet, you, who actually produced the $100 have lost $100. The government and I gained at your expense. THIS IS NOT GROWTH!

Especially when GDP is rising only slightly and government expenditures are increasing, the "economy" is not growing, it is shrinking. Why? Because consumption without production is not growth. If one group gains at the expense of another group this is not growth. Why? Redistribution of wealth is consuming without producing.

In summary, do not be mislead by the false economic indicator of the GDP, or those who tout GDP to praise "economic growth". GDP does not take into account how the money is spent, as in the case of Katrina. Nor does GDP differentiate between voluntary exchange of values, and consuming without producing, as in the "stimulus" package. Remember, government (meaning politicians) can spend nothing it does not take away from producers. When government spending rises, it shrinks the economy ". It is that simple.

If you have a question or comment, please CONTACT ME. It is from your feedback that I get my topics.

Copyright H&P Capital Investments.
All Rights reserved