I keep pushing partials because partials are becoming more and more the vehicle by which note sellers can get lump sum cash, while at the same time giving NOTE BUYERS the security they need in this chaotic economic environment. This is especially true with border line credit and little down payment.

A case in point was a note seller who had a blanket mortgage on 5 duplexes totaling over $600,000, and came to me wanting to sell the note. In looking over the package, I discovered the buyer of duplexes put less than 5% down. In other words, the duplex buyer had very little "skin in the game". In today's market condition, the NOTE BUYER did not want to take on the exposure of purchasing this large amount, especially with the duplex buyer putting very little down. Normally, very little down translates into high risk and therefore, a high discount, at best.

Add to this, the real estate sale was a "kitchen table" closing, with nothing recorded. To complicate matters further, the note had been modified with incorrect balances, as well as the note was transferred from one entity to another, again with nothing recorded. There was also an underlying blanket mortgage on the duplexes. So in essence, the note seller had a "blanket wrap". This underlying balance would have to be paid off. This deal was "all tied up in knots", and not marketable in its present condition. Most NOTE BUYERS would just automatically pass on this because it would be complicated.

I decided to investigate further. I found out the buyer of the duplexes had excellent credit, as well as the value of the duplexes was satisfactory. How do I purchase this note to get the note seller a lump sum cash, and give a NOTE BUYER security needed to purchase a cash flow.

The solution was offering to purchase 6 years' of payments, which translated into $219,891. Since the underlying lien was only $182,000, purchasing a partial would not only pay off the underlying lien, but also give the note seller a nice lump sum of cash. By purchasing 6 years' of payments, the discount was ONLY approx 12% . GREAT!!!. At the end of six years the note reverts to the seller, with a balance of almost 90% of the original balance, with one tremendous improvement: THERE WILL BE NO UNDERLYING LIEN PAYMENTS TO MAKE. This means the note seller would be able to keep all the $4,360 payments of the note.

Or perhaps the note seller might want to sell another 6 years of payments. Not bad, huh? Remember, there is no underlying note to payoff, which means the note seller would receive the entire $219,891, not to mention that the process would take very little time.

The seller agreed to the offer, and because of knowledge, expertise, and patience, we were able to "untie" all the knots to make the note marketable. The end result was the NOTE BUYER got a good note, along with good security. More importantly, the note seller paid off her underlying lien, which was a major objective of selling her note, because the bank was "leaning on her". Add to this the note seller also received a nice lump sum of cash.

The moral to this story is two fold:
1.If you are selling notes, do not overlook partials as a solution.
2. If you have the know how, many "unmarketable notes" can be made marketable.

In today's chaotic market, deals like this are becoming more of the norm. If you have notes to sell, remember that partials are a viable and profitable option. By thinking outside the box, and acting on what was possible, this note seller not only solved her problems, but also made a wise financial decision.

If you are selling your property using owner financing, I can help you structure your note to give it maximum value in today's market. Or if you have a question on your note or a Note to convert to cash, I will be happy to discuss your specifics. And if you know of someone who wants to sell a note, CONTACT ME Remember, I pay referral fees.

Be sure to contact THE PROFESSOR with questions or comments. This is where I get my topics.

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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.

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Current ARCHIVES (end of 2009-2011)

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 in 1621, 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 system 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" how a collectivist economic system was disastrous. 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; then "share and share alike". The results were not pleasant. Instead of harmony, the results were harsh words, anger, resentment when producers 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, unlike the prior set up, this time 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."

Here is another example of how one system produces abundance while the other system results in starvation. Governor Bradford goes on to further comment about the results of his change in systems; "any general want or famine hath not been amongst them since to this day." As a side note, 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 have questions, CONTACT ME. I will address them in future issues.

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