Friday, June 29, 2012

Some Additional Thoughts on Note Buying

Yesterday I wrote about some issues in the note buying segment of real estate. I wanted to expand on the topic because there is a lot of interest in it and it is a misunderstood issue. The first and foremost issue is that buying the note itself does not impart a lot of benefit of the buyer. Most notes that are sold are in default or imminent default. Therefore, the note itself has little value. However, unless the buyer asks for the assignment of the note, it is not automatically assigned to the buyer. The assignment is not only critical; it is essential and the route of many of the standing problems that plague the foreclosure industry. For the same reasons that lenders and their servicers are plagued with difficulties, the note buyer now has to ensure that the assignment has been properly recorded and perfected. Otherwise, they may have the same difficulty as the lenders and servicers are having now when it is time to foreclose. Distressed home owners are becoming very savvy. They know that they have some leverage in the foreclosure process and they are using it to get money from lenders or buyers. This is why I maintain that buying notes are not for the faint of heart. Conceivably, you just brought yourself a big headache in having to foreclose and pay the home wonder to leave. Another “note buying” point that needs clarification: Many of the notes that are purchased are on homes that are listed for sale. The sale of the note by the lender does not affect the listing agreement signed by the home owner. The listing agent still has the listing. However, if the home owner tenders a Deed in Lieu (DIL) to the lender or servicer, the listing agreement is voided because the home owner no longer has standing (the legal right) to list the home and prudent agents will terminate the listing immediately. Of course, many home owners neglect to mention to their agent that they tendered a Deed in Lieu. But THAT is another story!! LOL Paddy Deighan J.D. Ph.D

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