Three Documents You Must Have When Buying Real Estate Notes

download (68)There are three critical documents you’ll want in hand when buying a note. They are a description of the note you bought, as well as proof that you now own it without dispute.

Since there is an almost infinite number of variations of these documents, I won’t show actual ones, but just describe what they’re for and what the critical components are. You can use this as a checklist when the seller provides them.

The first is a Receivable Purchase and Sale Agreement. It lists the buyer, the seller, the receivable (the note) and what has been agreed upon.

The first section the Agreement needs is a description of the Receivable itself. Look for these:

  • Type of Security Instrument (Mortgage or Deed of Trust, depending on the state)
  • Original Buyer
  • Original Lender
  • Date
  • Recording Information
  • Unpaid Balance
  • Monthly Payments
  • Interest Rate
  • Number of Remaining Payments

There may be a section listing other documents requested by the buyer. These could include:

  • Credit report on the payor of the note
  • Recent appraisal, or other valuation of the property
  • Insurance declaration page
  • Pay history
  • Preliminary title insurance commitment
  • Original Note
  • Assignment of the Mortgage
  • Endorsement of the Note

There will be a section describing the purchase price and how it will be paid.

The Agreement I use has a section for Seller’s Warranties. This is where the note seller claims to be the true owner of the note. If the seller is a corporation, the board has agreed to the sale. They may state they have no knowledge of asbestos in the property. Read these carefully and ask questions if you’re not clear on what they mean.

The other two critical documents have already been listed, but they need to have their own page as well.

The Assignment of the Mortgage or Deed of Trust is the proof that you or your entity now have the ability to get the property through foreclosure if the borrower defaults on payments. This is the “security instrument” defined in the Purchase and Sale Agreement.

It will say something along the lines of, “The Assignor does hereby grant, sell, assign, transfer and convey all beneficial interest under that certain Mortgage described below… ” My version goes on further, but you get the idea that the seller is transferring all his rights under the Mortgage to you.

You’ll probably see many of the following lines:

  • Original Lender
  • Borrower(s)
  • Date
  • Original Loan Amount
  • Property Address
  • Legal Description
  • Recording Information

The Assignment must be signed and notarized.

The last document also transfers ownership, but of the note itself. This is called an Allonge to the Promissory Note, or sometimes simply the Allonge.

The Allonge is the shortest and simplest of the three. It simply lists:

  • Loan Number
  • Original Loan Amount
  • Note Date
  • Borrower(s)
  • Property Address

Then it will say:

Assigned by (the Assignor)

Pay to the order of (you or your entity)

Critically, make sure it says WITHOUT RECOURSE. It will be signed by the seller but doesn’t need a notary.

In earlier times, the original note itself could be turned over and “Pay to the order of… ” written on the back like you do with a check. The Allonge seems to be the preferred method now.

I wanted to save an exception of all this until the end. So far we have described a home sale via a note and mortgage or deed of trust. However, many of the notes we see are actually Land Contracts. This is a hybrid form that combines the promise to pay and the security agreement into one document. In this case the seller holds the deed until the obligation is paid off.

If you are buying a Land Contract, instead of getting an Assignment of Mortgage and an Allonge, you will get an Assignment of Seller’s Interest in the Land Contract. These may also be called a Contract for Sale or a Contract for Deed.

Once you have all these documents in hand you are the proud owner of the paper and can now record the appropriate documents in the county where the property is situated.

Choosing A Solicitor To Help With Property Buying

download (69)Buying and selling property is not always as easy as it might seem, especially if you are a first time buyer. It is a process that can be frustrating with possible setbacks, especially when you choose to work alone without any professional assistance. Some of the most common setbacks that first time buyers face include vendor drop outs which could result from better offers from other buyers, property cost hikes, survey issues and mortgage difficulties.

Solicitors are very helpful in the property buying and selling process and your chances of going wrong with the deal are greatly reduced when you have one helping you. They generally handle all legal aspects of the property buying process and they keep you updated every step of the way so you are able to relax. Conveyancers handle the contracts, carry our searches and surveys, and handle land registry and transfer of funds for the property. It is very important that you choose a licensed solicitor to make your process more pleasant and quick for that matter.

Solicitors are qualified lawyers and they offer a fuller range of legal services, but tend to be more expensive compared to conveyances. Licensed conveyancers on the other hand do specialize in property, but they might not be able to handle complex legal issues.

Find your solicitor

To start with your search for the best solicitors for first time buyers, you can start by getting references from family and friends. You can also ask mortgage brokers, lenders and independent financial adviser for recommendations. Estate agents can also prove to be very helpful in helping you find the best solicitor to handle your property buying process. The internet is another good platform you can use to find solicitors that are best placed to handle your process and from this you can compare and choose the most suitable. Ensure that your solicitor is a member of the relevant law society and conveyancer is member of the relevant council of licensed conveyancers.

The fees

Different solicitors charge differently for their services. You might get one who charges a fixed fee for the whole process and all services rendered while others might charge hourly rates or a percentage in relation to the property price. Get as many quotes as possible and then check for the breakdown of the costs so that you can make the right decision. Check bank transfer charges, searches, land registry fees, stamp duty on the property if it applies and any other additional work that might attract charges. Courier services and postage are the other possible charges that will affect the fees that you pay for the services.

The solicitor

Besides getting a solicitor who is licensed and a member of the relevant body, you want a professional you can get along with. Contacting them should be easy and they should handle you professionally and in the friendliest manner. Find out what systems they use to track purchase progress, their location to your convenience and what days they have available to handle your needs.

 

Top Tips to Save for a Down Payment

download (70)Being a renter does have some advantages. No paying off the mortgage, no property taxes, and the landlord takes care of any maintenance and repair costs. However, renting your home does have one major drawback: You are spending money on rent without gaining any equity of the property.

Many renters want to own their home, but struggle to find the cash needed to make a down payment on a property.

In fact, a recent survey conducted by the website gobankingrates.com showed that a fifth of adults in the U.S. don’t use a savings account, while a third of those that do have zero funds in their account.

Below you will find some top tips to help you start saving and put aside enough funds to put a down payment on a home.

Set a target

Knowing how much you can afford to spend on a property is crucial to help you identify how much you will need to save for a down payment.

After working out how much you need to save, you should compile a detailed saving plan to reach your target. Having a target goal to reach will help you buckle down and start to put money away. You will find it hard to save if you try and set aside an unknown amount of cash for a down payment.

Work out your spending habits

Go through your credit card and bank statements for the last few months to find out where your money is spent. You can then focus on the areas of spending you can cut back on.

Cut down on your cable bill

The average household bill for cable TV has rocketed in the last 5 years and now stands at nearly $100 a month, up nearly 40% from 2010. Unless you already have, cutting down on your cable bill is a great way to save money every month. If you just can’t bring yourself to cut the cord, you can talk to your cable provider and attempt to lower the bill and shop around for a better deal.

Get rid of your gym membership

Make the outdoors your free gym. Jogging, cycling and hiking are all great exercise and don’t cost a penny. If the weather is bad or you are already signed up for a year’s membership, most gyms offer a discount if you can get a friend to join.

Downsize your current rental property

If you currently rent a one bedroom apartment, then downgrading to a smaller studio can save you hundreds of dollars a month. A smaller property also means cheaper utility bills.

Make some income on the side

Due to today’s technological modern world of mobile internet and smart phones, it is easier than it ever has been to make some money from a side job. If you own a car, then you have a huge advantage and can jump straight into work with opportunities like Uber and Post-mates.

Get a high yield savings account

Leaving your savings in a checking account does not earn you any significant interest. Move your funds to a high yield account and get some interest on your savings.

Get a credit card with cash rewards

Drop the no frills credit card that you currently have and get hold of a credit card with a great cash back reward scheme. Credit cards that offer a reward scheme usually have a higher interest rate, so be sure that you make regular on time monthly payments to clear the balance.

Put aside your tax refund

It can be tempting to spend what you get back in your tax refund each year, but by putting aside any money returned you can make big steps to reaching your goal of affording a down payment.

Sell some of your stuff

Pick a day in the summer months with a forecast of good weather and throw an old fashioned yard sale. Post signs around the neighborhood in the days leading up to your sale and get online to promote it on Facebook and Craigslist. The more promotion you do, the more people turn out, and the more money you make selling your stuff.

Sell your stuff online

Are some of your possessions valuable or highly sought after? You will probably get more cash by selling them online through eBay than you will at a yard sale. While, larger items of furniture tend to sell better on Craigslist.

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How to Shop For a Mortgage

download (67)Prior to shopping for a mortgage, it is imperative that your credit report and down payment are in order. Your credit scores, down payment, and debt to income ratio will determine which mortgage loan types are available to you. To check your credit, you can request a free credit report annually from freecreditreport.com. Once you have received a copy of your credit report, it is important that you thoroughly review the credit report, resolve any derogatory accounts and inform the credit bureaus of any inaccuracies. The money you intend to use for your down payment should be in your bank account for a minimum of 60 days or you will likely have to provide a paper trail of the source of any large deposits. Each loan type will have different approval guidelines, but for most mortgage programs the standard maximum debt to income ratio is 45% of your gross income. Depending on your income sources and deductions on your tax returns, the income used by your lender may differ from your calculation. Once you have your credit, down payment, and have accurately calculated your debt to income ratio, you should be able to determine which loan type best suits your situation.

Ask your friends and family for referrals when shopping for a mortgage. Create a list of lenders that your trusted colleagues recommend. When comparing mortgage loan offers, make sure you compare apples to apples. Compare similar rates, terms, and costs. Make sure you ask for a loan estimate, which should include all costs associated with obtaining the mortgage. If the lender just emails you the interest rate and estimated monthly payment, you will not have enough information to effectively compare mortgage options and costs from each lender. Interest rates will vary from lender to lender, make sure you ask what the costs would be if they all offered the same interest rate. Also, some lenders may offer no fee loans, where the lender covers the costs of obtaining the mortgage; keep in mind that this loan type is usually associated with a higher interest rate.

A home loan involves numerous fees from a variety of sources. Most lenders charge fees for similar services, but call them by different names. If you are unsure of the reason for the fee, talk to the lender so you can get a better understanding of why it is being charged and if the other lenders you are considering for your mortgage are charging a similar fee. Keep in mind that some lenders may also charge just a few larger fees and lump many services into it.

Reputation should also be a factor when choosing a lender. Check each lender’s online reviews and factor in your friends and family members experiences regarding the mortgage lenders they recommend. Just keep in mind, the first priority in obtaining a mortgage should always be to make sure you receive an approval and that the loan closes in a timely fashion.

 

Before You Close, Have You Done Your Due Diligence?

images (21)After successfully submitting an offer on a property and having it accepted, there is a stage, usually up to three weeks, before the deal is concluded. During the wait before the deal is closed, buyers are often advised to do their “due diligence on the property they have placed the offer. But what does “due diligence” mean? And what should the potential buyer be doing during this period of time?

In the business of real estate, due diligence basically means evaluating and looking into any issues the property may have. The potential buyer should investigate the property thoroughly to identify any flaws or issues that may cost significant amounts of cash to fix after the property has changed hands.

The buyer should use their due diligence to ensure that the property fully meets their expectations of what they hope to receive after parting with their cash. The few weeks before closing are the last opportunity a buyer has to check the roof for leaks, ensure the basement doesn’t flood – and basically make sure that they are not getting ripped off or mislead by the seller. If a buyer does find issues or flaws, they still have time to do something about it. They can negotiate with the seller to have the problems resolved or reduce the price of the property. If the seller is unwilling to negotiate, and as long as the buyer was properly advised and has contingencies included in the contract, the buyer can cancel the deal and walk away from the property without losing any of their deposit on the home.

Using due diligence is an important process in buying a home. Below is a checklist of the key aspects you should investigate before closing on a property and parting with your money.

A property inspection

Almost every home buyer hires a property inspector to thoroughly analyse their potential new home from top to bottom. The inspector will look for leaks in the roof, problems with the foundations, infestations of pests, structural issues, electrical concerns, and any other potential problems that could cost considerable amounts of money to fix.

It also advisable to hire a separate professional inspector that specializes in testing for bio-toxins. Radon, asbestos, mold and other hazards are not generally checked for by home inspectors and can be very expensive to eradicate and rectify. Although it may seem obvious, you should also look into issues with the local area of the property. Such as whether the property sits in the middle of a flood plain or is located within range of some other environmental factor that could be hazardous. Any of these issues would be enough to warrant renegotiating with the seller of the property or, if the issue is a major problem, walk away from the deal completely.

A property title search

Before the buyer can take title of the property, and become the established legal owners of the home and listed in public records, they will be advised to carry out a title search, to clarify the ownership of the property, before proceeding.

For example, what happens if the previous owner of the home has an ex spouse or lost relative the turns up claiming ownership of the property, or there are boundary disputes with the next door neighbor that are unresolved, or due to unpaid debts a creditor has place a lien on the property. Problems such as these are stressful and can be expensive to resolve, but can be brought to your attention, before closing on the property, by conducting a title search. Enabling you to approach the seller with any problems before they are passed on to you with the property.

Homeowner’s association or condo rules

If you are purchasing a home or condo that falls within a homeowners association, you should look into any CC&Rs, conditions, restrictions, or declarations of covenants. It is highly advisable to review the rules and regulations of the property, and any potential fines that could be incurred for infractions, as some properties have strict rules. With regulations governing anything from the color of the home to the amount and type of vehicles that can be parked outside the property, RVs are sometimes banned.

By purchasing the property you are agreeing to live by these rules, so it is a good idea to review them and ensure that you are willing to go along with them. If you are unwilling, you can withdraw from the deal and look for another property that is more suitable.