Selling Real Estate Notes
Buying And Selling Real Estate Notes
Mortgage Notes For Sale By Owner
It is possible for real estate investors to buy and sell real estate lien notes. But these kinds of transactions are often complicated because the parties involved need to consider warranties, recourse mechanisms, representations and indemnity provisions. They also need to know whether the assignment or transfer of property will be made “as is” or not.
People who buy and sell real estate notes want to invest in real estate but without having to manage, fix, or rent out the property. Traditionally real estate investors would buy a property, fix it and then sell it at a higher price than they bought it. To learn more about selling real estate notes contact an experienced real estate attorney.
What The Law Says
Buying And Selling Note
The applicable law in these types of transactions is the Texas Business & Commerce Code Section 3.201 et seq. But pay more attention to Section 3.104 that says:
Sec. 3.104.NEGOTIABLE INSTRUMENT. (a) Except as provided in Subsections (c) and (d), “negotiable instrument” means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:
(1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder;
(2) is payable on demand or at a definite time; and
(3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain:
(A) an undertaking or power to give, maintain, or protect collateral to secure payment;
(B) an authorization or power to the holder to confess judgment or realize on or dispose of collateral; or
(C) a waiver of the benefit of any law intended for the advantage or protection of an obligor.
There is no requirement for a real estate to qualify as a negotiable instrument for it to be valid and enforceable. But real estate notes are still subject to common law rules relating to the assignment of contracts.
Determining The Validity Of A Real Estate Note
Sell Real Estate Note
Before investing in a real estate note, you need to ensure that it is valid and enforceable. Below are some of factors that make real estate notes valid:
- There must be money loaned
- The parties involved must be identified
- The note must be dated and signed by the debtor
- There must be an unconditional promise to pay a certain amount of money
- The terms for repayment must be clear
- The borrower must be current on the payments and there should be no lawsuit or bankruptcy anticipated from the debtor
- If homesteads are involved, both spouses must sign the note and the deed of trust securing the payment
- The deed of trust must be filed
You need to talk to a Texas real estate lawyer for information on other factors that need to be considered. An experienced lawyer can also evaluate whether the real estate note is valid and enforceable before a final closing.
