Lorelei Stevens
Lorelei Stevens is president of Wall Street Brokers, Inc. in Seattle, Washington. She has been a licensed real estate broker (Washington State Real Estate Brokers License WA-LL-SB-*275LD) and a discounted note buyer since the 1970s. She has worked her entire adult life with Wall Street Brokers negotiating millions of dollars of paper and is a nationally recognized expert. Lorelei has taught Legal Continuing Education seminars and has written numerous articles for legal, real estate and other professional publications on the subjects of seller-financing, managing, reinforcing and buying paper. She is the author of two books, one on seller-financing and another on note buying. She also writes a monthly column for Noteworthy Newsletter and is a frequent contributor to The Paper Source.
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Wraparounds Work!
What is a wraparound seller-financed note? It is simply a second promissory note carried back by a seller who continues to pay the existing first note. The key to a wraparound is that the seller continues paying the first note after selling the property, just as they did before they sold it. At the same time, they now receive a larger amount from their second note which is now owed to them by their buyer. The buyer gets title to the property, but the seller remains in control and remains legally responsible for payment of the first note. The first…
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Wraparound Wisdom
What is a wraparound seller-financed note? Simply put, a wraparound is a second position note wherein the payor pays the seller who, in turn, continues to pay the first note. You, the note buyer, come into the picture by stepping into the seller’s shoes. You purchase the second note (the wraparound), and receive the payments on it from the payor, and then forward the payments on the first note (the underlying), to the first lien holder. Because the underlying first note is secured by an existing mortgage or deed of trust with a smaller dollar amount, the wraparound second note,…
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Simultaneous Closings
A simultaneous closing, sometimes called “table funding,” is a transaction in which the seller sells the property, carries a note, and then sells the note at the same time the property sells, or within a very short time afterwards. This type of transaction falls in a gray area of the law. It could be considered a loan disguised as a sale.The logic behind this questionable condition is that the seller never intended to carry the note, and if we bought the note, we could be considered a lender because we would be the first party to provide money.If the transaction…
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Seller Seconds
You’re selling your real estate. You have a good offer from a buyer. However, your buyer doesn’t qualify for more than a new 70% to 80% loan, and is short on the down payment. It’s a common situation in today’s real estate market.The usual scenario is for the buyer to offer you a second mortgage note to make up the difference. What should you do?First, recognize the possible hazards of accepting such an offer. You should be alert for two potential problems: (1) the buyer may not be able to pay your second mortgage note; and (2) selling your note…
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Recourse Revealed
You want to sell your note for cash. When you sell it, you endorse your note over to the note buyer. An endorsement of a note is much like the endorsement of a check. A typical endorsement says: “For value received, pay to the order of (note buyer)” and must be signed and dated by the note seller.The endorsement is usually written on the back of the note or on a separate piece of paper called an “allonge” that is permanently attached to the original note and becomes part of it.This endorsement may be made “with recourse” or “without recourse.”A…
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Reasonable Replacement Notes
It’s the note seller’s worst nightmare. You need cash and want to sell your seller-financed note, but you can’t find the original. There may be a photocopy, but the real note is nowhere to be found. It is lost, stolen, or destroyed. Now what do you do? The best option is for you or us to contact the note payor and ask the payor to sign a new note, assuming the payor was the original signer on the note. Even though this is the best available option, it is not always possible because the payor has no obligation whatsoever to…
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Puzzling Partials
One of the most questionable transactions in the seller-financed note industry is known as the “PARTIAL”. A typical partial is your purchase of a certain number of time payments from the whole future payment stream of a note. For example, a partial would be your purchase of the next 60 payments of a 120 payment note. This deceptively simple sounding transaction is loaded with hidden problems.Note buyers considering the purchase of a partial should always have their attorney examine the transaction and ask a checklist of questions beforehand. The potential problems of the partial are so serious that expert legal…
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Precarious Partials
When you consider selling your note, you may find buyers who offer you a deal called a “partial.” A partial is a note transaction in which you do not sell the entire note all at once. In a partial, you do not step completely out of the picture. For example, if you sell half of your note to a buyer, you are actually only giving them the benefit of a certain number of payments — the earliest half of the payments — and you are keeping the rest. Did you really “sell” those payments? Did you really “sell” your note?…
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Negotiable Notes
In order for us to buy your note, it must be negotiable.The Uniform Commercial Code, the law controlling this subject, contains many complicated requirements that require expertise to comply with. We have that expertise, and will examine your note carefully to make sure we want to buy it.We have learned a few simple things to guard against. You can check your note for the following problems that could make it non-negotiable.Your note must be in writing and it must be signed by the person who is buying the property from you. It must be the original and not a signed…
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Maria’s Money
My name is Maria Stevens, and I just had my 10th birthday. I’m lucky that I’ve already started to make money with real estate and business notes, so I can save for college! I may seem young for this, but I trust the advice I get, and I really like the idea of making money! I started buying notes with my brother, Rory, because my family owns Wall Street Brokers. Since they are in the business of buying notes, they help us to understand each step of the way.Maybe you’d like to do what I’m doing, so let me explain.…
