Got Notes?

Despite a bearish sagging economy and what the Wall Street Journal called "stagflation," there's still plenty of money to be made by the average person in notes.

Notes are created when real estate, or realty, is sold, and the seller, or the mortgagor, or the trustor, acts as the lender in the transaction, carrying the mortgage to pretty much help the buyer, or the mortgagee, or the beneficiary, buy the realty. Since the seller agrees to carry a portion of the balance of the sales price, known as the principal, this iou is simply called the note.

Notes are discounted when they're sold because they're a promise to pay future money owed.

Future money's not nearly as real as present money, so for that fact, and due to the oldest marketing principle known to mankind, supply and demand, they are sold and bought at a discount. That is, discounted from the principal amount.

Where the money comes in, is in finding investors to buy these discounted notes. In fact, actual lenders bundle and package-sell so many of these that they make up what is called the secondary mortgage market. You don't have to be a player in the secondary mortgage market to make lump sums. There are literally thousands of people holding iou notes who'd love to liquidate for various reasons, and if you can locate them, backed by investors with deep pockets, integrity and experience, these investors would love for you to be the finder, while they become the funder in these transactions.

Note holders don't even have to liquidate the entire note. They can opt to sell a portion, say 10 years worth of incoming payments, for example, while keeping any ballon attached to the end of the mortgage term, or they can choose to sell 24 months' worth of payment stream. Or just the balloon. It's all up to them, and, it's all up to you as the finder. You'll simply negotiate your fee upfront, in writing, and receive your payment for being the middle-man, or brokering the deal, at closing.

Typically, you want to stick with a small percentage of the deal. Three to ten, or even eleven percent of the total value of the note is standard now (in 2008). You can be ridiculous in your pricing after you've established your reputation in the industry. Better to remain somewhat prudent to start. Obviously, lowering your percentage fee when it feels right can only help open up the chances of you landing the fees the you want later, with more experience.

Sources for notes are endless. County clerks offices, real estate agents, brokers and realtors are all great places to start. With any luck, some research, and due diligence on your part, you can be raking in some serious part-time dough in no time!

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