Broken Chains and Short Sales.

Working in the note business, one may face a number of challenges. When buying a note one should always take the time to revise important documents, ask for certain documentation, and really decide what needs to be done to move forward with the file. A good example of a possible complication could be trying to sell a note that was just recently found to have had a broken chain of assignments. What is a broken chain? For starters, when a note is sold from person to person the assignment is and should be recorded. However, if A sells to B and the assignment is recorded yet when B sold to C it wasn’t and C to D was then there is a break in the pattern, a broken chain.

Some people might not sell a note with a broken chain mainly because when trying to foreclose or do a sale, title work is done. And attorney’s, who it concerns, will want to see a clear path to the current the holder since the origination date. Nowadays, everyone is getting “legalled up” and the first thing an attorney will ask for is those recorded assignments. Documentation is very important for any business transaction. If anything is taken to court, the attorney will want to make sure all relevant documents are in their possession. Why? It is pretty simple, attorneys don’t want to be embarrassed. The good thing is that most broken chains can be fixed. They can take about 1-4 weeks be corrected (by tracking down missing assignments and having them notarized). Rarely does a broken chain take three months to fix.

Aside from broken chains, the note business is also deals with short sales. Short sales are any real estate sales that generate proceeds that are less than the amount owed on the property, as nicely defined by investopedia. Typically in a short sale the lender and the borrower agree to sell the property, the lien holders agree to release their lien on the property, and accept a lesser payment to prevent the borrower from defaulting on a loan and going through foreclosure. Therefore, short sales are like an alternative to foreclosure.

Usually in a short sale the realtor gets about 4% of the profit and the senior lien holder gets somewhere around 6-7%. A complete copy of a HUD and signoff of the 1st mortgage will be required in a short sale to come to an agreement on price.The last piece to be familiar with is the bidding process. Bids usually aren’t determined until the end, about two weeks to four weeks into the sale.

Although this is merely a brief description on broken chains and short sales, it will help note buyers get a generalized idea of these areas and their importance when purchasing notes.

For more information on short sales and broken chains, as well as other topics, visit NNG at https://www.facebook.com/pages/National-Note-Group/529259247086369  or  http://www.nationalnotegroup.com/.