We’re continuing from our last podcast episode, where we discussed how you can create a marketable promissory note that can then be sold for cash. This is a lifesaver for the investor short on cash, and it’s all based on fulfilling your promises as a business person.
In every seller financing transaction you’ll ever do in your investing career, you’ll need to understand the concept of clauses. There are specific ones we need to include in our Purchase Agreement and in the final note. One of the most important is the “Right to Refusal” clause.
The “Right to Refusal” clause says that if the holder of the note decides to sell that note to someone else for a discount, they would have to contact YOU first. You would then be given the opportunity to purchase the note at the discounted price, or refuse. If you can come up with the money, why not exercise your right?
Another crucial clause is the “Exculpatory Clause”. This one isn’t as well known and you may not meet too many gurus who even understand what it is. This clause allows you to purchase any property WITHOUT personal liability. The liability is limited to the property itself and will not extend to you. If you don’t pay, then they simply take the property and can’t come after you.
You also need to understand if you’re a “Mortgage State” or a “Deed of Trust State”. Depending on where you live, the standard deed will either be a mortgage or a deed of trust. Most investors like deed of trust based on how quickly they can make their money back. However, you can still make money in a mortgage state, but it will take more time.
This is only a few of the clauses you’ll need to truly create a market all of your own. For a FREE download of sample documents, visit LarryHarbolt.com/ThinAir.
For all your real estate education needs, visit me at LarryHarbolt.com.