Let me answer the question above by telling you a true story.
About 2 years ago, I was talking to a note holder who was interested in selling his note. He told me that several years earlier he agreed to rent his property to a family and provided an option to buy the property at a specific price. Part of the agreement was that every dollar the renter paid would go to the ultimate sales price. The agreement was drafted by an attorney of the renter’s choosing – not the note holder.
When I asked the note holder who was doing the record keeping, he said he had a receipt for every payment his renter/borrower paid and he told me the current principal balance. In reviewing the agreement, I could not reconcile his principal balance with what the agreement specified. The agreement indicated the balance should be $5000 higher. With a sales price of $100,000, $5000 was a significant number.
In discussing this differential, the note holder shared with me that he was too trusting and reluctantly agreed to allow his borrower to choose the attorney. It was clear to me that the error was the attorney’s, the parties just blindly accepted the terms and numbers in the agreement. The note holder spoke with his borrower, who refused to accept the higher principal balance and stopped making monthly payments. The note holder told me he was taking the borrower to small claims court.
I never heard from him again.
For a small monthly fee, this mess could have been avoided, and both parties would have had their own “CPA” providing accurate, timely financial information.
If you carry a note, hire a 3rd party servicer to handle your account!
