Posted by John Behle on October 20, 1998 at 18:04:13:
There are generally two letters, but it can be in the form of one signed by both parties.
The letters essentially state the balance of the loan, payment, rate, term, that it is current and that no modifications of any kind have been made. It also states that there are no credits or special terms other than reflected in the note and trust deed.
My estoppel for the seller of the note is built into my option form. The concern with an estoppel letter is that it could trigger a commissiondectomy where the buyer approaches the seller and buys his own note.
Some buyers absolutely insist on the estoppel letter, others will accept some kind of third party verification from an escrow company that has been collecting. The third party letter carries some risk, because the seller may have some side deal with the buyer, yet I have bought many notes without any contact with the buyer.
Sometimes getting ahold of the buyer or getting the estoppel can hang the deal up. Just remember, in many scenarios you can close without some of the information and always hold back some contingency funds.
We had a deal a few years back where the funding source was real hung up on a credit report. I think this note was seasoned for 20 years and had a very low LTV ratio. It went weeks before I said to heck with it and funded it privately and determined never to go near an institutional funding source again. That was the last deal I did with that company.
It is so simple in a case like that to hold back some funds if needed. So, the buy rate would be $$$$ if the credit were totally trashed and $$$$$ if the credit were good. Just hold back the difference until the credit comes in - or anything else you might be waiting on.