Posted by David Butler on July 10, 2007 at 13:51:51:
Hello Conor,
First thing here is to define whether you are going into contract on a home, and then flipping that “Real Estate Purchase Contract” - or if you are going into contract to purchase an EXISTING note, and then flipping THAT “Note Purchase Agreement”?
You can do either activity separately, but except in very rare and highly technical circumstances, not as part of the same transaction generally speaking - at least not for the purpose of selling-off a “wet” or “green” note. And it is not usually worth the time and/or trouble to attempt it. Much easier to do one, or the other.
Rather than delve into the particulars of “why” here, I will refer you to the Archives, where you will find several long discussions I have had on the topic in years past (as has Mike Morrongiello), using the key word search terms “creating notes”, “simultaneous closes”, “safe harbors”, “ostensible loans” and similar terms. Also, Mike has made more recent detailed replies in the past eight months or so on this specific discussion.
A helpful tip to remember is that from a practical standpoint, a well-written purchase agreement (for real estate or notes), with strong escape clause language, essentially functions much the same as an option agreement does. And they can be bought and sold in much the same manner.
Most note related courses offer forms, as do most real estate investment courses. You can also obtain forms from title companies for at least some of the paperwork; and stationers for others. And you can check various online resources for others. We have seen several web sites that offer pretty good generic legal contracts for around $3.00 each.
Hope that helps, and best wishes for your success. And…
Have Fun For A Living!
David P. Butler