Promissory Notes can sometimes be misleading in their simplicity, and if you're about to get involved in or create a promissory note you should be aware of a few simple but crucial steps to take in order to avoid any legal ramifications...
One of the MOST common and biggest mistakes a promissory note holder can make when creating a promissory note is to forget (and, overlook) the real importance and value of checking their buyer’s credit history report. It may seem like a very simple thing to do, but you would be surprised how many times a person in this position forgets to do this simple task. It happens time and time again. So, when you go about creating a promissory note, don't overlook the major benefit of checking the credit history of your potential buyer!
ALWAYS CHECK THE BUYER'S CREDIT HISTORY
By putting this simple step into play, you can save yourself from a having a bad experience not to mention saving yourself a ton of money both now and in the future.
Why it's so crucial. Because by taking this simple step of checking you buyer's credit history it'll help you to resolve (and, totally eliminate) any worries of your buyer’s ability to honor and repay their future debt to you. Why... there's not a single bank or financial institution that will NOT even start to prepare a loan until they first do a check on a persons credit history. This being the case, you can how it's as important for you to put this same strategy into action yourself.
Another equally as important reason to check your buyer’s credit history is... let's say that sometime in the future you choose to sell your real estate property note, trust deed, or owner financed mortgage for cash money?
What then?
You'll have peace-of-mind because of knowing your buyer's credit history. So, it won’t only be of benefit to you now, but it'd also make your real estate note far more valuable in the foreseeable future.
Here's a third reason why. Usually the very first thing a potential promissory note buyer (and/or investor) is going to require to sell your promissory (real estate) note is information about your payer’s credit history! Knowledge of your buyer’s credit history is crucial because it'll determine just too how much money you'll ultimately get in hard cash if you decide to sell your real estate note. Of course, the better the buyer's credit history the less risky it is for a new buyer, and a much safer bet to go ahead with the deal.
So, knowing your buyer's credit history beforehand makes your promissory note far more valuable in the eyes of the buyer... and... ultimately for you as well.
With this in mind, what then is an acceptable credit history report in relation to the sale of a real estate promissory note? The answer to that question is really up to you. But generally speaking, if it was my promissory note, I wouldn't even consider it unless it has a score of less than say 550. The credit score counts for a least 40% of a total of 100% in rating real estate notes and its value. So, if you’re contemplating on creating (and/or perhaps selling) a real estate note it really does pay to check your buyer’s credit history in more ways than one.
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