As in most other states, a Kentucky real estate note indicates that a property was sold using owner financing. The property could be a house, commercial establishment, or even a parcel of land. The buyer and seller could be individuals, corporations, trusts, or any number of other entity types. The Kentucky real estate note indicates how the buyer of the property is going to make payments to the seller. It will include elements like the original note balance, interest rate, term of note, payment amounts, and what happens in case of late payments or non-payments. The original note is signed by the buyer and kept in a safe place by the seller. Click here for more details about mortgage notes.
The Sales Process
The cycle for a Kentucky real estate note begins when the buyer and seller agree to a sales price and terms of the sale. An attorney or title company would normally create the needed documents, which would include the note, deed of trust or mortgage, closing statement, etc. Once that transaction is completed, the buyer takes possession of the property and is on title as the owner. As long as the buyer makes on-time payments to the seller, the buyer is generally free to use the property as he or she pleases.
If the buyer is late on a payment, there is often a late fee that must be paid. If the buyer stops making payments completely, then he would be considered to be in default. The note holder could foreclose at this point and, at the end of that process, get the property back.
Whether or not the note is performing (up to date with payments) or non-performing (in default), the person holding the note has the option of selling the note to a note buyer. Naturally, a performing note would receive a much better offer because of the reduced risk in acquiring it. Note buyers such as Seascape Capital or note brokers would make the note holder aware of various options for selling the note. For instance, on a performing note, the note investor would make separate offers to buy the full note or buy just some of the payments. Once the price is agreed upon, the note buyer would go through a process of reviewing the documents, appraising the property, doing a title and lien search, etc. The entire process takes 3-4 weeks, after which the note investor would provide the agreed upon funds to the seller and would begin receiving payments directly from the payer.