What If You Did Not Want A Note, But Wanted Cash Now?
What if you were stuck with a note because that was the only way to close the deal, but you would have preferred the cash? What if you need a lot of money right now and cannot wait month to month for these payments? What if you don't want to deal with the hassles that may come if the payor defaults on your payments? What if there is an unexpected emergency? What if you want to take the full amount of the money and invest it your own way? What if you want to leave the country, start a business, travel the world, or retire?
You could sell your note in a process that would give you less than the actual value of the note which is called a note discount. There are no investors out there that will give you face value on the entire note. The amount you will get depends on various factors.
How do you know if you have anything that qualifies as a note? A big clue is that you have signed a lot of contracts and paperwork and are getting regular payments from someone because of that process. You are the owner of an IOU or note.
- Did you win a lottery?
- Did you win a lawsuit and have a structured settlement from the insurance company or other party?
- Did you inherit property?
- Did a church member will their property to your church?
- Did you sell your home directly to the buyer which included payment arrangements to you?
- Are you a trailer park owner who sold land or a unit to a tenant?
Note buyers will buy that IOU from you for a lump sum of cash now. How much you are paid for that note depends on various factors including age of the note, anything that might be outstanding or liens on it, credit history, and actual value of the note. In order to figure out if your note is eligible for quick cash we need to ascertain certain details and can get back to you with a quote on how much you can get for your note.
When you apply for a quote, you are not committed to sell, you are just getting a quote for the price you can get for the note. You may then decide if you want to sell it or you may decide to hang on to it and continue receiving your payments.
If you own a note, chances are someone has already approached you with a sales pitch asking if you want to sell it for quick cash. If not, just wait and you will be approached.
Are you wondering why they want your note and are willing to give you money for it? What is in it for them? Better yet, what is in it for you?
The way most notes are written, it will give you a certain amount of money on a monthly or quarterly basis until it reaches a certain dollar amount. For instance, if you had a note from the winning lottery jackpot of $20 million it would probably only pay you $1 million because it would be too much of a hardship to pay you the full amount upfront. Each year for the next 20 years, your note guarantees payment of $1 million dollars.
Notes are basically IOUs promising to pay you a certain amount of money until the full value is paid in full. Notes can come from huge gambling winnings, real estate, accident/disability claims, and almost anything where there is a large payment due that cannot be paid all at once.
If you own a note, you are entitled to regular payments. A note investor would be interested in the note if he/she can collect more money from your note than they paid for it. For example, with that $20 million dollar lottery note that you might have had for the last 10 years which has already paid you $10 million dollars. It is now worth $10 million dollars. For an investor to consider this worth his/her while, they will offer you a discounted rate on your note so they can make a profit. NO investor will ever give you face value because that would not be an investment. They might offer you $6 million dollars upfront in exchange for your note. You get the $6 million in cash. The investor holds onto the note and earns $4 million in profit in the next 10 years.
What is in it for you? A large amount of cash upfront. A disadvantage to you, a loss of a large percentage of money due to you and taxation.
What is in it for the investor? If they can afford to pay the money upfront, it can be written off in taxes and give them a considerable profit in the end. In the end, they, too, will be taxed for it.
Using the example of the lottery win, if you are due $10 million dollars, would you be willing to give up $4 million of it in order to get $6 million at once? Why would you do that?
Perhaps you have an opportunity to invest in something really big that will make you more than the $4 million you give up? Maybe you only want to give away a portion of your note to pay bills, save a home from foreclosure, or get medical treatment.
Or you might just decide you would rather keep all of your money, invest it wisely, and stick to a budget.
