Myth Defined: A myth is an invented story, idea, concept, or legend that concerns some idea or hero without a basis in fact. There are numerous promissory myths. Here are the main myths.
Myth #1: The value of a promissory note is clear and obvious-it is not debatable.
Myth Buster: A promissory note can have many values. The term "value" means different things to different people. The meaning of "value" is different to when used by the Internal Revenue Service, by an art auction company, by an antique dealer, by a real estate appraiser, or by an investor.
There are at least 15 meanings to "value": Fair Value, Fair Market Value, Market Value, Book Value, Cost Value, Discounted Cash Flow Value, Quick Sale Value, Liquidation Value, Speculative Value, Intrinsic Value, Investment Value, Personal Value/Owner's Value, Insider/Family Value, Wholesale Value, and Retail Value.
Myth #2: The cash value of a $50,000 promissory note is $50,000-just like a bank CD.
Myth Buster: Promissory notes are not like cash or bank CDs. They are mere promises to repay cash, not actual cash. There is always uncertainty about debt repayment. Consequently, their value is discounted because they lack marketability, liquidity, enforceability, adequate collateral security, proper documentation, and proper interest rate.
Myth #3: Investing in a promissory note is low-risk investing-just like buying a bank CD.
Myth Buster: Every investment has some degree of risk. Because of the reasons mentioned in #2 above, notes may have a higher risk factor. To compensate the investor for this added risk, their yields are higher than safer investments. This concept is the "Risk-Return Trade-Off".
Myth #4: Doing a foreclosure to collect on a defaulted promissory note is quick, easy, and inexpensive.
Myth Buster: There are always significant cash expenses and costs related to the foreclosure and repossession of a property. Attorney fees, eviction fees, property insurance premiums, property repair costs caused by ordinary wear and tear, neglect, and vandalism, real state commissions, other selling costs, and title company closing costs are the main expenses.
Doing a foreclosure and repossession can take between four months and twenty-four months, depending on the legal jurisdiction, and individual facts. This long time-frame results in addition costs and expenses for productive time lost, collection efforts, and losing the use of money for up to twenty-four months-the opportunity costs of having cash tied-up unproductively.
Myth #5: Selling a promissory note is quick, easy, and inexpensive.
Myth Buster: Selling a note is not easy, quick, or inexpensive. There are significant expenses and costs related to selling a note. The main reason is no organized buyer-seller market place exists. A separate selling package is prepared for each note; then the package is presented to each potential buyer. None of these individual buyers is geographically centralized; they reside and do business all over the USA. It costs more time and money to sell (market) one note compared to selling a stock on the New York Stock Exchange.
Myth #6: Any licensed attorney can do a good job preparing the promissory note and supporting documents.
Myth Buster: Just because an attorney has a law license does not mean he or she is knowledgeable in all areas of the law. Being a real estate attorney does not necessarily make the attorney a promissory note specialist. Many real estate attorneys have only a shallow understanding of the note field. Experienced, capable note attorneys have usually specialized in that area of the law--the promissory note field is definitely a specialty area.
Myth #7: Experienced promissory note experts and teachers are abundant, and can teach you the business quickly, easily, and inexpensively.
Myth Buster: Many self-described note experts and teachers have not been, and are not now in the note business. They are actually in the business of selling education. They describe themselves as experienced experts to make the sale. Some have real credentials.
But, regardless of the teacher, the note business, like any other profession, cannot be learned quickly, easily and inexpensively. Like any other serious calling, it takes time, effort, and practice to perfect the necessary skills. There just is no free lunch. Every valuable skill costs time and money to acquire.
Lawrence Tepper specializes in:
National Valuation and Appraisal Services That Serve Your Needs
Free Initial Discussion--Free Fee Quote--Call or Email
Review web site: http://www.PromissoryNoteAppraisers.com
Promissory Notes, Debt Instruments, LLC's Appraised & Valued
Expert Consulting Services
EDUCATION AND TRAINING
Law Degree /Accounting Minor University of Denver
Colorado Real Estate Broker-- Promissory Notes Specialization
Certified Commercial Investment Member From National Assoc. Realtors (CCIM)
PRACTICAL EXPERIENCE
35 + years of appraisal and valuation for Attorneys, CPA's, Estates, Trusts, Administrators, and Financial-Investment Advisors.
Myth #1: The value of a promissory note is clear and obvious-it is not debatable.
Myth Buster: A promissory note can have many values. The term "value" means different things to different people. The meaning of "value" is different to when used by the Internal Revenue Service, by an art auction company, by an antique dealer, by a real estate appraiser, or by an investor.
There are at least 15 meanings to "value": Fair Value, Fair Market Value, Market Value, Book Value, Cost Value, Discounted Cash Flow Value, Quick Sale Value, Liquidation Value, Speculative Value, Intrinsic Value, Investment Value, Personal Value/Owner's Value, Insider/Family Value, Wholesale Value, and Retail Value.
Myth #2: The cash value of a $50,000 promissory note is $50,000-just like a bank CD.
Myth Buster: Promissory notes are not like cash or bank CDs. They are mere promises to repay cash, not actual cash. There is always uncertainty about debt repayment. Consequently, their value is discounted because they lack marketability, liquidity, enforceability, adequate collateral security, proper documentation, and proper interest rate.
Myth #3: Investing in a promissory note is low-risk investing-just like buying a bank CD.
Myth Buster: Every investment has some degree of risk. Because of the reasons mentioned in #2 above, notes may have a higher risk factor. To compensate the investor for this added risk, their yields are higher than safer investments. This concept is the "Risk-Return Trade-Off".
Myth #4: Doing a foreclosure to collect on a defaulted promissory note is quick, easy, and inexpensive.
Myth Buster: There are always significant cash expenses and costs related to the foreclosure and repossession of a property. Attorney fees, eviction fees, property insurance premiums, property repair costs caused by ordinary wear and tear, neglect, and vandalism, real state commissions, other selling costs, and title company closing costs are the main expenses.
Doing a foreclosure and repossession can take between four months and twenty-four months, depending on the legal jurisdiction, and individual facts. This long time-frame results in addition costs and expenses for productive time lost, collection efforts, and losing the use of money for up to twenty-four months-the opportunity costs of having cash tied-up unproductively.
Myth #5: Selling a promissory note is quick, easy, and inexpensive.
Myth Buster: Selling a note is not easy, quick, or inexpensive. There are significant expenses and costs related to selling a note. The main reason is no organized buyer-seller market place exists. A separate selling package is prepared for each note; then the package is presented to each potential buyer. None of these individual buyers is geographically centralized; they reside and do business all over the USA. It costs more time and money to sell (market) one note compared to selling a stock on the New York Stock Exchange.
Myth #6: Any licensed attorney can do a good job preparing the promissory note and supporting documents.
Myth Buster: Just because an attorney has a law license does not mean he or she is knowledgeable in all areas of the law. Being a real estate attorney does not necessarily make the attorney a promissory note specialist. Many real estate attorneys have only a shallow understanding of the note field. Experienced, capable note attorneys have usually specialized in that area of the law--the promissory note field is definitely a specialty area.
Myth #7: Experienced promissory note experts and teachers are abundant, and can teach you the business quickly, easily, and inexpensively.
Myth Buster: Many self-described note experts and teachers have not been, and are not now in the note business. They are actually in the business of selling education. They describe themselves as experienced experts to make the sale. Some have real credentials.
But, regardless of the teacher, the note business, like any other profession, cannot be learned quickly, easily and inexpensively. Like any other serious calling, it takes time, effort, and practice to perfect the necessary skills. There just is no free lunch. Every valuable skill costs time and money to acquire.
Lawrence Tepper specializes in:
National Valuation and Appraisal Services That Serve Your Needs
Free Initial Discussion--Free Fee Quote--Call or Email
Review web site: http://www.PromissoryNoteAppraisers.com
Promissory Notes, Debt Instruments, LLC's Appraised & Valued
Expert Consulting Services
EDUCATION AND TRAINING
Law Degree /Accounting Minor University of Denver
Colorado Real Estate Broker-- Promissory Notes Specialization
Certified Commercial Investment Member From National Assoc. Realtors (CCIM)
PRACTICAL EXPERIENCE
35 + years of appraisal and valuation for Attorneys, CPA's, Estates, Trusts, Administrators, and Financial-Investment Advisors.
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