What Are Cash Notes?
Cash notes have also been called cash flow notes. The two terms are used interchangeably. Cash notes are agreements between two parties where one makes monthly payments to the other over a period of time. They are typically used in some real estate transactions but are also used for other types of large purchases. Structuring an agreement in this way causes money to come in every month for the seller of the note; hence the term "cash note."
Other People Are Reading
-
Identification
-
Cash flow notes are specifically structured so that the borrower pays an individual rather than a banking or lending institution. The agreements can be handwritten or formally typed up but always include the borrower's and payee's names, contact information, terms of the contract, and specified amount to be paid back in addition to what is being purchased. They may also note specific consequences to the borrower if the note is not paid as agreed.
Types
-
The most common type of cash note involves real estate. You'll find these when a person selling a home allows the purchaser to make payments directly rather than financing through a traditional bank. Cash notes also are used for lottery winnings, sweepstakes prize money, casino winnings, divorce settlements and inheritances. You'll also find them used in the purchase of marine vessels, aircraft and timeshares, to pay royalties to authors and for lawyer's fees. These are just a few examples of the many kinds that exist.
-
Uses
-
Cash notes are created between any buyer and seller when the buyer cannot get regular financing or when the seller agrees to receive monthly payments rather than upfront cash for the purchase. Sometimes cash notes are offered in bartering transactions in place of cash or items.
Discount Sales
-
Cash note owners are at times willing to sell their notes at a discounted value simply to have a lump sum payment now rather than waiting for all the payments to come in. Buyers of cash flow notes can find such persons by looking up deed information at county courthouses and putting advertisements in newspapers. It is also helpful to foster relationships with businesses that manage the affairs of elderly persons, such as Realtors, attorneys and, especially, accountants. Networking is key to locating private notes owned by individuals.
Considerations
-
Carefully review the terms and conditions of a note before agreeing to it. This is true whether you are the seller or the buyer. Always have a qualified attorney review your paperwork. Make sure you are clear on what procedures are to be followed if the note is not paid as agreed.
-
