S.E.C. Real Estate Observer

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You have just completed a creative, well executed, real estate exchange. You may have been the principle or the agent, but the end result is, you now have paper. It may be a personal note, or a note secured by a Trust Deed or mortgage.

You are proud of your transaction and the end result was exactly what you had planned, ownership of paper. You are now ready to move on to the next transaction, to counsel the next client, and to prepare your homework for the next exchange meeting.

What about the paper you just received in the previous transaction. I believe now is the time to do some self-analysis and planning.

First, why did you want to acquire the paper?

Most Exchangors have several reasons for paper in their portfolio. Paper gives monthly income plus interest. Paper is normally easy to exchange for other things, both real and personal. If structured properly, paper can be sold in the cash market.

I believe the above reasons, plus many others, have sufficient benefits to justify your desire for paper. The only negative aspect is that it is a diminishing asset.

If you are like the majority of brokers I know, you will put your newly acquired asset in a desk drawer or perhaps in your safe deposit box and then hope the payor makes payments, or that you may find a transaction at an exchange meeting which will have more benefits to you than ownership of said paper.

I would like to suggest a professional way of handling the paper you acquire.

First, set up a file labeled with the Trustor/Beneficiary and Property Address which secures said note and Deed of Trust. This folder should contain a copy of every document pertaining to the transaction. This folder would be in addition to your exchange folder, and must include, but not be limited to the following:

1. Copy of escrow statement and instructions.
2. Copy of title policy
3. Beneficiary statement of first Trust Deed loan if your note is a second.
4. Copy of note and Deed of Trust. *
5. Copy of request for notice (if you do not have one, draw and record same).
6. Copy of fire insurance (if applicable).
7. Two photographs of property.
8. Two payment books. One to mail between you and the payor and one for your master file.
9. Copy of letter you mail to payor with his payment book.
10. Copies of all correspondence regarding your paper and any other pertinent information.

*Originals are to be kept in a safe deposit box at your bank. They should he put in an envelope clearly marked as to its contents.

If we are dealing with personal paper, you may use the same checklist only modified by getting a complete financial statement, type of work, years on job, etc., on the individual payor.

Editor’s Note: This article was published in the Real Estate Observer in March, 1973.