As a buyer of seller-financed notes, you should have each transaction examined by a qualified attorney. But who is qualified?
When you look for a lawyer to advise you on your note deals, the best rule to follow is this: choose an attorney who buys notes with their own money.
Why a good real estate lawyer isn’t enough
I’m almost embarrassed to say it took me many years in the note business to figure this out. Like most note buyers, I assumed that a good real estate attorney knows all about notes. I was wrong.
I knew that buying seller-financed notes is a specialized field that requires specialized knowledge. What I hadn’t recognized is that giving legal advice to note buyers is just as specialized.
By assuming a good real estate lawyer would know all about note buying, I was putting an unfair burden on the lawyer. Note buying is a second cousin to real estate. It goes beyond the real estate arena into the Uniform Commercial Code and other areas such as bankruptcy, usury and securities law. Expecting a real estate lawyer to be expert in all of those is presumptuous.
Hire the lawyer who buys notes
What finally jolted me was a story a lawyer friend told me. She had been accepted by a law firm that specialized in real estate, but the firm would not hire her until she bought a home of her own. She had lived in rentals all her adult life. Their logic was simple: no client wants a real estate expert who doesn’t even own a house.
It hit me that the same thing is especially true of note lawyers. There are a small number of competent lawyers with long experience in seller-financed notes who have never bought one for their own account. But the lawyer who does buy notes is the one for a note buyer to hire.
For one thing, you get a colleague as well as a counsel. A note-buying attorney has had the same problems you have and faced the same risks. That shared experience is a reality check you don’t need to explain, and it saves you time and money.
How to find a note-buying attorney
There are several approaches to try:
- Your local bar association. Many publish lists of attorneys by specialty.
- The Martindale-Hubbell Law Directory. This lawyer locator uses a rating system devised by attorneys themselves and lists the specialties of firms and attorneys in your area. It should narrow your search so a few phone calls can find a lawyer with personal experience buying notes.
- Note buyers and title companies. Look in your local classified ads for institutions that buy or broker notes, or in local listings for title insurance companies. Both usually have staff attorneys with good knowledge and contacts. You probably can’t hire those attorneys, but you can ask them to recommend good attorneys who buy notes.
Questions to ask before you hire
Once you have the field narrowed down, call the attorneys on your list and ask whether they have ever bought seller-financed notes with their own money. Make sure you stress that last part: their own money.
When you find one who says yes, explain that you have a note transaction that needs review. Ask a few basic questions about the lawyer’s services and fees. If you get satisfactory answers, you have most likely found an attorney you can work with.
