Paper currency does not have any intrinsic value – it denotes a value; in other words, it is a promissory note from the note issuing authority. This proves how thoughtlessly we accept promissory notes for financial transactions, because at the end of the day we know that the promise could be redeemed for something of real value. Extending the metaphor to other fields, one can have promissory notes in every field. In fact loans were financed by rich merchants or money lenders this way only. For example in Venice or Lombardy, notes by money lenders or primitive banking institutions could be redeemed at a later time for the agreed upon value. Even today non-banking channels regularly use promissory notes of some form for financial transactions. In a war ravaged Afghanistan, hawala notes are a standard, trustworthy and fast way to transfer money and take loans.
Real estate notes are such promissory notes that promise to pay the holder of the note a lump-sum amount or a given monthly sum. An example can make the issue clearer. Suppose one has a house he wants to sell for a certain amount, and another person has agreed to buy the same for the agreed amount. However the buyer does not have the whole amount as down-payment, and he agrees to pay a monthly sum to cover the balance. In this case the buyer would give the seller a promissory note saying that he owes a certain sum of money to the seller – the note becomes an instrument of entitlement. There can be other notes as well, like residential and commercial mortgage notes, trust deeds, business notes, structured payments arising from legal settlements, annuities, lottery wins, etc. A builder often finances the payment for a newly constructed house through such real estate notes. While those with an institutional basis might easily manage such notes and resultant financial transactions, for many individuals it might be difficult or not sufficiently rewarding. There might be cases where the note holder might need some money upfront, and not a low monthly payment. In such cases the note holder may sell the note to a note buyer who would pay the remaining due, and take over all credits and liabilities associated with the note. Thus, the original note holder is freed from cumbersome financial dealings receiving his due as lump sum amount.
This section of 01webdirectory is a pointer to resources related to real estate and other notes.