Business notes can be most interesting to acquire

Business notes can be most interesting to acquire, especially this specific recent one. About two years ago a neighborhood laundromat in MA, offering other cleaning services as well, was sold for $100,000 with $70,000 cash down and with the seller taking back a $30,000 note. This note had no payments due nor interest accruing until 3/1/14. The amortization schedule thereafter was for two years with the note then being fully paid off. The seller of this business/the note holder later declared bankruptcy and the bankruptcy trustee was now selling this note to pay creditors. With such a strong down payment by the buyer which we were able to independently confirm and feeling comfortable with everything else we were able to check out, we decided to bid on this note.

It turned out there was one other bidder, the buyer of this business/the note payor. He saw an opportunity to pay off his note at a substantially discounted amount and made a bid payable over six monthly installments. We thus initially decided we could start bidding at the same amount but all cash which would thus be a stronger bid. We decided, however, to bump it $1,000 and all cash. By making this offer, this meant there needed to be a court hearing before the bankruptcy judge who would then seek higher offers but by sealed bids handed to him on the bench. Hmmm, what to do. The payor knew our initial bid as we knew his original bid. I guessed he would increase it maybe to a $1,000 more then ours so we went $1,500 more. The envelopes were opened and his bid exceeded our original bid by $1,050 so our sealed bid was the highest. We will shortly receive a copy of the bankruptcy court order documenting our new ownership of this note.

We would be very happy to wait it out for full payment based on the original payment schedule though I plan on approaching the payor with an early payoff incentive which both he and we would be pleased with. What a fabulous business this is.