Armstrong Capital Newsletter

Happy March! Spring is just around the corner and new things are cropping up all around us. New note holders, new transactions and new ways to transact our business.

Last month I gave you a list of copies of documents that are needed to start a transaction AND a sample cover letter to a funding source. This month I want to go over with you some of the things a funding source does when they receive your package.

The main three (3) things that the funding source will do in their due diligence process will be:

- Run a credit check on the payor (the person(s) making payments, the buyer(s) of the property). This will be the first thing they check. If the credit is not acceptable the funding source will then get back to you with revised offers or they will pass on the transaction at this time

- Do an appraisal of the property. The funding source may do a drive by appraisal or they may just do a BPO (Broker’s Price Opinion) with some pictures at their discretion.

- Get an updated Title Report and title insurance commitment from a title company. This is done to make sure that the title to the property is free and clear of any liens, judgments, easements or derogatory items that may cause a “cloud” on the title and thus affect the position and value of the note itself.

Throughout the course of the transaction the funding source may also check the following items during the due diligence process and before closing documents are drawn up and sent to the seller:

- Run a demography check on the area that the subject property is located in. The demography report will give the funding source information on the crime in the area, the unemployment rates, the overall real estate volatility (whether there has been a rise or decrease in values over time) and much more.

- Verify that the property taxes on the subject property are paid in full and not delinquent.

- Verify that the hazard insurance (if applicable) is current, in full force and coverage is adequate.

- Send an Estoppel letter to the payors to verify that the payments, interest rate and loan amount is accurate. And to verify that they have no offsets or verbal agreements about the payment. (i.e. The seller said I didn’t have to make him payments for the next year because there was a roof leak and I had to repair it, etc.) The funding source may elect to send a letter or do a verbal interview with the payor or both.

- Google the participants in the transaction. With the internet becoming more and more of a tool for us to use in our business the funding sources will at times Google the note holders name(s) and the buyer(s) names just to see what pops up, you would be surprised what can be found on the internet.

- Internet research may be done. The funding source may elect to research the county public records online, governmental agencies, legal research and even the postal service to verify certain names, numbers and information.

As you can see there are many things that the funding source has to do and verify from the time they receive your copies until the time the closing documents go out to the seller. They may from time to time give you a call and ask you to get a question answered or get a copy of some other document for them. Whatever they ask you for make it a priority and get them the information as quickly as you can. This will ensure that the transaction goes smoothly and is completed as quickly as possible.

Next time we’ll discuss things that could go wrong and why some transactions get cancelled. Have a great month!

Jeff

Armstrong Capital
800-845-3055
fax 818-865-2323
PO BOX 6517
Westlake Village, CA 91359
visit our website at www.armstrongcapital.com

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Jeff Armstrong is president of Armstrong Capital. He is a member of the Million-Dollar Club, a Master Broker, visiting instructor for the American Cash Flow Institute, and the author of three best selling books. He can be reached by calling 800-845-3055, faxing 818-865-2323, e-mail jeff@armstrongcapital.com, or visit http://www.armstrongcapital.com and click on "Note Brokers" for questions and information about his Master Broker services, Mentorship program how Armstrong Capital can help you succeed.