 President's
Corner
Lets
briefly touch on some things
that can be done but that are
out of the main focus and niche
of buying existing individually
held first position seller
financed notes (or the other 1%
of my business).
Second
Position Notes – Yes, there are a few true end buyers for second
position notes but the discount is so great you need to go through hundreds of
note holders to find someone that is desperate enough to take the discount.
The few buyers that I know will only pay up to 35 cents on the
dollar for a second position note and there are many requirements that make
getting these to funding very tough. So, I don’t spin my wheels on second
position notes.
Non-Performing
Notes –
Yes, there are a few true end buyers that will buy a note that is in default
(when the payor on the note hasn’t made the payments and it is near or already
in foreclosure) but again the discount is usually so great that it is tough to
convince someone to take the discount.
Sometimes note holders who would otherwise not call us to sell their note
will start to call and want to sell their defaulted note.
I tell them that they should have called to sell their note before it was
in default because now with a non-performing note the discount is much greater
that with a performing (paying on time) note.
The few buyers that I know who purchase non-performing notes will only
pay up to 50 cents on the dollar for a first position note in default.
What about a second position note in default, no way.
Simultaneous
Transactions – Yes, there are a few, very few, true end note buyers that
will still do a true Simultaneous Transaction where the seller of the property sells
the property, carries back the note and sells the note at the same time.
I learned years ago that for me this way of doing the note business is
extremely tough. In short, it came
down to the fact that there were just too many people to make happy.
The investor and the note broker are usually always happy.
But then we have the seller who doesn’t want to take the discount, the
buyer who wants to give a lower down payment and wants a lower interest rate and
sometimes there is a real estate agent who want to know how much money we are
making and if it is more than they are making.
So at this point the most I will get involved is to educate the seller
(or real estate professional) and suggest the most favorable terms of the sale
of the property and the best terms of the note to carry back so that if they
want to sell the note after they sell the property they will get the best price
possible and the least amount of discount. Then
after they have sold the property we can then purchase all or part of the note.
Loans
– I get calls all the time from consultants, brokers, sellers and individuals
looking for a loan. They want to
tell me about a unique situation or an unusual request or special circumstances.
We are talking about people that want to refinance their homes, get a
loan on a piece of property, hard money loans, bridge loans and the like.
You will get many, many calls from people that want loans for something.
I will say this just once, if you can’t put it on a mortgage worksheet
then we can’t do it. The first
clue is when you ask, “When was the property sold?” and then you hear back,
“Oh, it wasn’t sold” or “It’s not for sale.” My suggestion is that
you start to find yourself a few loan officers, mortgage brokers, hard money
lenders, commercial property lenders and venture capitalists that you can refer
these people to when they contact you.
That way instead of saying “No I
don’t do loans,” you can refer
them to someone that might be
able to
help them and at least earn a
referral fee.
As
you can see, my business is focused on the purchase of existing seller financed
first position notes on the secondary market which comprises 99% of my business
every year. The other 1% might
include non-performing notes, simultaneous transactions and referral fees for
loans. I do not want to spin my
wheels on things that have, for me, been traditionally and historically a waste
of my time. I am not trying to
discourage you because there are a few brokers who do specialize in the 1% that
I just prefer not to do.
Remember, Success Demands
Action! Keep on marketing, it’s
going to work! TWITA!
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