| How to Buy Notes - Know Your Note Buying Enemies |
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How to Buy Notes...You and Your Seller
How to Buy Notes...You and Your Seller Sun Tzus is a famed Chinese warrior and everytime before going into battle he would instruct his soldiers to know their enemy. Well the same is true with note buying. Know your seller should be the mantra for every note buyer (and broker for that matter!). Why? If you aren't familiar with your seller you may find yourself in a position when trying to negotiate and not know what their key hot buttons are. A How to Buy Notes Example,My Recent Bid A bank has the mortgage on a house in Salt Lake City and they want to sell the 1st. The note had matured over 2 months ago and the borrower hasn't paid on the note in over 120 days. Technically the loan could be called due. No foreclosure notice has been served by the bank. The bank has called you to see if you want to buy the nonperforming note and mortgage. The first thing to look for is price, what should I offer? Helpful documents are the title report and BPO. Also, contacting a local realtor for comps. Then I submitted by bid. I was told by my rep that she would need the approval from senior staff. She became very hesitant to answer my questions when I asked about the situation of the borrower and where she needed pricing to be. Her behavior was suspicious to me so I decided to probe for more information. When I did, she clammed up and would not discuss anything further with me. Obviously something was very wrong with this note buying deal. It was odd that the bank rep would react that way - in fact it was the first time Id seen that kind of a response to an individual loan before. How to Buy Notes - Tips when Talking to the Banker I gave her a call back and tried again. Does the borrower have a unique relationship with your bank?, I asked. That is absolutely true, she replied. It grabbed my curiosity as I wonderered what was going on with this defaulted mortgage. So I kept asking more questions to see what I could find out. She didn't oppose them, but only answered yes or no. Is there a reason why the bank hasn't foreclosed yet? Yes. I know you can't tell me, but I am assuming that this is a difficult relationship for the bank to foreclose on. Am I correct? Absolutely, she answered again. I cant tell you any more than that. I have one last question. Is it safe to assume that the bank is more concerned with the exit strategy rather than price in selling this nonperforming note? Yes, that is correct. What is happening with this note deal? After a couple more phone calls, I was able to gather that the woman's ex-husband was a close friend of the banks President. She was also well connected in the political circles of Salt Lake City. If the bank foreclosed on her, they might find themselves in a political nightmare. And that is why they wanted to sell the nonperforming loan to a 3rd party investor. How to Buy Notes - The Lesson Learned If you don't take the time to probe around and find out what your sellers particular situation is, you will completely miss the sellers key negotiating points. The bank was more concerned with our exit strategy rather than price. They wanted to know how we would work out the note with the borrower. Your How to Buy Notes Action Items From This: 1. Understand why a bank is selling their notes or pool of notes. 2. Find out what the negotiating points are. Why are they selling you this defaulted mortgage? The answer is usually one of the following: a. Bid Price b. How fast you can close c. Your ability to close (in other words, the bank cares more about whether you can close rather than what price they Buyer is offering for the discounted note) d. Your note buying exit strategies (in other words, the bank may determine whether to accept a bid or not based on what kind of buyer you are - are you a foreclosure operation with no attempt at loan modifications, for example?) So keep all this in mind when youre next talking to a bank to buy notes. You will become a much better note warrior! DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Interested in learning more about the Note Buying Business? Watch Hours of FREE Training Videos here: How to Buy Real Estate Notes Real-life, Up-to-Date Information for You. Visit NoteBuyingProfits.com or Call 718-783-7605 Or Click Here: How to Buy Discounted Mortgages From Dean Engle & NoteBuyingProfits.com - This time on How to Buy Notes |