A Common Hurdle When Learning How to Buy Cash Flow Notes

When you are looking for non performing notes, you will most likely run into this common hurdle. I wanted to take the time to share it with you.

It’s my guess that you have been calling numerous banks in an attempt to look for notes to buy.

A number of these banks have probably responded to you in the same way. They are sayting that they either don’t have any non performing notes or that they don’t sell notes.

When one hears these objections, should we accept them as the truth or just blow by them and try other contacts?

Your Two Responses to the Question: Can I Buy Cash Flow Notes?”

Let’s review to the 2 possible situations you will be get:

1. We do not sell real estate notes.

2. Sorry, we do not have any non performing notes.

The first statment I might believe, but the second? No way.

If someone is telling you that they don’t sell non performing notes, I would say that their statement is about 25% correct. Maybe.

On the otherhand, if they are telling you that they don’t have any non performing notes, the likelihood that they are pulling your chain is about 99.9%.

What do you do? Find someone else to call at the bank.

Learning How to Buy Cash Flow Notes…How to Find Contacts

You can try contacting the CFO directly at the bank or you can use the corporate HQ number and ask for the head of secondary marketing. Then try to contact loss mitigation.

Always keep in mind that you can solve a problem in many ways. Don’t get discouraged when you are turned away, don’t let the first door shut stop you in your note buying pursuit.

How to Buy Cash Flow Notes – Will’s Tip on Finding Contacts

I want to share with you a tip that one of my students, Will, has shared with me. A tip on finding contacts, follow these steps.

1. http://www.thomas-law.com and select mortgage banker licenses

2. From there you can select the state and click on the link that says “mortgage lending division”

3. Click on the licensee records link

4. Select 82 licensed mortgage bankers

It’s that simple, now you have the principal contact info and emails for all your bank contacts! You can use this tool for all 50 state and start buying some cash flow notes!

Make your own success.

Below is a question I got asked recently. I thought this was valuable info, so I am sharing it with you here:

“I have been doing some reading on all the reasons why lenders would sell properties at big discounts…

What I want to know specifically is what criteria do lenders base their decision on when selling their mortgage notes at discounts. With focuses on LMREP, it would benefit me tremendously if I was selling my services based on their criterias”.

Here is my response: First of all make sure that you are using the correct terms when trying to express your points. You need to differentiate the difference between mortagage notes and properties. You mentioned both in your question.

You mention both in a question to a bank rep and if I were them, I’d immediately write you off as a knucklehead who doesn’t know a deed of trust from a deed and wouldn’t respond to any further emails or calls from you.

A Tip on Buying Mortgage Notes

Just a word of caution to bone up on your note lingo before you talk to the banks:

Remember that when you are talking to that key person when buying mortgage notes, you have only one chance to make a great impression.

How is that for wisdom?

A few reasons:

Institutional-Level Reasons to Sell Mortgage Notes:

a) banks in the process of merging, or posting quarter/annual financials and needs to get assets off its balance sheet. Quick way is to sell the notes

b) bank may have a “relationship” with the borrower, or there are extenuating circumstances.

c) in certain cases, the bank might now want to foreclose on borrowers because of the negative press they will get. These actions may affect their public image.

d) although the banks have no problem starting the foreclosure process, a lot of them do not want to carry our the actual foreclosure. When buying mortgage notes, you may see a lot a week away from foreclosure proceedings.

e) loan is upside down and doesn’t warrant recovery action/expense (small 1sts sub $20k on properties of similar value may never be foreclosed on by certain banks – great opportunities in buying mortgage notes present themselves in many cases)

f) In order to see what the market would pay for these loans, banks may price a part of its non performing book and send it out.

Reasons to Sell Mortgage Notes at the Individual Reps

a) Borrowers can be flaky, they won’t follow through on payments, or just unwilling to work with the bank. The loss mitigation rep does not want to work them anymore as well.

b) borrower is non-responsive, no contact

c) foreclosure processes in their state are too long

e) the rep doesn’t want to go above their head to get an approval for a write off or mortgage note sale. So they sell at their authroziation level or at the direct managers.

f) the rep might be shooting for their monthly bonus and sell off some mortgage notes to reach this. Sometimes it could just be a matter of meetin a monthly quota.

Hope this was useful to you.

Let me share something on how to buy REOs versus Non-Performing Notes with You.

A hard choice, I know.

I know a lot of people would wonder why they should buy non performing notes when they could buy real estate at such a low price.

Yes, REOs can be cheap.

And yes, you would be acquiring real property as opposed to a debt.

And, yes. You can get rid of it pretty quickly if you price it right. So why shouldn’t everyone drop everything they’re doing and buy REOs?

4 Risks Involved In Buying REOs:

1. Valuation

You must be precise with the value of the home, as well as the interior condition. When you have a non-performing note, you have several options in ways to turn your note investment into positive cash flow. (example: getting your borrower to make payments).

It’s quite another when you have a vacant property, trying to squeeze profit from your REO. It can obviously be done, but you should know your area values and your interior condition much better when buying REOs than when you’re buying notes.

2. Purchase Risks

They can be a time waster until you nail your sources! Usually you are dealing with 2-5 brokers deep in a chain, and at least one ubiquitous “attorney” who is a fraud and huckster claiming he or she is (not has, but “is”!) a “mandate” for someone else.

3. REOs-Deal Risks

A friend of mine just spent 2 months chasing one deal of 16 REOs. He just closed on 1 of them. All the others were pulled by the seller as the agents (all but 1 were listed) got the properties into contract.

Or he lost to another competitor because he had anywhere from 3 or more brokers between him and the seller. Out of the whole deal, the one REO not pulled was the one that wasn’t listed. When you are dealing with non performing note pools, the rate at which notes are pulled is a lot lower. (Ask me about the west coast pool I lost one of these days.)

4. Discount Risks

Discounts on REOs aren’t usually as good.

You can close on a note buying deal at a 30% discount and you will hear about pricing this low on a regular basis. REOs priced at this range are typically unheard of.

I don’t mean to be negative about REOs. All I am saying is know what you are getting into. Don’t listen to everything that you are hearing about REOs being the deals to invest in.

When it comes to buying a Madison Wisconsin home knowing what you want in yours may be difficult to define. However, although you may have some idea of what you want is easy. It is deciding on those things that are necessary and those which aren’t makes it a little more difficult.

First off if you have a family then you need to make the time and sit down and discuss what everybody wants from the new home. So you and everybody else should not only be deciding what it is you want from your new home but what it is in fact you need.

If you are not sure then you may find yourself ignoring those properties which in fact could turn out to be the home of your dreams. Below we offer some tips that may help you when trying to find the Madison Wisconsin home of your dreams.

Tip 1 – You need to make a list of all the items that you will need your new home to have. If therefore you need a 3 bedroom, 2 bathroom house put this at the top of your list. Also for those with children you may need to include the proviso that the home is close to good schools.

By being able to identify what you really need from your new Madison Wisconsin home then you can better convey this to your realtor. This will enable them to quickly identify properties that they feel are suitable and eliminate those that aren’t. Once you have listed the essential requirements then you are able to move on to those which aren’t.

Actually finding a home that meets all your needs and wants will not be that easy. In fact you will often find that there are plenty of others who are looking for what you want in the same price bracket as you. Certainly the smarter home owners have made vital changes to their homes in order that they are more able to meet their buyer’s requirements.

Tip 2 – It is vital that before you do actually start searching for your ideal home it is a good idea to having the funding in place first. This way you won’t end up in a situation where you lose out on the home of your dreams as you haven’t been able to get the funding in place quick enough. Certainly have your mortgage pre-approved will help to make the whole process of looking for and buying your dream Madison Wisconsin home so much easier.