So many brokers call with a ‘great note’ to sell us. Of course we welcome brokers who have listed a loan for sale on behalf of somebody who carried it back and we will honor all brokers agreements with note sellers. We pay out many thousands of dollars in commissions to brokers every year. Too often the ‘great’ note turns out to be a not-so-great note. If you’re a broker, it is going to be very helpful to get as much information before you call us to price out a note.
Normally when we are speaking with the note seller, we can ask a simple question such as ‘How much did you buy the property for prior to your sale of it?’ or “How long did you own the property before you sold it and carried back a note?’ We would be able to get an answer right away. When a broker or 3rd party calls on behalf of the note holder, they may not have thought to ask those questions before hand and just want to get a quick price from us.
If you are a broker, secure your note seller by a listing agreement, or even just a simple contract with them that states you have the exclusive right to market the note sellers loan. We are licensed by the Department of Real Estate and would never do anything to jepordize that license, we aren’t going to breach your agreement with the note seller, but we have questions that most likely you didn’t get the answer to and if your note seller is out of town or unavailable to answer them, its difficult to give you a firm commitment to buy the note you want to sell us. Most times we will need to speak to the note seller directly. Ask us to setup a conference call, of if that is not possible, we can e-mail you the questions we need answers to.
Nearly all properties have gone down in valuation over the last 3 years (at least 3). Prices have fallen more in some areas than others and yes there are the occasional exceptions where somebody added on to the property, or it was remodeled extensively / ‘rehabbed’, but most quotes brokers bring us are just properties that have sold in the last 3 years or so and of course have in reality gone down in value!
A good source of reference for residential property value is www.zillow.com . So many times I have quickly checked values with them, I now have tagged the web address in my favorites. Another place to go to take a look at most any property is to google the address. Google map streets has very good photos of nearly every address in the US. I also like to check to see if the Real Estate Taxes are paid up, you can go to the county tax collectors website and in many counties type in the address of the property and it comes up, unfortunately L.A. county you will need the assessor’s parcel number to get the information on the website, so instead you will have to call their toll free number (888) 807-2111 first to speak to a live person to give them the property address so they can look up the assessor’s number for you and they can tell you on the phone about the tax status, but if you would like it in writing (I would), you need to go to the website and type in the information to get a printout.
So now you have a photo of the property, a map of the area, comps of other similar properties, the tax status of the Real Estate Taxes, the last thing that would really help is a ‘property profile’. The profile gives you information on the property including zoning, square footage, a copy of the Deed to the property and a copy of the Deed of Trust you are selling! For most areas, you can just call up any major title company (First American Title / Fidelity National Title / Chicago Title), and ask for their customer service department (its free!), tell them you are a note broker and need a property profile on the property address that you listed your note on. They will fax or e-mail it to you at no charge. When we buy your deal, we order title insurance or an endorsement to the existing title policy and these title companies want our business (your business) so they have the customer service department at our (your) disposal.
These helpful tips can be used by anybody with access to a computer and telephone. It will sure make you look more professional as a broker when you have this additional information. Of course there is no substitute for getting in your car and inspecting the security of the loan yourself, calling local Realtors for an opinion of value of the property, obtaining all of the documentation regarding the loan, the escrow, the fire and title insurance policies, etc. But you can leave part of the job to us, or all of the job to us if you like. If you need assistance, feel free to call, click or fax us anytime.
BUYING NOTES IN TROUBLED TIMES
May 22nd, 2010During times where high quality notes are few and far between, there are ones out there that hold up even to the most discerning note buyer. This week we purchased a 1st trust deed loan on a luxury home in southern Orange County where the buyer placed such a large down payment, it was a no brainer to buy the note. The buyer sold his previous home and had over a million dollars from the proceeds, he found another home he wanted to buy and placed all of the million dollars and then some as a down payment on the new home of $1.4 million. The resulting loan for $370,000.00 at 7.5% interest for 3 years was snapped up by us in less than 4 days from start to finish. This is not a typical note, but it sometimes happens when a more mature home buyer wants a modest sized mortgage, so a large down payment is placed to make the payments low and plans to payoff the loan by the time your 65 years old is always a good thing.
Why didn’t the buyer just apply at a bank? They did! The buyer couldn’t show enough conventional income on his tax returns in order to qualify for a loan from a bank, even with the enormous cash down payment, they turned him down! Their credit was great, both the husband and wife were over 760 FICO, sometimes the situation lends itself to alternative financing because of the guidelines set forth by the bank regulators. The banks are back to basics in their lending. Its “tight money”. This is going to be the future of our business. Banks and lending institutions are restricted to lending to people who almost don’t need a loan, well lets say people that are well qualified for a loan, with high credit scores, tax returns that show all of their income, paycheck stubs and substantial cash down payments, if you are missing even one element to that formula, “no loan for you”. This is as it should be to have the banks stay out of trouble and stay out of our business, there are exceptions to the rules in my view, but banks don’t see it that way, at least not at this time, so in steps the privately arranged financing. Private, seller-assisted financing will only increase as time goes on. There should be more and more seller-carryback loans out there in the coming years. We would like to see those loans fully amortized, with due-on-sale clauses, late charge provisions and the taxes and insurance payments impounded. We are a buyer for quality, seller-assisted carryback 1st position loans, all day long.
Posted in Larry's comments on some of his recent deals. | 1 Comment »