mortagesandforeclosures

by Dean Engle

How to Buy Notes...You and Your Seller

Most of you have heard of Sun Tzus. He is a famous Chinese warrior and his main instructions to his soldiers before going into battle was know your enemy.

This same concept applies to note buying.

Know your seller should be the mantra for every note buyer (and broker for that matter!).

Why is this?

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.

How to Buy Notes - My Recent Bid Example

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.

And they've called you in order to find out if you want to buy their non-performing 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.

So I put in my 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.

Of course this made me suspicious so I continued to ask for more information. She replied that she was not at liberty to discuss anything more about the borrower.

There was something fishy going on with this note buying deal.

I have never been in this situation before, when dealing with one individual loan. The bank reps reaction was very odd.

How to Buy Notes - Tips when Talking to the Banker

I decided try a little exploratory language with her and called her back.

Does the borrower have a unique relationship with your bank?, I asked.

Absolutely, she immediately replied.

It grabbed my curiosity as I wonderered what was going on with this defaulted mortgage.

I was aware that she wouldn't reveal any information to me other than yes and no answers, but I kept probing.

And theres a reason why the bank isn't foreclosing in this case, correct? I asked.

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 more question. Would the bank be more open to selling this nonperforming note if they new what exit strategy I would be pursuing? Rather than bassed on price?

Yes, that is correct.

So what was going on in this note deal?

Well, what I learned in two more phone calls with the woman I was negotiating with at the Bank was that the borrower was extremely well connected in Salt Lake City political circles, and her ex-husband was a close friend of the banks President.

Foreclosing on her could create a political ruckus for the bank, it turned out. So the bank was exploring discreet options to rid itself of its non-performing loan - namely via a note sale to a 3rd party investor.

How to Buy Notes - The Lesson Learned

If you dont take the time to probe WHY the seller is looking to sell a loan, and the circumstances around the sale, you may completely miss the sellers key negotiating points on a transaction.

In this case, it wasnt price. It was what we were planning on doing to work out the note with the borrower. Price was much less of an issue.

How to Buy Notes - Action Items

1. Always try to understand WHY a bank wants to sell you a note or a pool of notes.

2. Figure out the negotiating points and what are the reasons why the bank is trying to sell their defaulted mortgage to you. It is usually one or more 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. Note buying exit strategies (certain banks prefer investors that only foreclose once they've exhausted other options)

So the next time you are taking to a bank about buying notes, remember these key points.

Itll make you that much better a note buying warrior!

About the Author:

Interested in learning more about the Note Buying Business? Watch Hours of FREE Training Videos here: How to Buy Bad Paper 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

Get all the information and photos:: http://mortgagewide.info/how-to-buy-notes-note-buying-knowing-your-enemies/