Top Real Estate Articles

How to Buy Notes - A Note Buyers Dream…Understanding Your Borrower’s Needs

Mar 28, 2009 Real Estate Properties

One Lesson on How to Buy Notes

Its funny how the little things (so u think) are actually a big deal for your borrowers.

What am I saying?

I have two stories to share with you. They are about Natalie and Judy, 2 borrowers that were included in one of my portfolios.

A Story on How to Buy Notes…Introducing Natalie

My first example is about Natalie, she had a performing first mortgage that was included in the pool of non-performing notes that I purchased. Natalie was an ideal borrower, whose mortgage payment was due on the first of every month. She owed $93,000 and paid a monthly payment of $680 like clockwork, the only thing was that the payment was received around the 5th of every month.

So, when I called Natalie for the first time, guess what her biggest request was? She asked me sheepishly if I might be able to push her payment due date back from the 1st of the month to the 7th of the month so that her paycheck had time to clear in her account!

What does this have to do with make money as an investor who is learning how to buy notes?

Because of one simple thingin the market today, and just in human relations in generalthere is one fact when it come to the financial relations of people.

It’s sometimes the little things that matter the most.

As an investor in non-performing notes, when a borrower like Natalie asks me if she could pay her mortgage a few days after her due datehow did you think I responded?

I said of course, what date works for you?

You mean, you CAN do that for me? She sounded incredulous.

Thats all it takes, just me asking?

Wow. Eye-opener for me in this business of how to buy notes, I tell you. That something as simple as changing a due date could make such an impact.

So of course, my next step involved asking Natalie if I could refinance her real estate note. I asked her if I could put her in touch with a specialist that worked on my team, and because she now trusted me.she provided all the information that I asked from her.

A Lesson Learned on How to Buy Notes

If you actually listen to what your borrower is saying, and can determine their needs, you can create a relationship based on the fact that you helped them. Anytime that you help someone in need, they automatically feel an obligation. Use that feeling of obligation to your advantage.

Another Example of How to Buy Notes, Judy’s Story

I have a 2nd story that I want to share with you. This one is more recent.

Judy is from Tennessee, she has the cutest accent that Ive ever heard.

Her accent is so sweet, you cant help but smile every time you hear her voice.

And when Judy spoke, what do you think she said in regards to her defaulted mortgage?

Dean, I owe you all a HUGE thank you for paying my taxes.

My first thought wasWhat?…taxes?? So of course, I looked through my file to see what I did. I quickly realized that after running my tax check (something we do towards the last business day of the month), it was in my best benefit to pay her taxes current.

How to Buy Notes-Benefiting Both Yourself and Your Borrower

We advanced it to her loan obviously (property taxes advanced by you can be charged to the principal of the loan), and since her delinquent note rate is pretty high, we get to accrue interest on that advance. So from my perspective, it was both protecting our interest as well as making a smart business decision that would make us money.

And from hers, it was the sweetest and nicest thing we could have done, because we were looking out for her. The actual words she used with me were: Dean, I want to thank you for helping me keep my house. Ive been here 20 years and now Im finally caught up thanks to the patience youve had with me.

I was floored. Absolutely amazed at how a simple decision to protect our real estate note position, pay the taxes owing so they wouldnt fall further delinquent and threaten a tax deed sale (Tennessees a tax deed state, not a tax lien state - more on that in a later post), could be perceived by the borrower as a generous move to protect her own interests.)

You can only imagine how the rest of my day went, it was wonderful! Nothing feels better than to sit there and receive such gratitude over the phone. It really touched me. In the business of buying notes, experiences like this dont happen very much.

And I also learned today how useful it would be to explain advances to pay taxes and insurance for any other borrower in terms of helping to protect their home and to help them to protect their home.

A situation where everyone wins doesnt seem so clich now does it?

Not when you look at what Natalie and Judy taught me about the experiences in how to buy notes.

Tags: buy notes, discounted mortgages, Foreclosures, how to buy notes, learn how to buy notes, Mortgages, Non Performing Notes, note buying, profit from buying notes, Real Estate Notes, Real Estate Properties

Buying Notes-Where’s the List of Banks That Sell?

Mar 26, 2009 Real Estate Properties

Investing in Notes-The Most Common Question

What is the most common question asked? At least 58 different people have wondered the same thing that I did when I completed my first course on How to Buy Notes 4 years ago. Where is the list of banks that sell?

That was the only question I had for my instructor, Mark. By the time my 3 day workshop was done, I was so eager to get a hold of the list. I didn’t understand why he was waiting so long to give it to us. Why couldn’t he have just handed it out at the beginning of the course?

The “Magic Binder” - Banks That Sell Notes

When Mark handed it to me, I wolfed it down. I skimmed every page for nuggets, details, of every bank that “the Master” knew. And here’s what happened. Here’s what I did with that information…Exactly … nothing. Why? Let me walk you through what happened after the course was over.

a) For one thing, a good number of the banks werent in business anymore. (If Indymac was a bank I wanted to pursue, I would probably have a hard time trying to deal with the FDIC).

b) Most of the phone numbers were useless. They were just main numbers, the same numbers that I could find through a google search or in the phone book.

c) Some of the banks weren’t selling their notes anymore

d) There were banks that weren’t on the list that actually did sell notes and defaulted mortgages

e) Once I had the name of the bank itself, I still had to make my presentation to the right person - and that had more to do with what I needed to talk to the banker about than about whether the bank sold notes or not

And now…what do you think happened to the magic binder of banks that sell? It is still propped up in my bookcase and hasn’t been touched.

So What’s my Point on Buying Notes here?

The list is huge. There are so many banks that sell notes and defaulted mortgages.

And it’s based, in almost all situations, on who you know.

In fact, the people that know the list inside and out more than anyone are … Let’s think about this for a minute:

a) less than 3 dozen banks and lenders that sell notes.

b) People that I know in this industry buy from less than 20 lenders. These are people who run a $1-50 million dollar fund. A lot of them have no more than 10 people that they purchase from. (some advice, good brokers are a gem. Treat them well!)

c) An individual that I worked with in the past became very wealthy from one relationship. He spent 7 years buying notes from The Associates. They were his only seller.

d) Everyone who’s a “professional” note buyer has one thing in common… and here’s the secret so listen carefully:

The Secret To A Note Buyer’s Success

They can talk the talk and walk the walk. The professionals not only know exactly what to ask for, they know what to do with the information once they’ve received it. You get that? What you do with what you know is more important.

Now, imagine yourself with one of the most successful Note Buyers (the Zen Master of Note Buying). The both of you are on the top floor of a New York City building admiring the view of the lower east side.

It is an amazing view…all the noise of the city is muted. She asks you to join her onto the fire escape so you climb through the window. All of a sudden you can hear all the sirens and honking cars in the noisy background. She says to you…”Look….that building right there…there they are”. You have a puzzled look on your face.

“Who is there?” you ask.

“They are,” she answers. “The ones you are looking for.”

You look out to where her arm is pointing, but her arm is moving in a gentle arc all the way from your far left to your far right. Now, you’re really clueless. You’re about ready to ask her to explain what she means, but she cuts you off.

“I can sense your doubts.” she tells me.

“I have a story for you”.

She shares a story with you about her master and the time he taught her where to look for the Fountains of Perpetual Notes. She tells me the four words that he spoke to her…”Look for the suffering”.

“So now,” she whispers to you, her arm still pointing over the buildings lighting up New York’s night sky, “I tell you.

“Look for the suffering and there you will find the Fountains of Perpetual Notes.”

She leads you back into the building.

Find the Fountain of perpetual notes. Look for the suffering.

All I’m looking for is a list of banks that sell notes!

How are Suffering and Buying Notes Related?

There is suffering everywhere.

There will be a few lender that don’t have non performing assets to sell.

But there are a lot of lenders that are selling notes right now. To both investors they know and investors they dont know.

Lenders are even being forces to sell notes to investors that they don’t know.

There are many investors that are calling up those lenders asking to be put on the “list” of approved investors. If I were to give you the list of banks that I know sell, it would be like telling you to go pick a number and to stand in line at Katz’s deli at lunch rush-hour on a weekday.

So just go and “Look for the suffering”.

Approach everything with the thought that every lender sells. Don’t ask if the sell…but rather ask to whom they sell.

Tags: bank notes, buying notes, Foreclosures, homes, how to buy notes, learn how to buy notes, mortgage notes, Mortgages, note buying, profit from notes, Real Estate Properties

Loan Modificatons-A Solution For Your Non Performing Mortgage?

Mar 16, 2009 Real Estate Properties

Loan modifications, specifically principal write-downs will be the answer to many people’s mortgage needs.

An interesting solution.

The Solution For Negative Equity - Loan Modifications

The FHA insurance package which will insure $300B of new mortgages for borrowers that are in “negative equity” positions is part of the Hope for Homeowners initiative which was passed by Congress in July.

Negative equity, meaning that most of these properties are worth less than the balance of the loans.

Well, the borrower has to qualify for the loan modification with a 31% or lower DTI ratio, at least 6 payments made and none of them late.

What happens if the borrowers meet all the guidelines? (And keep in my mind, that most of these are non-performing mortgages. And if I had to guess what the debt to income ratio on average in 2007 was, it would most likely be around 40-45%).

Loan Modifications - Who Qualifies?

The answer is: Very few people.

When the program became available, out of 49 people applying, zero applications were approved.

NonPerforming Mortgages Included In FHA Secure Program

The FHA Secure program had a total of 203 applicants. Out of that number on 49 applications were approved.

In California around the same time, a Notice of Default was filed on about 1,300 homes.

If the H4H program needs more time, can’t we just wait?

Yes.

Just keep in mind that if lenders are going to participate in these 90% principle reduction loan modifications, they will be looking for federal backing. H4H included.

So, while everyone’s waiting for the good news on H4H to come out, why not get your wallets out and make an offer on those 49 notes that were just turned down?

There will be a whole lot more non-performing mortgages (to buy) where those come from.

Tags: banking, buying non performing notes, buying notes, home, home loans, how to buy non performing notes, Investments, learn how to buy notes, load modifications, Mortgages, Non Performing Notes, note buying, notes, Real Estate Properties, where to find notes