As a principal or DIRECT authorized principal representative, I will share this information with you. If you are an intermediary, don't bother to ask.
Principals, you've got to have and prove you've got deep pockets to play in this game. Take what you are given to start, then negotiate for what you want later.
I'm going to take a leap of faith and assume if you're here, you already know what the prchasing process is... BUT, if you don't or are foggy about the industry process and only way it will get done, I'll take a minute to give you some BG (BackGround) info.
Please bear in mind, I put this site together to educate. The instruments discussed should only be considered by those who have consulted with their financial advisor and fully understand these topics.
Right here, right now, let's dispell the internet myth that "...large REO tapes of up to $1b are readily available."
"So...show me what you've got in a tape. And Show me the Seller or LOA" "People like this are not buyers they are oxygen theives trust me ask two of my account executives that just wasted a whole week with a big group that did nothing but shop suppliers."
Ask yourself this: If you were the owner of a valuable asset, would you throw it out on the internet to see if anyone would buy it? I didn't think so.
And neither will any bank or servicer.
There exists a process or "protocol" which must be adhered to. If you don't yet know the rules or think you're someone special to which such rules don't apply, have fun wasting your time. Unless you're "hooked up" to the source as direct as possible, you're going to be involved in the most hellalcious exercise in futility of your life known as..."the daisy chain".
Or as my partner refers to it (TSI) "Three Stooges Investing"
There are a number of ways or methods in which to use these instruments to make money. Lots of money. Each instrument is a complex but easy to comprehend maze of intricacies. As you read through this information, you will have questions. Questions that I invite you to ask after following protocol.
REO: "Real Estate Owned". The liquidation of "Bulk" REO assets is typically handled by an "Asset Manager". Most times internally to the institution or servicer.
They will typically deliver a pool ($10 Million to $100+ Million) of properties at 55% to 80% (depending on area, even steeper discounts) of the true value including fees. While the pricing has been about that percentage, getting to the list of properties is another story. The reason the pools are elusive, is simply because they are purchased by well positioned investors before anyone "sees" the list.
Buyers must be ready to pull the trigger at a moment's notice on REO packages (1-2 hours max for commitment of LOI,12 hours for deposit into escrow to hold inventory)That means we need to have our buyer's educated and well prepared.
The REO process is extremely competitive so "newbie" buyers/investors to the game will have great difficulties in securing packages if they don't know "how" the deals work and are structured which is where I come in.
The buyer/signatory MUST be identified upfront on the initial note order form or letter of intent. The seller's must know "who" they are potentially doing business with from the start because of the U.S. Patriot Act so if we cannot get past this key buyer ID disclosure issue with involved buyers we cannot move forward.
Buyer ID is crucial and the first step as the seller will be to check their "watch lists” for certain organizations, names and parties that they are prohibited from doing business with under law. Secondary to that critical item is the new "internal" watch lists the banks have in place due to the unbelievable level of fraud occurring in the arena so the involved parties requesting product for purchase “MUST” be disclosed.
Realistic buyers are a must. We need to ensure we are working with buyers who clearly understand the current market and price points.
Much of the frustration occurs when large buyers with deep pockets puff out their chest and demand to get to the front of the line to dictate what the seller will give them and at what price point. They want high-end everything for little or nothing.
Yes, we are in a correcting real estate market but buyer's must be realistic. This type of attitude and behavior will not fly with the banks and selling sources. These types of buyers/investors will never secure product and will likely get themselves blacklisted.
This is one of the "hot" topics with bankers and private sellers right now. They are sick and tired of arrogant buyers, uneducated brokers and consultants.
Financial performance - last but not least is necessary. The buyer's MUST have their finances in order and be able to prove it.
Cash is king and cash buyer's trump buyer's that use credit. Hard money loans from shakey lending sources for newbie buyer's will not impress the sellers and will likely lessen the buyer's chance of securing a REO or notepool.
We all must remember at the end of the day the Seller decides "who" they will do business with period. They are trading trust deeds for cash and they choose who they will conduct business with. Unfortunately, the buyer's and involved parties are not in the driver's seat on this one as there are more buyer's than seller's right now. So let's all be clear on that...the seller's are in control.
NPN: "Non Performing Notes".
Very simply, these are individual or "pools" of residential or commercial mortgages. Once the borrower fails to meet the promise to pay on the note, the note becomes "non-performing". These instruments can be accessed via similar channels as REO portfolios.
Now for the "Catch 22"..."The" Protocol.
That's just it...there isn't just ONE protocol.
Each seller has their own.
Then the paperwork starts flying all over the place - everybody wants "to be protected".
My advice? Forewarn your clients ahead of time that each seller has their own legal department which means their own set of protocol. Which means thier own "Buyer Profile" form and their own "LOI". In addition, your buyer will need to "proof up".
Typically called a "POF" or proof of funds. A simple statement from the buyers financial institution indicating they do in fact have the required liquid funds to close the transaction. No account numbers necessary. If your deal gets this far, it will then be buyer and seller on the phone hammering out thier deal. So, just relax.
And speaking of the seller...
if you're trying to get next to them...It's like this... you have an exotic Italian car. The best mechanic in town is the only person you let service your car. In fact, every exotic car owner in town wants him to service their car.
This many clients keep him extremely busy. So busy in fact, they don't speak directly with him. They make an appointment with his assistant. The work gets done. Everybody's happy.
That's the game.
CA Partnership is filled all CA properties sold!
Nationwide partners being sought: Available 300+ Properties mixed states available / 300+ Non performing notes available