Tips and tricks for buying and brokering mortgage notes

The following tips and tricks for buying and or brokering mortgage notes are just some observations I’ve made throughout the years. They are in no particular order of suggestion implementation, nor by any means all-inclusive.

I do feel that if you put these suggestions into practice, they will help you become a better note buyer and/or note broker by helping you to close more deals.

So, I will just go ahead and list with several tips that immediately come to mind as of right now:

1. To generate leads for your note buying program, learn how to work purchased lists of note holders— it’s much more efficient than trying to mine the courthouse leads yourself. Then, for starters, shoot for (or assume) approximately a 2% conversion rate for direct mail (actual notes bought to mailings sent out during a given month). For example, you might conservatively figure on a grand- scale average of $3000 referral fee for every note brokered; that would equate to 20 notes closed out of every 1,000 mailings or $60,000 profit minus whatever it cost you to purchase the leads and send out the mailings.

2. Ally yourself with sources of cash to buy notes with by networking with other investors and setting yourself up with note broker programs offered through institutional note buyers– you never know when you’re going to need to raise cash in order to take advantage of a good potential investment or just see an opportunity to turn over a deal to someone else and make a quick profit.

3. Always try to establish why the note holder wants to sell and whether there is a specific amount of cash that he/she needs. You can then tailor your purchase offer accordingly. He may not need to part with the entire note and there are ways for you to return the note back to him after you collect x# of payments– while still getting him the upfront cash that he needs. If you get him exactly the amount of cash he needs without losing much or his principal, it may greatly increase your chances of buying at least a part of that note– and, here ‘s the clincher– many times, the note seller does not exercise the rights to take the note back and will end up selling you additional payments after that. In short, just give people what they want and need and then you will get what you want and need in the end— which is to buy more notes to amass a high cash flow. It’s that simple.

4. Set up your note buying qualification system, learn and trust this system and this will help you to exude confidence at all times in all dealings with note sellers. For example, if you use the same quote sheet or note prequalification checklist all the time, you will soon come to the realization that systematically working it will get all of the relevant upfront questions answered. If you’re good at talking to people, you will excel- and if you need work at talking to people, this will help you to gain the confidence that even if you do not know yet what you are doing, you are very definitely beyond the shadow of a doubt asking all of the right questions. Tell them very professionally that you will get back to them shortly. Then run the completed quote sheet by the note investor and see whether what you have there is saleable product or note.

Keep this in mind– the questions and process is always the same. The only difference is the people. And or the type of property the note is secured by. Granted, I am oversimplifying this a bit, as there are many different scenarios and surprises that may come up as the quoting or purchase process or due diligence moves forward, but you need to get the basic prequalifying down pat first for your note buying program because the due diligence comes later and that is a separate process.

5. If you’re just starting out as a note broker, As soon as you have a few quotes under your belt and you learn to recognize whether the note has potential, if it does be sure to always ask for copies of the mortgage, note and closing statement or settlement sheet (copies, not the originals at this point). Any serious note seller will get you these and if they do not immediately have them, let them know that the attorney who handled the closing will probably have them. If they balk or do not want to get you these documents, they are not serious and you need to just move on say goodbye and not waste any further time trying to buy a note that may never materialize.

6. At the outset of a conversation with what may be a potential note seller, when someone responds to your marketing, ask them: “Are you receiving payments on a note or mortgage now?” And if yes, the follow up question is “What are the payments and how many are there?” You will be surprised at how many calls you will get from people posing as note holders who are actually just trying to shop some cash flow they found online or somewhere and they are just pulling your chain to try and get a price. Or you will get calls from some people who are actually paying on a mortgage and looking to get out of it. Don’t ask me why they call us or why they think what we are doing is even remotely related to whatever kind of convoluted logic they are spewing out. Just stay on point with those two upfront questions and you will not end up wasting your time on nowhere calls.

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