Posted by John Behle on November 07, 2000 at 19:38:09:
A student had a less than favorable first experience being strung along by some "broke brokers". The following was my answer and some hints to sell notes more successfully.
One of the main reasons I take my time with the cash flow forum, answering questions, emails, etc. is that I am so appalled by the DECREASING level of professionalism and expertise in the note industry.
Everything has to be in context as you know. Once or twice I've mentioned among other sources that notes can be listed on ANN. Many many times, I've encouraged some due-diligence on the potential buyers and pointed out the "BROKE-BROKER SYNDROME" - that you just experienced. Just a couple days ago Myself, Bud and some others posted some direct contact websites to the national funding sources.
Usually I'm pretty harsh on the "broke-brokers" and those that have ONLY had one of the high priced seminars as their education. Bottom line is few have any clue what they are doing and they are taught the tactics that caused you grief.
I advocate again and again the advantages of buying notes and discourage people from selling them. There's a couple reasons. One is that there are greater profits in just buying notes for your own behalf and it can avoid some of the laws and licensing.
As far as creating seller financing to finance real estate deals I advocate to first check for cheaper conventional or BC type funding. 90% of the time you can get what you need cheaper in that arena.
Creating notes is wonderful - if you have a relationship with a funding source. That is why I encourage finding the buyer first, checking them out and then creating notes in cooperation with what they will buy. It is usually best to deal with one of the old time local sources - unless you go direct to one of the national companies. Most will work with anyone and believe me - you know more than many of the people they deal with. I like the local buyers - when I sell a note or need funding which is rare. Usually I end up turning to the institutions when we need money for a deal. It takes a little while to develop, but the way to really do the note business or use paper in acquisition or sales of properties is to put together private financing.
How do you check out buyers? Well, as you mentioned, the "I'll get back to you" can be a sign. When they say they have 100 or 200 funding sources, that is another. Ask them how long they've been in the business. A pro won't be offended. If someone were to ask me, I'd just know they've run into some of the one week wonders out there.
Ask how long it takes them to fund a deal. Mr. Buyer, If I gave you a full package on this deal today, how long would it take. Do you use your own funds? Are you working with local or national investors?
There's no way to know for sure, except that if you are working with someone like American Note, Metro, Associates, etc. then you know they have the experience (especially American Note - my students).
Local buyers. Ask how long they've been in the business. Visit their office. Check the business licenses - how many? how long? No office? probably not a player. Check the ads in the paper. When were they incorporated? Check archives on old papers. Check their company name for deals at the County Recorder's office. Just a few ways, nothing set in stone, but you need to know the broker/funding source first. Avoid the brokers if you can go direct to the funding source, but A GOOD BROKER (just as in real estate) can be extremely valuable. I'm not against brokers, just those that don't have a clue what they are doing.
Anyway, you've run into one of the problems of the note industry that both annoys and motivates me. It is possible to avoid the problems.