Posted by John Behle on March 29, 2008 at 18:12:20:
In Reply to: Re: The Last Seminar - July 21-25th 2008 posted by Abdenour Achab on March 29, 2008 at 05:21:21:
Massive amounts of forms for the note business is an illusion put together by companies that center around selling seminars but have little or no real experience in the business.
In the real business, I use a small handful of forms and they differ little from state to state. The concept of a lot of forms being needed didn't come into the business until John Stefanchick and Larry Pino decided to profit from selling a paper bootcamp.
Larry Pino had NO experience in the note business, but saw an opportunity for a course to be taught. He contacted John Stefanchick who had very, very little experience in the note business. Prior to that John was selling a course titled "Investing in Metropolitan Areas" on the seminar circuit and had only been at that for a short while.
Since Larry was an attorney, he added from after form after form to the course because legal forms seem to add value to people. Other institutions and individuals have done the same or duplicated or expanded on their forms. Most "Paper" bootcamps are a derivative or breakoff of that original seminar they began teaching in about 1989.
I began in the note business in 1977 and real estate in 1976. I began teaching people about notes in 1980 and formal two day seminars in 1982. "The Paper Game" book was published in 1982. I began teaching a 5 day paper bootcamp in 1985 or 1986. I was the first one to do so and coined the term "bootcamp" as it applied to paper seminars. I only charged $995 at the time and find the prices others charge for the lame amount of information provided to be disgusting - almost criminal.
That said, reality is few forms are used or needed in note investing.
Two forms I use commonly that are not absolutely needed, but helpful are a Note Information worksheet and a Yield Worksheet. But, when I began investing, a note file might include information on scratch paper, backs of envelopes, etc. I put together a form to orderly collect information and keep track of it as well as a form to keep track of calculations. Both are included in the forms in the course and explained in detail.
There are only two and sometimes three forms that are required in note investment. The first is an option or purchase agreement. Of course, I have bought many notes that have just had a short agreement sketched out or even a handshake agreement. I used different purchase contracts at first, but decided I liked an option agreement the best.
FORM ONE - Option to purchase
My option agreement serves the role of a purchase agreement even though it is structured as an option. I am a big - VERY big - believer in state approved forms. There are a couple reasons for that. One is that as a real estate broker since 1981 and agent since 1979, I have closely seen the development of laws and forms in my state. The forms “approved” by the state are throughly reviewed and carefully conform to local laws. Each paragraph is meaningful and essential. The second reason is that as a continuing education instructor for the state in the background, legal issues and use of the various legal forms I have seen even deeper how a state approved form can be closely tied to state law.
In my state and most others, there are no state approved forms related to discounted mortgage or note investment. So, my “option form” I use to purchase notes began with the state approved option form for real estate. I added some essential paragraphs related to verification of the terms of the note and the terms and balances of any underlying notes. I go through this form and its use throughly.
FORM TWO - Assignment of Trust Deed
Most states are Trust Deed states. Most of the others are Mortgage states. In every or almost every state, there is a state approved form for the assignment of Trust Deeds and/or Mortgages. My state is primarily a Trust Deed state so I use the state approved “Assignment of Trust Deed” form. Everyone can and should use their state approved forms. PERIOD.
To use a form from a course or seminar that does not apply to your state is far beyond foolish. It can be very dangerous in many ways. It can lead to severe legal problems and financial losses. That is one of the biggest dangers the students of the purveyors of paper seminars face.
The Assignment of Trust Deed form transfers the rights and powers contained in the “Trust Deed.” I discuss the use of assignment forms and how to find and use the proper form for your area, the type of note you are buying and how you are buying the note.
FORM THREE - Assignment of the Note
In a Trust Deed state, the note you are buying is usually a Trust Deed Note. In a Mortgage state, you buy a Mortgage Note. This is the I.O.U. or actual evidence of debt. In the bootcamp, I discuss Trust Deeds, Mortgages, Land Contracts and how to buy each type of note. The note can be transferred by an assignment. This can be a simple form or quite often no form at all. The note itself can be transferred and assigned with a simple acknowledgment on the actual note itself. It can be assigned just like a check is endorsed to another. Most of the time I use this method, so this third form - which is discussed in the course - is usually not used.
That is it. Those are the forms that are used in the real business.
Now as to the other issues. The paragraphs added to my option agreement as to the verification of the terms of the note I am buying and the terms of any underlying loans cover the issue of verification as far as the note seller is concerned. The fact that it is an option covers the potentiality of adverse or contrary information being discovered. I do not build into and would never advocate building into an agreement a price reduction. It is up to negotiation at that point depending on the circumstances. I am not bound to follow through on the option, but the seller is if I find the terms acceptable.
As far as verification of the terms with the payor, I approach that in a different way than many. There are quite a few notes I buy without any communication with the note payor at all. And, I like it and want it that way. It prevents the far too common “commission-dectomy” that occurs when a payor and beneficiary cut the potential note buyer out of the loop. I like to control the situation.
The important fact is to verify things - NOT how you verify them. Being quick and efficient is far more important than the methods used. FORMS CAN SLOW THINGS DOWN or even derail transactions. Many times a form cannot be verified in the manner someone likes and transactions die. I’ve seen deals delayed by months over forms that truly are NOT that important. Again, verifying things and finding out information is important - how that is done is not.
There are many ways to verify the current terms on underlying loans. There are many ways to verify title integrity, LTV ratios, etc. My commitment to NOT get tied to and tied up by forms is one of my strengths. Those students who remain flexible are those who make the greatest profits. I buy notes quicker than anyone I know. I buy good notes and my methods I teach work well.
Verification of down payment is not something I cover with a form. It is a minor factor that others view too highly. If I am buying a seasoned note, the current LTV is the most important factor. There are many different ways to verify information. I teach them in the seminar. Set forms and procedures may help some buyers to buy more and more mediocre notes. Flexibility allows the ability to buy much more profitable notes.
Let’s take an example of different styles and ways to view things. There is a particular note broker that raves about how he is the most successful note broker in the galaxy. I’m glad to hear there is one less person in this industry with a low self image, but I’d have to differ with his definition.
Brokering notes is similar to brokering real estate. For the world’s top agent in sales to claim to be the “world’s best”in real estate. Hundreds of extremely wealthy real estate investors might take exception to that definition. Donald Trump might be an example. I don’t think he has a real estate license and his profits have not come from sales but from buying. But, I would guarantee his success exceeds whoever might have brokered $400 million in real estate or notes.
A good note deal in the style I teach might equate to more income than a hard working broker makes in a year or in a lifetime. One of my articles describes a 1.4 million dollar profit from one bad note deal for example. Most note brokerage seminars, infomercials, etc. claim note brokerage incomes of $10,000 per note. Most professionals would state that is more than double what reality is. So, how many commissions on note deals would it take to equal the above example? Hold on, I need to open a spreadsheet for this one.
Looks like it would take 280 note deals to equal that one good investment.
I teach students to profit through many, many, many techniques and strategies in the note business. Others just try to teach how to work extremely hard to create some mediocre income through lots of commissions. My greatest profits are through notes that others would not buy, do not see the potential in or could not get to as quick as I do. I own the note quicker than most people return phone calls. When they reach the note owner - it is me.
I’ve been discussing the real world and the need for few forms and the fact that students should use state approved forms instead of those from seminar manuals. At the same time, in the back of the manual in an appendix, there are dozens and dozens of pages of sample forms developed by an attorney that helped teach some legal aspects of the note business. They are there available for reference and to become familiar with, though I make little reference to most of them in the seminar.
For example. The attorney developed a 17 page purchase agreement for notes. I have run across few sellers that would not be intimidated and run away from an agreement like that. I have a three page option agreement and that is all that is needed.
He also includes forms for buying partials. I teach students NOT to do partials in the manner that most people do in this industry. It is a short sighted and problematic way to do things. Other forms include things like agreements as to what happens in the case of an early payoff in a partial. Using a form like that is one of the most destructive ways to go about doing partials. Since most people in the industry have never seen past these narrow minded approaches to buying partials and poorly conceived agreements, many people in the industry will no longer do partials and many if not most funding sources will not touch them.
Yet, I was doing partials before anyone even coined that terminology. I do them the same way I did thirty years ago and they solve problems for sellers and provide above average profits for myself as an investor. I don’t face problems with foreclosure, early payoff, bankruptcies, etc. It’s also simpler to do, simpler for sellers to understand, simpler to market and achieves much better yields.
Hope that answers a few questions. If you have more, we can follow up. For now, I have a movie to go to. Have a great day, John
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