You’ve probably heard of Sun Tzu’s (the famed Chinese
warrior) instruction to his soldiers to “know your
enemy” before going into battle.

Well the same is true with note buying.

“Know your seller” should be the mantra for every
note buyer (and broker for that matter!).

Why?

Because if you don’t “know” your note seller then you
might be entering a negotiation with them without
having any idea of their key negotiating points.

Let me give you an how-to-buy-notes example,
based on a note we recently bid on:

A bank has a 1st mortgage on a single family home in
Salt Lake City that they want to sell.

The borrower hasn’t paid on the note in over 120
days, and the note matured over 2 months ago, so the
whole loan could be called due.

The bank hasn’t served the borrower with a
foreclosure notice.

And they’ve called you in order to find out if you
want to buy their non-performing note and mortgage.

I looked at this loan first from the standpoint of
price – how much could I offer for it. We pulled a
title report and a BPO and looked at comps that a
local realtor provided to us.

And we put in our bid.

My rep at the bank hinted that she would need
approval from a committee of senior staff at the bank.

But she was very cagey about answering any of my
questions about where she needed pricing to be in
order to sell, and what the status of the borrower was.

I became a little suspicious and tried probing for
more information, but she immediately clammed up and
said: “I’m not at liberty to say more about our
borrower.”

Something was up in this note buying deal.

It was odd that the bank rep would react that way -
in fact it was the first time I’d seen that kind of a
response to an individual loan before.

How-to-Buy-Notes Tips when talking to the Banker

So I called her back again, and tried a little
“exploratory” language with her.

“Would it be safe to say that the bank has a unique
relationship with this borrower?” I asked her?

“Absolutely,” she immediately replied.

I was curious – what was going on here
in this defaulted mortgage deal?!

So I kept fishing, understanding full well that she
couldn’t reveal any information to me, but that she
wasn’t opposed to my pressing for more information as
long as she could answer in yes or no terms.

“And there’s a reason why the bank isn’t foreclosing
in this case, correct?” I asked.

“Yes,” she answered simply.

“And you’re probably not at liberty to tell me, but
this sounds like it’s a difficult relationship for the
bank to foreclose on, is that correct?”

“Absolutely,” she answered again. “I can’t tell you
any more than that.”

“One last question,” I asked. “Is it safe to assume
that the bank may be more open to a bid on this loan
that clarifies what exit strategy we’ll be pursuing
with the borrower rather than an actual purchase price
for the nonperforming note?”

“Yes,” she answered briefly again. “That would be
correct.”

So what was going on in this note deal?

Well, what I learned in two more phone calls with the
woman I was negotiating with at the Bank was that the
borrower was extremely well connected in Salt Lake
City political circles, and her ex-husband was a close
friend of the bank’s President.

Foreclosing on her could create a political ruckus
for the bank, it turned out. So the bank was exploring
discreet options to rid itself of its non-performing
loan – namely via a note sale to a 3rd party investor.

——————————————————-
* The lesson you should take from this How to Buy Notes example *
——————————————————–

If you don’t take the time to probe WHY the seller is
looking to sell a loan, and the circumstances around
the sale, you may completely miss the seller’s key
negotiating points on a transaction.

In this case, it wasn’t price. It was what we were planning
on doing to work out the note with the borrower.
Price was much less of an issue.

Your how to buy Notes Action Items from this:

1)    Always try to understand WHY a bank wants to sell
you a note or a pool of notes.

2)    Try to find out what the key negotiating points
are for the bank for selling you this defaulted mortgage

Usually it’s one or more of the
following:

a.    Price

b.    Speed with which you can close

c.    Your ability to close (in other words, the Bank
cares more about WHETHER you can close rather than
what price they Buyer is offering for the discounted note)

d.    Your note buying exit strategies (in other words, the
bank may determine whether to accept a bid or not based
on what kind of Buyer you are – are you a foreclosure
operation with no attempt at loan modifications, for
example?)

So keep all this in mind when you’re next talking to
a Bank to buy notes.

It’ll make you that much better a note buying warrior!

Talk soon,

Dean
PS: If you enjoy this kind of no-fluff info, you will be delighted
with our A-Z NoteBuying Course. It’s full of it!
(And our insane 33%-off Special will not go on forever. Hint, hint.)

And to say it in the words of  Josh Gray
from UpgradedProperties.com in Chandler, AZ, who put the
following (unsolicitedly, I might add) on our forum:

“Dean, I truly appreciate all the information you have provided in
the A-Z Course. I have read ALL the competition’s materials and
it comes nowhere near yours.”

Would you like to turn anyone you know (like
me), who has something to say, into a chipmunk?

There’s a F.REE piece of software called MySpeed
(offered at www.enounce.com) that allows you to
control the speed at which you hear/see (any flash)
videos. (And without changing the pitch!)

Absolutely great for spending less time listening,
and more time doing.

Here’s a way to shrink 16 hours of video, like our
A-Z Note Buying Course, hint, hint) into *10* hours.
-> Without killing the audio quality or changing your
learning experience in any way.

Matter of fact: at that faster speed, you don’t have
time to ’space out’ while listening, so not only will you
take the info in faster, but you will also be more
alert/learn better.

It just turns me into a chipmunk.

Go ahead … give it a try … you know you always
wanted to turn someone into a little furry cartoon
character.

Install the software (sorry, XP & Vista only) and
watch one of our videos (like this real investment club presentation)
to test it.

MASSIVE time saver!

And if nothings else, you got a good laugh out of it.

Dean

PS: There is a similar piece of software that has the
same effect on AUDIO MP3s: www.fasteraudio.com
(Lets you convert your MP3s into ‘faster audio’ MP3s.
Also useful!)

PPS: For Nerds only:
Learn to READ faster with software like www.readfaster.com
or www.acereader.com (Both excellent products, btw.)

=================================

* Check out our NEW FORUM: www.NoteBuyingProfits.com/forum

* Ready to REALLY get down & dirty?
‘A-Z Profiting from Discounted Mortgages Business-in-a-Box‘.
-> 16 hours+ of Video Training, 23 pages of checklists, a complete 8-Week Roadmap,
an extensive Table of Contents for quick reference, plus TONS of Bonuses.
[===> You can check out Hours of F.REE Training Videos of the actual Course Content HERE.]

* ‘PRIVATE ACCESS CLUB’ (PAC) – Test-Drive it for F.REE for 30 Days!
Get Your Questions Answered LIVE & get Ongoing Support & Training!
Conference Calls/Webinars, Interviews with Industry Insiders (Bank Reps, Top Note Brokers, etc.),
Real-Life Case Studies, Role-Playing, Members-Only Forum, and ‘HOT SEATS’ to get coaching on
Your Deals/Business Challenges, and more

* Questions? Chances are I already answered them at www.NoteBuyingProfits.com/blog.
(Use the ‘Search’ feature or click on the ‘FAQ’ category on the right to see them all!)

If you really want to know the in’s and out’s of how to talk to banks to buy defaulted mortgages aka nonperforming notes, why not hear it direct from the horse’s mouth, so-to-speak?
 
I mean direct from a banker.

Make that TWO bankers.
 
That’s right….

Join me tomorrow (Wednesday) at 8pm EST, 5pm PST for a conversation with TWO bankers, Saprina and Janet (some of you may remember Janet from the ‘A-Z Profiting from Defaulted Mortgages Business-in-a-Box’ Course, others may have heard Saprina before in our Private Access Club – here is a brief snippet from our last call with Saprina to give you a taste).
 
So if you want to know anything about the following, then don’t miss out tomorrow:

* What are the first words to say to a banker to buy defaulted mortgages?

* Does it matter what language you use?

* The 3 Things never to say to a banker when buying defaulted mortgages

* The 2 Things always to say to a banker when buying defaulted loans
 
And if you want to test your phone calling skills, a few of you will get the opportunity to try a sample conversation with Janet and Saprina!
 
This could be the time that you perfect that banker call you’ve been dreading for so long.
 
Don’t miss it!

Short Sales aren’t going that well, aren’t they?

It’s NOTE BUYING TIME NOW.
 
Dean

PS: Again, here is the link to be on the webinar/call tomorrow.
(If you see this after the fact: no worries – all recorded!)

A critical skill when buying notes aka defaulted loans aka defaulted mortgages aka nonperforming notes aka ‘bad paper’… all the SAME THING!

Actually, a critical skill, no matter what kind if investing you are doing… be it doing Short Sales, or any other types of Foreclosure Real Estate Investing!

Check out this short Video, which is an excerpt of a 20-min on the subject.

It’s a FREE bonus as part of the ‘A-Z Profiting from Defaulted Mortgages Business-in-a-Box’ 16 hour+ Training Course.

Wow – what a wild week last week, and it’s continuing this week.

Will it be $700 Billion, or $150 Billion as some lawmakers are suggesting?

Will Treasury get its way?

And then, if it passes, will that suddenly dry up the ENTIRE supply of non-performing bank notes out there?

ABSOLUTELY NOT.

The bad news is that a lot of banks are actually going to be in trouble and have to recapitalize themselves if they have to sell their assets, even at Treasury’s anticipated prices.

In fact, you should be “sharpening your pencil” as they say in the note buying industry, in order to get ready to start bidding on paper.

Whether it comes from Treasury, or whether banks themselves engage in “price discovery” in order to see what their assets are really worth, I anticipate there will be a lot more paper in the market over the next year.

I put together a short VIDEO with my take on the subject for you, where I am also pointing out the webinar we are doing tonight in the Private Access Club on ‘How to get Your Note Buying Business UP-AND-RUNNING within 8 Weeks!’ (No worries, if you are reading this later… the REPLAY will be up in the members area! And, hint, hint, there is a 30-day FREE trial for you…)

I will take you by the hand through an 8-Week Roadmap I put together for you, where I am laying out a CLEAR PATH for you, from A-Z. Step by Step. Done for you.

(Currently, we are putting on a new LIVE ‘how to buy nonperforming notes’ webinar every Wednesday at 5pm PST/8pm EST – and you can check that and ALL THE REPLAYS of past webinars for 30 days for a FREE here…)

Anyway, here is another 12-min Video Segment from the 90-min Interview we had with Saprina on buying nonperforming notes.

‘How to buy Real Estate Notes‘ Topics covered in this segment:

- Did you ever ask a note buyer for Proof of Funds?
- On GIFTS  to bank reps…
- % Single Note Buyers vs. Portfolio Note Buyers she dealt with
- Would you tell the Defaulted Mortgage Investor in what RANGE his bid would need to be?
- Comp structure of Bank Reps
- Why Note Sales are MUCH easier than SHORT SALES…
- Which Position Name to ask for when trying to locate the Bank Rep in charge of selling Non-performing Notes within the Bank
- INSIDER TIP: find a (former?) Bank Rep YOURSELF to consult for you!
- The KEY TO SUCCESS when buying nonperforming notes from banks

And that’s only 12 minutes… We have the full 90-min Interview, LOADED with REAL-LIFE ‘how to buy nonperforming notes’ information, in the Private Access Club members area (as well as LOTS of other great Video/Call recordings in the PAC Archives)!

Hope you enjoy this no-nonsense info on how to buy Real Estate Notes.

Good.

You’ll want to meet Saprina.

She’s a veteran – a former seller of Notes at one of the largest national banks.

And I’ve asked her to share tips on how to get YOU in the door with banks.

She was a mentor for me on my first note purchase. The one I made $96,500 on that I’ve highlighted on www.notebuyingprofits.com (first Video at top of that page).

If she can help me, she can help you.

Some of the questions I’ll be asking her:

• How did new investors/note buyers introduce themselves to you and “get approved”?
• What are the biggest “no-no’s” you look for when interviewing non-performing notes investors – any words that give away certain info that “kills” their chances to buy from you?
• Did you ever ask note buyers for references?
• Are there “blacklists” of non-performing note buyers? If so, how are they used in the industry today?
• Would you receive gifts from a real estate investor? What kinds?
• Who’s your best investor of all time? Why?
• Do banks proactively go looking for investors?
• Did you sell single non-performing notes?

You’ll have a chance to ask her additional questions yourself TODAY AT 5pm PST/8pm EST.
(For Private Access Club (PAC) members, the recording will be available later inside of PAC.)

Join me for this unique opportunity, today at 5pm PST/8pm EST.

Register now for this how-to-buy-defaulted-mortgages Special Interview.

Webinar spots are limited.

And, as a special goodie & pre-taste: watch ANOTHER interview I did before with another veteran bank rep – straight out of my ‘A-Z Profiting from Discounted Mortgages Business-in-a-Box‘ Course. (You can get the complete interview FOR FREE, incl. online video, Audio MP3 & iPod video version, by putting in your name & email at the top right of this blog!)

However, I just finished the “Closing on a Note” Course for you – 4 hours and 23 minutes of no-nonsense note buying training and review divided into 4 parts (or 4 DVD’s if you prefer the hard copies).

And, as usual, watch the first hour (in this case: 90 min) for FREE!

Take a peek:

A couple of things to keep an eye out for (don’t laugh at my lame attempt at a music video – it’s “inspired by actual events” as they say in the movies):

• Fades – what they are and how to use them (minute 23:06 in part 1)
• Pulling apart the $405 million pool (minute 38:35 in part 1)
• How to tell between the Banker who’s the “Easy & All” vs. the one who’s the “Some & High” (minute 6:50 in part 2)
• Deconstructing your Competition – better known as the Johnny-Clegg-note-entertainment-bonanza – turn up the volume on your computer speakers and enjoy (minute 19:11 in part 2)
• The 43-minute drilldown on the one document you sign in a note purchase (starting at minute 2:59 in part 3)
• Boarding a loan – the A-Z checklist (minute 6:07 in part 4)

Enjoy. This is the final of the 4 note buying courses that I’ve just finished.

16 hours chock-full of no-fluff information, training, and insights to give you a leg up on the competition as you launch or grow your note buying business.

Note: I will very soon release most the material I created in one big package. Enter: ‘A-Z Buying Non-performing Bank Notes Business-in-a-Box’ – coming up shortly…
Actually, hint: you can check out the offer already if you click on the order link on the ‘Closing on a Note’ Course page. (One could argue I am giving away the farm here…) Plus, there will be even more valuable goodies in there that are not mentioned yet on the order link. So stay tuned for that.

Talk soon,

Dean

So here’s the question, which Brian K. posted in a comment on an earlier post, and which I’ve received numerous times over the past two weeks in my free 20-minute sessions …

“If I need money to buy a note, should I chase down notes or secure money first?”

So in order to answer this one, let me tell you a little story about Dean Engle and his early non-performing note purchases:

1. $23,500 – 1st note I bought. It’s there in black and white on the homepage (first video). All from my own money
2. $54,000 – 2nd note I bought. I didn’t have enough for this one and I didn’t have any other sources of financing lined up so I convinced my wife that she’d do better buying me a note and getting 13% on her investment, plus 2 points, than holding her Cisco options which were underwater (!)
3. $26,000 – 3rd note I bought. I invested out of my self-directed IRA
4. $14,500 – 4th note I bought. Also from my self-directed IRA
5. $23,000 – 5th note I bought – and my 2nd quick flip. I sold it for $30,000 within a month, but funded it from my self-directed IRA (had it under contract before I purchased it, but couldn’t close it in a single transaction so had to come out of pocket)
6. $8,750 – 6th note I bought. None of my own money – brokered deal on which I made $2,000 (YOU DON’T NEED MONEY FOR ALL NOTE DEALS!!!!)
7. $66,500 – 7th note I bought. I used hard money for this one – so I put up 25% of the note cost ($16,625) and the investor put up the rest, at 4 points and 13%
8. $12,500 – 8th note I bought. From my self-directed IRA
9. $153,550 – 9th note I bought. Used the hard money lender again that I’d used on my 7th note. Same terms
10. $7,000 – 10th note I bought. From my self-directed IRA

I want to point out three very important points about this list of notes:

1) You can buy small notes, for very little money
2) It doesn’t have to be your own money
3) You don’t need to have ANY money – you can broker notes or bird-dog notes (see #6 in the list)

I learned very slowly that I could go out and get money from someone to fund my notes. And here’s who that person was who funded that first note (note #7): a foreclosure auction buyer – (maybe you call them trustee sale buyers in your state).

Here are the three reasons why I like auction buyers when you’re starting out note buying:

• They know more about notes and non-performing notes than most lenders (after all, they’re dealing with banks and trustees and foreclosures all the time in their business)
• They can place a value on a property faster than anyone. Usually they’ll have completed a driveby of the property (if they even need to do one – some of those guys know their county so well they can judge value just based on a street address!)
• They can make a decision to fund a deal very quickly – as long as you have the right paperwork to give them, they can usually fund the next day if you need it

So how would I answer Brian K? With one of TWO recommendations:

1. Decide you want to be a bird-dog, and broker notes – to get it started.

OR

2. If you want to BUY your own notes, then line up the money first. Then chase the notes.

If you know you have no more than $50,000 available yourself, then you can chase notes worth less than $50,000.

But as I just suggested to Rick the other day (Rick’s in north Georgia chasing notes himself, and admits he has about $100,000 available of his own cash), why not line someone up at a 25-75% split and “leverage” yourself up?

Rick’s $100,000 could then be worth $400,000 in note purchases.

AND he gets to learn from someone with deep experience in buying foreclosures if he chooses his hard money lender right (you learn from every deal and every relationship)

Ah, but I hear you asking me: “so how do I convince my hard money lender to lend me money?!”

It’s simple – one of my Oklahoma readers used the Basic How-to-Raise-Money toolkit file – you know the one with those 2 deal summaries I wrote up on the southern California note and the Portland Oregon note? (If you haven’t already: watch my FREE 84-min Video on How-to-Raise-Money NOW!)

Well they used that EXACT document and showed it to a handful of target investors and said: “This is what we’re looking to do, would you fund something like this if we came to you asking for your money?”

That little document opened doors for them. They’re in talks with a number of those investors now. Why? Because it lays out a sample deal in simple terms that any investor will understand and appreciate.

And think of it from the investor’s perspective – especially the auction buyer’s perspective – they MAY look at you and think “hmmm, this is cool – I can use [YOUR NAME HERE] to learn something about bank notes, which I’m hearing all about right now. Maybe he can go find them, I can fund them, and we can work them out together.”

If you set it up right, and pick your partner right, this could be a very nice win-win relationship!

So, ACTION STEP: find out the next foreclosure trustee sale or sheriff sale or auction in your county, and GO THERE. And see who you meet. Strike up a conversation, say you’re starting to buy notes and looking for hard money.

I’ll be amazed if you don’t meet at least 1 investor who’s interested in hearing more about note buying!

And ACTION STEP #2: go out there and start Finding Notes and if you find one you don’t have the money for – BROKER it to someone who does. At least you can make some good money! (We pay 1% of the acquisition cost, for example, for notes or pools smaller than $1million – not that I’m recommending you to just come to us with notes – but rather to give you an idea of what you might be able to charge other note buyers, at a minimum.

That’s the equivalent of $1,000 on a relatively small $100,000 note. Better than working at the office!