Become an expert in the discount mortgage market.
The business of flipping discount mortgages requires some easily acquired knowledge and skills but requires little or no cash. That is one of the many reasons the discount mortgage business needs serious consideration. Let me first explain what a “Mortgage Flip” is for those of you who are not familiar with this concept.
Step #1–Find someone who has sold a property and as part of the transaction has taken back a mortgage. For any number of reasons (probably because you told them it was possible), they are now willing to sell that mortgage if they can end up with some cash.
Step #2–Find a buyer for that mortgage.
Step #3–Facilitate the transaction.
Step #4— Pocket the difference between what the seller wanted and what the buyer would pay. This may be somewhat simplified, but there is not a lot more to it once you know what you are doing.
There is only one absolute necessity to get started, and that is a telephone. As long as you can get to a phone, you are in business. This business knows no geographical boundaries. I have successfully closed transactions from Hawaii to Alaska to Pennsylvania. The best part is you can do it all without ever leaving your chair.This business offers tremendous freedom. I work out of my house because it suits my lifestyle. I can roll out of bed when I want, and I am at work.
A Very Simple Business
This is a very simple business. You find someone who has something they probably do not want and match them with someone who wants what they have and you get paid handsomely for that service. What is nice is that you can do this without ever leaving home.
There is one final benefit that I would like to mention, and it is an important one. Two things are happening as you become more experienced and close more discount mortgage transactions.
1) You become an expert in discount mortgages. By working with the institutional buyers, you learn to tell the difference between good and bad transactions, what documents you need, what research needs to be done, etc. In other words, you are being taught all the intricacies of the business by experts.
(2) The best part is while you are learning you are getting paid. So, when a really good mortgage comes along, you are in a position to invest in that mortgage for your personal portfolio at rates of return other people do not even dream about. This is the way you create wealth. It does not get any better than that!
Below is ALL the information you need to hunt down the treasures. I guarantee that NO one else is doing this or know how to do this.
To begin, you need to understand what is a “note holder.”
A NOTE HOLDER is any individual or company that has sold a property and is receiving payments directly from the buyer. For many reasons, the NOTE HOLDER has chosen not to go through a conventional lending institution. The NOTE HOLDER receives payments usually on a monthly basis and does not receive a “one lump” payment.
In many cases, the NOTE HOLDER is motivated to sell their note to receive a large amount at one time instead of having to “service” the note such as hiring an attorney to collect if the buyer falls behind on payments which happens quite regularly.
Also in many cases, the NOTE HOLDER usually does not want to owner-finance.
Something unpredicted comes-up;
People have difficulty in getting a loan from a conventional lending institution for various reasons.
* Bad credit * Un-paid credit cards * Past bankruptcy * Defaulted loans * Unpaid college loans * Divorce proceedings * Too much debt * Low credit scores
TIME VERSUS MONEY
Let’s say that an individual sells his/her property and takes back a mortgage. They are now the NOTE HOLDER.
The property has been sold for $100,000 with a 10% interest for 30 years
That would be a total of 360 payments at roughly $1,000 a month
360 payments of $1,000 @ 10% = $360,000 total payout in 30 years
You contact the NOTE HOLDER and offer $92,000 cash at closing for their note.
They counter back with “what about the $360,000 total???
You say, “Remember when you stuck one nickel in a coke machine for a coke 20 years ago”???
“Well, today you stick ten nickels in that Coke machine for the same 12 ounces Coke.”
THAT is what time versus money means!
Most often they get the point!
WHAT TO LOOK FOR
When trying to find people who are currently holding Owner-Financed Notes/Mortgages,
There are several ways to do it, and it can at first be quite confusing.
When entering a county courthouse, go directly to the County Clerk’s or Recorder’s office.
This is the office in every county courthouse where all property records are filed.
The first step is to locate the OPR records, (Official Public Records).
Then find the INDEXES to the LAND RECORDS within the OPR
The land records INDEXES include all the documents that are filed about Real Property or Real Estate.
There are several names for the document you are looking for.
- Trust Deed
Once you have located the OPR INDEXES, there will be several types of documents listed in it.
- Warranty deeds
- Oil, Gas, Mineral leases
- Lis Pendis
- UCCs, Uniform Commercial Codes
- Deeds-Of-Trust, Mortgages, Trust Deeds, Notes or Contracts
- Deeds-of-Trust to secure assumption
- Mechanics liens
- Trustee’s Deeds
- Mechanic’s lien affidavits
- Substitute Trustees deeds
- And many, many more types of documents.
What you are looking for are Deeds-Of-Trust, Mortgages, Trust Deeds, Notes or Contracts
Please note: you do NOT want Deeds-Of-Trust to Secure Assumption or Assumption deeds. These are almost always filed when there is a divorce, and one spouse assumes the obligation of the payments. They are almost always bank loans, and one spouse is staying in the house and assumes the conventional mortgage payments to the bank.
When you find the Deeds-Of-Trust, Mortgage, Trust Deed or Note INDEXES, this is the list where you want to start your search.
There are three ways that these documents are filed in the INDEXES in almost all county courthouses nationwide.
PERSON MAKING THE PAYMENTS ACTUAL NOTE HOLDER
PERSON MAKING THE PAYMENTS ACTUAL NOTE HOLDER
PERSON MAKING THE PAYMENTS ACTUAL NOTE HOLDER
When you scan down, the column marked INDIRECT, REVERSE OR GRANTEE in the index you are looking for,
- NAMES OF PEOPLE, i.e. Jim R Johnson
- COMPANIES i.e.,Joe’s Battery Shop,
- LLC, Limited Liability Company i.e., GK Investments LLC
- LP. Limited Partnership, i.e., Robert’s Rentals LP
- INV. Investment Companies, i.e.,Whitewater Investment Company
- LTD. Limited Corporation. i.e.,Sunnybrook Farms LTD.
- P/S Partnerships, i.e., Jones & Hendricks p/s
- INC. Cornerstone Corporation Inc.
- And of course Individual Names of people.
You DO NOT want:
- Credit Unions
- Mortgage Companies
- Savings & Loans
- Any other Financial Institution
TYPES OF DOCUMENT BOOKS
If your county is not on a computer system, here are the best ways to look up people holding owner-financed notes.
1. THE DAILY REGISTER OF INSTRUMENTS FILED
This is an excellent way to research owner-financed note holders. It is usually found on the front desk of any courthouse you go to. It is exactly that, a daily register of instruments filed. It is usually a very large book and has several columns.
Look for the column marked GRANTEE, DIRECT, REVERSE.
Then scroll down. You will see several S & Ls, Mortgage Companies and Banks listed.
As you scroll down, you will see an individual’s name or, LP, INC., PS, etc. THIS IS WHAT YOU ARE LOOKING FOR.
Usually to the right will be a book/page number, also called liber/page number.
Find the corresponding book go to the designated page and you will find a Deed-Of-Trust/Mortgage there with several pages.
THE VERY FIRST PAGE on all deeds-of-trusts, Mortgages, etc. will have three names.
- The first name always is the grantor or the person making the payments. It is ALWAYS on the very top of the page.
- The second name down is always the trustee’s name.
- Just below the trustee’s name you will find the lenders/beneficiary’s name and address
THIS IS THE NAME YOU ARE LOOKING FOR
This is the person who holds the Note/Mortgage and is receiving the payments.
The address of the person holding the note is just below it. In a few cases, the address of the lender will be on the very last page marked “RETURN TO.”
Just below the lender’s name and address is the amount of the note/mortgage.
This is NOT the sales price of the property; it is the amount loaned to the buyer after the down payment.
You can get the following information from the first page of the deed-of-trust/Mortgage
1. Lenders full name
2. Complete address
3. Exact $$$ amt.
4. File Date
5. Document number
6. Buyer’s full name for future re-financing
Texas is what is called a non-disclosure state so the terms, monthly payment amounts. % rate etc. is not disclosed.
That information in a promissory note that is not filed, but the lender will have this at home. This pertains to Texas and other “non-disclosure” states as well. Your state may be a “full disclosure” state, and the Deed-of-trust or Mortgage may contain all the information.
If the county clerk does not keep a daily register on file, which is very rare, then ask for;
2. Deed-of-Trust/Mortgage books.
Very few counties have this any more, but if they do, it will be of great help since all deeds-of-trust/Mortgages will be filed together. If the county courthouse has neither the Daily Register nor the Deed-of-Trust/Mortgage books, you will have to go to:
3. General Land Records.
This is the most difficult way to research the information you want. All of the Documents that are filed will be “lumped together, ” and you will have to look at all of them to weed out Deeds-Of-Trusts or Mortgages. If the county you are working in has a computer system, you are very much in luck. This is by far the easiest way to research the information you want.
4. Computer System
Several different companies sell their computer systems to the counties nationwide, ut they are also very similar in how they operate. You should be able to “cull-out” only the Deeds-Of-Trust/Mortgages, Notes and Contracts to look at. Most courthouses will not let you plug-in a laptop computer, so the best method is to
The reason the buyer’s name, ( the person making the payments), is important is that you may in the future want to approach them about re-financing their note for the equity they have built up.
5. ON-LINE RESEARCH
There are several companies on-line, but you usually have to pay to view the documents. The best company is always free and is called
NETRONLINE PUBLIC RECORDS. When you get to the site, you will find a map of the United States. Put the arrow on the state you will want to research and click. The counties of that state will appear on the left. Scroll down to see if the county you want to research is on-line. You can tell this because it will say to the right;
1. Go to Data On-line
2. No Data Available
An example of what to expect is:
Texas has 254 counties but only around 25 are on-line, and they are usually the largest counties. This is the easiest way to research since you don’t have to go to the county courthouse, but also, several other people will be getting the same information, so it is always best to pick a smaller county to work in person, (POP 100,000+). These counties usually have not been “picked over” by other researchers/brokers, and many will not take the time to go to the courthouse.
There are different ways to search for each county. Some require more or less information. Most times you do a search by typing in the type of instrument you are looking up. You will always need to choose the type of instrument you are searching. ie; DEEDS-OF-TRUST, MORTGAGES, CONTRACTS.
Most of the searches require a date, so you would use the starting date of 3 years back. (JG Wentworth and other companies recommend going back no farther than 3 years. People move, addresses change, and the note may have been satisfied or even foreclosed).
When you are going through names, and you come across privately held mortgages, you will have to open the document to get the information you need. You will be able to actually view the original document by downloading either Java Script or Acrobat reader.
For the most part, you will have to figure out how that county works. Each one always has a “how to” search page. You will want to click on that and go from there.
TELEPHONE NUMBER LOOK-UP
There are several ways to look up telephone numbers of the person how is holding the NOTE/MORTGAGE.
Always check the copyright date to make sure the search engine is up to date.
From experience, I have found that you can usually get 1 accurate, verifiable phone number for about every 3 you look up.
The best ones are:
- Yahoo people search
- White pages.com
Please note: If you choose to call the NOTE HOLDER at home, ask to speak directly to the NOTE HOLDER. Experience shows that other members of the household may have no idea what you are talking about. If the person who is holding the note is not at home, it is always best to find a time when they will be at home and contact them directly then.
In summary, the best and most reliable way to get names of current note holders is always directly from the county clerk’s/recorders document search at the county courthouse. It is fast, reliable and assures you that the information you retrieve is always true and correct.
Go with a Pro
I highly recommend that you flip loans only to professional institutional mortgage buyers. There are several reasons for this. Professional buyers put up all the money, do almost all the work and take all the risk. As far as I’m concerned that is all the reason you need to be in this business. The discount mortgage business has dramatically changed in the last few years when more and more institutional buyers entered the market. My best guesstimate is that my primary institutional sources are buying in the range of over 40 million dollars worth of mortgages per month. If you would like me to partner with you on deals, you can submit your deals to me at www.CashForYourNote.US
Some of the commercial buyers make you conditional offers on the loans you bring to them, as long as you provide them with information such as loan amount, terms of the loan, number of payments made, number of payments remaining, etc. None of this is very difficult.
When the loan seller accepts your offer (what the note buyer has offered less your profit), it is now your job to collect the necessary information such as copies of the mortgage, the note, settlement sheet, etc. After you have collected the necessary information the commercial buyer then takes over and does all the things you do not know how to do. They order credit reports, do title searches, order appraisals, prepare all the settlement documents and a lot of other things.
Best of all they fund the transaction and pay you the difference between what they offered for the loan and what you offered the loan seller. For example, if they were willing to pay $100,000 for a mortgage and the note seller was willing to accept $95,000 your profit would be $5,000. They really do not care how much you make. I suggest that you remain reasonable, do not try to get rich on every deal and you will make your fair share of transactions.
When Things Go Awry
Things do not always go as planned. There are instances when the institutional buyer discovers that there are problems with the transaction. These problems range from innocent mistakes to outright fraud by the note seller (can you imagine such a thing?). What happens now? Who gets stuck with all those expenses that were incurred along the line when the deal breaks down? Guess what! The commercial note buyer does, as long as they agreed to this in advance. Now that is really a good deal!
Another recommendation I would make is to start this business part time. This is a business that has a way of growing slowly but steadily if you will just stick with it. Starting part time has a way of reducing the pressure and the need of immediate results. In this business instant success is the exception and not the rule regardless of what some of the TV gurus would lead you to believe.
If you have any follow-up questions, please contact me at any time. I will be happy to assist you in any I can. Remember, If you would like me to partner with you on deals, you can submit your deals to me at www.CashForYourNote.US
MORE WAYS TO FIND NOTES
There are some very cheap ways to get your name before larger groups of people to let them know that you buy notes. To begin, how many pieces of mail do you personally send each month? I suspect that if you keep a tally, you will find that it is a larger number than you think. I have a label that says that I pay cash for mortgages and attach it to the back of every piece of mail that goes out of here except Christmas cards. They go on the electric bill, the phone bill, business letters, notes to friends and so on. I intend to ask some of my out-of-town friends if they will place them on the back of their mail as well. I may be able to develop some out- of-town market possibilities that way.
Another cheap way is the “I HAVE MONEY” slip. This is a small piece of paper that simply says I have money to invest in mortgage notes. I will take a weekend drive and stop by real estate offices. I ask the receptionist if I can put one in each of the agent’s mailboxes. So far, I have never been refused since I show her a copy and tell her that I am an investor and that I can help her agents close difficult transactions. I also hand them out at real estate seminars, investment club meetings and anywhere else there is a group of people.
There are several mortgage broker’s receptionists who keep them on their desk for customers to pick up. This is not in conflict with the broker’s business but rather a help to him. I often use it instead of a business card. I also will include it in other things that I mail if it makes any potential business sense. Any time you or someone you know is making a mailing, the envelope, postage, and labor are already paid for. Why not piggyback your piece of mail with it?
Did you ever notice that brochures or other merchandise are often included in your American Express or Amoco Oil bills? It’s cheap and effective. The way I prepare these is to type four copies of the message on a single sheet of paper, take it to the local copy shop and run off 500 copies. That costs me about $20 and produces 2,000 pieces after I cut them on the copy shop paper cutter. That is a penny each and darn cheap advertising. I have never tried putting advertising on car windshields in the parking lot of a shopping center but these slips might work for that, too. I assume that type of advertising must work since a lot of people do it.
In a recent article, I mentioned a number of categories of people who know where the notes are, including estate attorneys, settlement attorneys, and CPAs. For each category of person, there should be an association or some other group that holds meetings and publishes a newsletter. It would probably be an excellent idea to get to know someone who belongs to these groups and arrange to attend as a guest, be a guest speaker or to advertise in their newsletter. When you look at the number of such people in your community, they should keep you busy if you get to know them and get them to remember you when they find a deal. As discussed above, you might even do some piggyback mailings to their members via their newsletter mailings. You might even volunteer to contribute something toward their postage to get it done. It doesn’t take very many successful transactions to pay for that effort. You might want to change the copy a bit to offer a “Free Quote” or a “Free Consultation” to those that have a note to sell. There are hundreds of little ways that we can get the word out on a daily basis right along with the rest of our daily activities.
With these and all the other possible ways to get the word out, the real secret is a plan of CONSISTENT ACTIVITY and a COMMITMENT to carry it out. Commit to a certain number of mailings per week, a certain number of telephone contacts per week an a certain number of “found transactions” per month. A resource as simple as your yellow pages will show you the attorneys, CPAs, financial planners. etc. who operate in your geographic area. Call them. Mail to them. Have lunch with them. NETWORK, NETWORK, NETWORK and make yourself famous for buying notes. Again, this is a “build your business” business, not a get rich quick scheme. Build it right and the payday is great!!
Should You Advertise For Notes?
Advertising in newspapers has been generally unproductive and expensive for me. Any successful advertising I have heard of takes the form of a repetitive campaign in the same publications. These are typically small local newspapers or organizational publications such a religious, fraternal, and legal publication, etc. How about an ad in a retirement-oriented publication since many retirees are likely to hold notes?
As a matter of fact, one local Mortgage Broker advertises exclusively in a specialty yellow pages called the Shepherd’s Guide. Theoretically, only “Good Christian suppliers” are allowed to advertise in the book. It is distributed entirely through area churches. He gets all of his business, with implied endorsement, through this one advertisement. It is modestly priced at about $250 per year and has a circulation of about 70,000 families. (Editor’s Note: Don’t advertise in any “specialty directory” unless you can honestly say you belong there. To do otherwise is not only dishonest, it will actually hurt your business as people discover they’ve been deceived).
What About The Yellow Pages?
I can also add that the standard telephone company yellow pages is NOT the place to advertise. Again, be judicious with any advertising unless you can determine the strong likelihood of a payoff. The Yellow Pages can be extremely expensive.
25% Of My Business Comes From This One Sentence
End every conversation with “By the way, did I ever tell you that I buy notes and mortgages?” Probably at least 25% of my business comes through this. Try this sentence in every conversation. Those can be very profitable words and the best possible advertising.
Start A Data Base
There are many more creative ways out there to find notes: Bulletin boards (physical and computer), wearing T-shirts with “I pay cash for notes” printed on them, bumper stickers, magnetic door signs and more. Clearly, in an imperfect market, it is up to you to let the public know that you buy notes. It is also important to remember that the note holder who is not motivated to sell today may become motivated next month or next year. That translates to the need to keep them reminded of our interest. Start a data base of note holders and drop them a reminder in the mail from time to time. Your marketing plan should certainly include a consistent follow-up activity.
HERE IS BROCHURE COPY TO INCLUDE IN YOUR MAILINGS TO REALTORS, HAND OUT AT OPEN HOUSES, MINI-SEMINARS YOU DO AT THEIR OFFICES, ETC. EXPLAINING...
How A Mortgage Can Sell A Property!
The use of a private seller carryback mortgage (or deed of trust) to enable a property to sell quickly and profitably is one of the most dynamic and best-kept secrets in real estate today.
The benefits to the seller are immense: an immediate all-cash sale without having to pay any points or fees and without having to wait for (and hope the buyer passes!) the lengthy loan process.
The buyer receives financing at attractive terms without paying any points or fees or going through a drawn-out qualification process.
Private mortgages or trust deeds thus make sense for the seller, buyer — and the agent!
Best of all, VERY FEW AGENTS KNOW HOW TO DO THIS. It’s not hard to learn, it’s just that they have never been told about the concept. Yet it is one of the most POWERFUL WAYS TO SELL A PROPERTY.
How does it work?
We are interested in transactions involving a buyer’s down payment and a seller-held first or sometimes a second mortgage or trust deed. In other words, the seller agrees to receive monthly payments for their remaining equity after the down payment. There is no long wait for a lender to process paperwork, there are no fees or points anyone has to pay, the process can be done very quickly.
We contract to purchase that mortgage or trust deed from the seller and they get cash, not monthly payments.
How does the seller know that the mortgage/trust deed will be purchased?
We sign a legal contract with the seller obligating us to purchase it. The seller knows what he or she will receive for the mortgage or trust deed before he or she even sells the property.
Is the mortgage sold at a discount?
Yes, but our policy is to always strive to keep it to a minimum.
We never charge any points, fees or other expenses; our quote is always exactly what the seller will receive.
Remember that when seller financing is involved, the process is much quicker and smoother than dealing with a financial institution — and much more likely to close!
What we can pay for a particular mortgage or trust deed is of course determined by a number of factors. The seller knows what he or she will receive for the mortgage or trust deed before he or she even sells the property.
We pay the highest cash possible to the property seller for the mortgage or trust deed.
Just give us a call and we will furnish you with several alternatives that may expedite the sale of your listings.
How To Find Notes And Earn Referral Fees
Thank you for inquiring about our program to pay you generous referral fees for finding private mortgages and other valuable notes.
You don’t need to know anything about mortgages or finance to participate. All you need is the willingness to work!
Here are some techniques that will get you started finding notes. Once you start using them, people will call you with notes. Just ask them the questions exactly as they’re written on the enclosed Note Information Form, write down the answers and fax the form to us. We’ll take it from there, calling you to let you know if we’ll buy the note and how much we’ll be paying you if we do (normally we’ll pay you 2% of what we pay – so if we buy the note for, say, $20,000, you get $400).
Most of the calls you’ll get will be about real estate notes – mortgages or trust deeds people are receiving payments on. Sometimes you’ll hear from lottery winners or annuity holders. What you need to ask them is on the top of the Note Information Form.
WHAT WE CAN BUY:
¦ Mortgages or trust deeds where the caller is RECEIVING the payments.
¦ Lottery winnings.
¦ Insurance annuities.
WHAT WE CANNOT BUY:
¦ Mortgages or trust deeds where the property buyer put no money down.
¦ Promissory or signature notes not secured by real estate.
¦ Notes secured only by equipment, cars, mobile homes, etc. with no real estate.
On the next page is our Referral Agreement. It simply says we’ll pay you for every note you find that we buy. In return, all we ask is that when you call us about a note you don’t call any other buyers about that note. THERE IS ABSOLUTELY NO COST OR OBLIGATION, AND YOU CAN CHANGE YOUR MIND ANYTIME. YOU ARE IN TOTAL CONTROL OF WHETHER OR NOT YOU PARTICIPATE.
Finding notes takes an investment of your time and/or your money. If you have money but don’t have a lot of time, you can simply place advertisements in lots of newspapers and do quite well over the long term. If you have more time than money and are willing to work hard, you can still be successful. There are over 100 ways to find notes. Here are some of the better methods:
Online Ads: An easy way to find notes is to place your own ads in the classified section of as many newspapers as you can. Here’s one that works well:
*** CASH *** QUICK ***
For your mortgage. No fees. Call (your phone number)
It’s inexpensive and it makes the phone ring. The drawback is that you’ll have to explain to many callers that they can’t sell the mortgage they’re PAYING on, but that might be preferable to spending the extra money on a larger ad to explain it (a lot of them would call anyway). Or, you might try an ad such as:
If you sold your property and are RECEIVING payments on a mortgage, I will buy that mortgage for CASH! Call —
(Use trust deed or contract, as appropriate for your state).
Also mention that you buy annuities and lottery winnings in your ad.
Put your ads where people will see them. If you have the funds, try display ads in the sports or comics section. If you can’t afford that, use the big papers sparingly (Sundays only) and concentrate on the small-to-medium sized newspapers. Try out-of-town papers, too, especially if you live in a place where you see lots of competition from other note buyers.
Don’t forget the “shoppers,” those free all-classified ad papers (the Thrifty Nickel, Penny Saver, etc.). Ads in shoppers are cheap and can be effective, but you have to run them for months to gert results.
The secret to finding notes is PATIENCE. Frankly, you won’t get many calls, just because the percentage of people who own notes isn’t very high. The more papers you advertise in day after day, the more calls you’ll get. Keep running your ads, week after week. Rural, small and medium-sized papers can be ideal – they’re cheap and you have no competition. A good criterion is this: If you’ve located no notes after two months in a larger daily paper, 6 months in a small town daily or 1 year in a weekly, drop the ad for 6 months and then try again. If you just hit those averages, you are doing just fine.
What will you say when people call? Just use the enclosed Note Information Form. Ask the questions on it, copy down the information and fax or mail it into us. Tell them someone will get back to them if they ask questions you can’t answer.
Networking: If you’re going to be an active note finder you have to let people know about you. It’s a long process before you get results, and the principle of “out of sight, out of mind” applies. You have to keep reminding people that you’re out there waiting for notes. Obviously, you should concentrate your efforts on people who are in a position to bring notes your way, primarily real estate agents and brokers, title company employees, bank trust officers and bank loan officers, and attorneys with a real estate practice.
Look for advertisements placed by real estate agencies promoting their top producers. These are the leaders in the local real estate community. Call them and tell them you’re looking for “owner financed” notes and ask them to call you with any they know about, either now or in the future. You can even offer them a modest referral commission, say $100 for every note they bring you that is purchased (when you’re making $500 or more for one phone call to the note owner and a fax to us, paying the agent $100 is smart!). Note that in some cases real estate agents are prohibited from receiving such commissions, but that is their decision, not yours.
Follow-up with a brief letter and enclose your card – or, better yet, your own Rolodex card! You could have some color Rolodex cards printed with “CASH FOR NOTES” on the tab, and your name, phone number and other information on the card, and hand them out to real estate agents and others. Keep in touch with these folks with a letter every couple of months and it will begin to pay off.
Make a habit of dropping in on every open house you see, look around a little bit, and then get the conversation with the agent around to your real purpose: let him or she know you buy notes. Be sure to leave them with your card (or Rolodex card) that indicates you buy notes — in fact, give them several to pass around their office. Follow up your open house visits with a phone call or personal letter to the agents, thanking them for their time and reminding them you buy notes. Ask them to tell other agents about you, and send more cards they can pass around the office and post on the bulletin board.
Networking shouldn’t be restricted to real estate agents. Attorneys, accountants, title company officials and bankers often have notes crossing their desk. Use the personal contacts you already have with these people to let them know you are interested in notes. A tasteful letter indicating the same, mailed to names you find in legal directories at the library or simply culled from the phone book, may produce results. Your letter must be low-key and professional if you expect results.
The Bulletin Board Method: You can always put up little signs on community bulletin boards advertising that you buy notes. Remember that the stores, community centers, and other establishments that permit notices remove them on a regular basis (such as every two weeks). It becomes almost a full-time job just to keep your notices up. If you’re going to do this, you’re eventually going to have to hire someone like a high school student to do the legwork.
This technique has one great advantage: you can do it yourself for free. Therefore, it’s a way you can get started this afternoon with no up-front investment. Be sure you handwrite your ad and use the same wording advised for your newspaper ads. Handwritten ads are much less threatening than printed ones; simply write it out with a black felt-tip pen and have it reproduced on index cards at a quick print shop. Put up your cards with a stapler, which is much faster and less expensive than thumbtacks. Print “cash for mortgages” and your phone number on tabs they can tear off.
Again, this is a method that requires patience. You have to keep putting your notices back up and keep working at the program. This is really a supplement to your other efforts and should not be your only method. The downside to the bulletin board method is that the response will be so poor that you could be discouraged from notes altogether, which would be a disaster. If you try this, convince yourself not to expect any response at all. Then you might be pleasantly surprised.
The Courthouse: One method of finding notes is to research property sales at the county courthouse. You’ll be looking for people who have sold the property and the buyers are making the payments to them. The seller’s name and address should appear on the records and you can contact them via postcard offering to buy their notes. This is an expensive and time-consuming technique but it sometimes can pay off.
On the following page is the Referral Commission Agreement for new Associates and the Note Information Form. Just copy the Agreement, sign and return it and you’re on your way (it’s all free, and you can cancel at any time with no obligations whatever).
Make several copies of the Note Information Form. When someone calls you with a note, just ask the questions on the form, fill it out, and tell the caller someone
BROKER’S NAME: ____________________________
BROKER’S FAX / EMAIL (____)__________________________
Tell Us About The Property – What is the address of the property securing the note? ________________________________________
Does the note payor live there? _____
(If not) Is it currently rented? _____ For how much? $_______
What kind of property is it? (i.e., single family home, condo, duplex, apt. bldg., lot /land, etc.)______________
Describe the property & neighborhood in detail _______________________________________________________________________________________________________________
What was the sale price of the property? $_________________
What was the sale date? ____________
How much cash did the buyer put down? $__________
How much was the 1st mortgage? $_________
If there is a current appraisal on the property how much did it appraise for? $________ When was it done?_____
If there is no current appraisal, how much is the property worth today? $______________
Tell Us About The Mortgage (Trust Deed or Contract)
Is the mortgage you want to sell a 1st mortgage? Yes ___ No ___
(If Yes, skip the next 4 lines)
What is the name of the lender holding the 1st mortgage? ________________________________
Is it a (check one) FHA mortgage ___ VA___ Conventional ___ Private ___
What is the original amount of the 1st mortgage? $__________
Current balance? $____________ Interest rate ? ___%
Monthly payment ? $__________
Does this include taxes & insurance?____
What was the original balance of the mortgage you want to sell? $_______ Current balance? $_______
How long is the mortgage originally written for?__________ What interest rate? ____%
How much are the payments? $________ per ____ Are they current?___
If not, how far behind? ____
What was the date of the first payment? __________ When is the next payment due? _______
How many payments have been made? _____
How many remain? ____ If a balloon payment will be due, how much is it? $___________
What is the date the balloon is due? ________
Tell Us About The Payor
How often have they been late? ____
What is the payor’s employment? __________________________
What is their name(s), address and (if known) S.S. No.? ______________________________________
Tell Us About Yourself
Why do you want to sell the note? ________________________________________________________
How much cash do you need right now? $______________
What else should we know about the note, the payor, the property or any other aspect of this?
What do you think is a fair price for your mortgage? _____________
SELLER’S NAME: _________________________________________________________
(Put seller’s address and phone on the back, not to be faxed to investor unless requested)
ADDITIONAL INFORMATION OF USE TO INVESTOR:
REFERRAL COMMISSION AGREEMENT
THIS AGREEMENT entered into this _____ day of _____________, ____ between _________________________________________, hereinafter referred to as PRINCIPAL, and __________________________________________, hereinafter referred to as ASSOCIATE.
1. This agreement establishes PRINCIPAL as the entity to consummate the sale of mortgages, deed of trust notes, contracts for deed, annuities, lottery proceeds and other negotiable instruments (hereinafter all referred to as “notes”) for note sellers/note owners referred by ASSOCIATE.
2. It is mutually understood and expressly agreed that ASSOCIATE is acting as an independent contractor and is not an employee or agent of PRINCIPAL. ASSOCIATE agrees to refrain from making any representations or commitments in the name of PRINCIPAL without prior approval of PRINCIPAL and agrees that PRINCIPAL is not bound by any such representations or commitments.
3. ASSOCIATE engages PRINCIPAL as his sole and exclusive funding source on every note submitted to PRINCIPAL and will not submit the same note to any other entity, either directly or indirectly through third parties, without the prior written consent of PRINCIPAL.
4. ASSOCIATE’S duties under this agreement will be to locate note sellers and obtain information needed by PRINCIPAL. PRINCIPAL will contact and negotiate with note sellers directly.
5. PRINCIPAL will pay to ASSOCIATE a commission of two percent of the purchase price for each note purchased unless an alternative compensation is agreed upon by both parties. PRINCIPAL agrees to pay this commission on any subsequent future dealings with note sellers originally referred by ASSOCIATE, even if the note sellers go directly to PRINCIPAL.
Name of Associate (Please Print)___________________________________________
City, State, ZIP __________________________________ Phone (___)____________
The Ultimate Way To Find Notes In Today’s Market
Marketing methods that worked in times past do not necessarily work in today’s market.
My experience has shown me that there are many marketing techniques that can only be described as myths because I have never found them to work. Note broker and investors need high-quality, focused marketing plans, including the tools and training to execute these plans. In reality, this advice is no different than what a good sales manager would do for sales people in the field.
It is fair to ask, “What over the years has changed about marketing for notes?” and “What changes have occurred that affect the market?”
To answer those questions, let’s start by asking the question– Is there a market and what drives it? To answer that, one must understand that the “need” for seller financing is significantly driven y the voids or changes in the loan origination business.
Such voids or changes are:
• Loan interest rates
• Underwriting — aggressive vs. conservative policies
• Where a quick and easy conventional loan is not obtainable — sellers turn to alternative financing
• Lack of understanding: Most note brokers and investors (even seasoned ones) don’t understand what drives their market– because they can’t answer the question, “Why seller finance?”
With low loan interest rates over the past few years, much of the existing inventory of seller financing has refinanced, and the profile of who uses it has changed. There has been a definite the shift in the trend as to who uses seller financing. Therefore, it becomes more important to know where the trend lines are headed.
The information below shows a trend of the type of people who utilize seller financing, consisting of individual note owners (mom and pops – M&Ps) to real estate people who use seller financing as part of their business model. Those who use seller financing as their primary business model are what I call a “professional seller” (pro – seller). The statistics below are just guesstimates but are considered reasonably accurate by knowledgeable industry folks. Over the 15 years shown, it illustrates the changes that have occurred:
1990: 80% M&P
20% pro – seller
1995: 50% M&P
50% pro – seller
2000: 35% M&P
65% pro – seller
2005: 20% M&P
80% pro – seller
Chasing the individual note owners (M&Ps) is still possible, but it is now a far smaller piece of the pie than it was years ago. Even at that, individual note owners should be solicited along with the rest, but the broker has to use better methods to find these individuals.
Just Because It Worked 5 Years Ago Doesn’t Mean It Works Today
In years past, the two “best” methods that I have used to market for individual note holders have been:
Newspaper Ads – The fact is, they just don’t work today.
The effectiveness of newspaper ads dropped dramatically around 1999. The key reason why they lost their effectiveness is that the profile of the typical note seller changed.
Direct Mail – This has always been the most effective way to reach individuals who have financed one property. In fact, I believe I was the first person to ever use direct mail to find individual note holders (in 1982 in Dallas County, TX).
The Problem With Rented Lists
As I noted previously, using my newly-created mailer increases the broker’s chance for success because I was able to locate a far better list vendor than Record Data, Experian, etc. The basic difference is that my current list vendor is a mailing list vendor for privately-held notes, specializing in generating a highly-refined, mailing list, which is unlike the standard list provided by a mailing list vendor.
In the past, almost all note brokers and investors bought names from research vendors (as opposed to mailing list vendors). The problem with only using courthouse research vendors is that they sell data strictly from the courthouse, regardless of whatever has happened since the origination of the note, and without determining lien position, type of collateral, loan size, and the many other variables that affect the value of a note. My findings show that a “mailing list vendor” is able to produce a better quality end-product, increasing the broker’s income.
Because most of the money spent mailing to an incorrectly targeted list is wasted, it starts with to whom and where you mail the piece. My vendor scrubs the list and is able to sort out undesirable notes and bad addresses. I don’t end up mailing to people who have moved or have a note that no one wants (2nds or one that’s too small).
My conclusion: direct mail can still be done, but the effectiveness of the result hinges on a well-thought-out and refined system – not a 1980’s style of mass mailing to courthouse names. This refined mailing system is the only effective way to reach both moms & pops and professional sellers.
Don’t Do What I’ve Done
Here are some marketing strategies I have tried. They have not proven to be successful. For the most part, I think these oversold “marketing strategies” are a myth. In general, I don’t think that they should be taught. I’ve certainly never found them profitable, even after arduous efforts to make them work!
I know of no one today making a living marketing in these ways:
Marketing To Real Estate Agents
This is only effective when the origination market has dried up. That is, when many/most buyers can’t get financing from conventional lenders and seller financing is often needed to sell a property.
It has always been extremely difficult to train real estate agents to “manufacture” notes to a defined specification so that they can sell it at closing. Personally, I have never been successful with that program – even during very tough financing times.
For Sale by Owner (FSBO)
Over the years, my experience has been that calling on FSBOs produces little reward for the amount of time and energy required (except when seller financing is offered in an ad). Most FSBOs are not real estate investors but actually homeowners attempting to market their own property. They are willing to spend many hours considering the “mystical” world of seller financing but at the last minute revert to a loan origination. As a practical matter, I strongly discourage my students from pursuing such leads because there are better and more practical methods available to find noteholders.
Referral Sources For M&Ps
While I have known some buyers who claimed success perusing
referral sources such as attorneys, accountants, bankers, title companies, etc., they almost always were soliciting in small towns located in such places as West Texas, New Mexico, etc. Referrals can and will always produce some business for a long-term established buyer (as it has for me),but no one is really making a living doing it that way today. It is not a good way to begin your business. However, if you treat people right, a certain amount (although small) will come from these referral sources without even trying. In the long term, it will produce enough activity toadd to but not substantially grow a business; in the short-term, it is not the most practical method
for a new broker to pursue establishing a business. The need is to get the business started with a surge of activity, and look later at these referral sources for their future potential.
I have generally found that of the best methods for marketing to M&Ps there may be a 100 ways to stumble onto a note, but realistically speaking, there really is in fact (and always have been) only 4 or 5 good ways to find notes!
Probably the ultimate way to find notes today is to find professional sellers. Who are professional sellers? They are real estate investors (including rehabbers) and land developers. Land developers can also include recreational land, mobile home ready land tracts or, even more commonly today, used mobile home and land (MH&L) sellers.
The market is now significantly comprised of professional sellers. Unlike the M&Ps, the professional seller market is not fragmented and is a lot easier to work with than chasing one time note owners. The key here is that you are dealing with people who need and desire to “manufacture” new seller financing. It has been my experience that when you teach them
the concept of seller financing, they do it over and over, thus producing a steady stream of notes.
How To Find Professional Sellers
A percentage of people running ads offering to finance are professional sellers, not M&Ps. They like the convenience and control of carrying notes, and they likely already have notes (inventory!!). “Reverse ad marketing” is the best method we have found for locating pools of notes.
The brokers and investors do best after they have had mentoring, learned the details, and practiced their the pitch before using reverse ad marketing with note sellers. It is a matter of building confidence in what you say when interacting with potential note sellers. I have several brokers and investors that I have trained, and they are finding deals and making money with this method!
Real Estate Investors’ Clubs
This is a place where numerous investors congregate every month. I have created, and continue to develop, materials where note brokers and investors can teach real estate investors how to create seller financing correctly. This allows them to avoid the “seasoning in title issue” and how to make money with new investors that want to buy a “loaded property” (one where there is a lease/purchase tenant already in place).
Remember, the highest percentage for success is to locate real estate pros. So, offering real estate brokers and investors a high-impact mailer piece can impact your business tremendously. I guarantee you, it works! It creates an opening for the broker.
To pursue a real estate professional with the intent of conducting business starts with cultivating a relationship. That is the key to doing the first deal and having repeat business. Even though they may know your name, it doesn’t mean they will call you with the deal. The broker has to engage the customer by numerous interactions with information that the note owner/creator actually needs. The broker forms a relationship. Then as that builds, the opportunity will present itself to buy the “professional seller’s” inventory. Finally, the broker will be able to help them create better notes going forward. These are likely to be better notes than the ones in their current inventory, plus they get referrals to other pros in the business.
Using The Power Of The Internet
What we have discovered in buying notes is that many people sell their notes within about six weeks after turning down a quote. If that quote was from you and they sold it to someone else, why? Was it your price? Perhaps, but I think it is more likely that when they finally got around to making the decision to sell the note, they sold it to the person whose name was in front of them.
One of the best ways to put your name in front of those potential sellers, and to keep it there, is through using the power of the Internet and e-mail; specifically, combining an Internet home page with a highly targeted e-mail marketing system.
Is sending out mass e-mails effective? I get probably twenty a day and rarely even open one.
I don’t advocate massive e-mail campaigns. I advocate a highly-targeted e-mail marketing system. There is a great difference.
There are several inexpensive software packages that will allow you to customize e-mailings. So if you have a database of people who have, say, mobile home notes, you can send them e-mail that not only includes their name, but details about their particular note. This, of course, is much more personalized, and your e-mail comes across as much more interesting than just some generalized letter.
Anyone who has e-mail has received ads for CD-ROMs with millions of e-mail addresses for sending mass mailings. Is this how a note broker should get names for his mailing list?
No. The note business is a niche market. To do a mass e-mailing like that involves a great deal of time and effort to reach an infinitesimally small percentage of people who own notes that are on those lists.
How do you start an e-mail marketing program?
You have to begin with Phase One: Compile e-mail addresses of potential note sellers. The best way to do this is to use on-line newspaper classifieds. I’m not talking about the New York Times or the Los Angeles Times, because a lot of people are already monitoring those. I’m talking about papers like the Orlando Sentinel, San Diego Union, Dallas Tribune and others.
Go to the classified section on their Internet sites. Look under “Real Estate” or “Finance.” If the newspaper site has a keyword search feature, be sure to use it. The keyword “fin” is a good one to use; just type it in the search box. That will pull up all the ads that use the word “finance” in their text and variants of it, such as “owner-financed,” “seller financing,” “owner will finance” and so on. If the site doesn’t have a keyword search, cut-and-paste all of the real estate ads into a word processing document. All word processing software has a keyword search feature, and you just do your keyword search in the ads from there. This saves you hours of reading each classified ad to find owner financing. Doing the keyword search takes you right to the ads you want.
Using either method — the keyword search on the site if it is offered, or cutting and pasting the ads into your word processor and then doing a keyword search — will result in a large list of properties for sale with owner financing offered.
I prefer going through Yahoo! (www.yahoo.com) to find these newspapers, since they have the information organized for each newspaper in the entire country by state.
Most owner-financed properties sell relatively quickly, because there are many people who cannot get conventional financing. Within about six weeks of the listing there is often a note created. Most people who are willing to finance the sale themselves aren’t going to agree to a simultaneous closing because of the discount involved, so they hold on to the note. However, our research — and experience — is that within a year-and-a-half they end up selling the note anyway. This method of using the Internet to find them allows you to use your e-mail marketing to keep your name in front of these note holders for that year-and-a-half.
But newspaper classifieds just have phone numbers of sellers. How do you get their e-mail addresses?
Getting their e-mail address is Phase Two.
I recommend using a CD-ROM that has all the residential telephone numbers in the country. You can get one at any store that sells software. You can use that as a “reverse directory”: Enter their telephone number and you will get their name and address.
Once you have their phone number, name and address, you can log onto a search engine which finds e-mail addresses. There are several of these, and most of the major search engines have links to them.
As a general rule, it takes about three-and-a-half to four minutes to get their name, address and e-mail. Granted, to do a lot of them is a tedious process, but the result will be a list of people who have not been receiving mail about selling their notes because their notes are just on the verge of being born.
You now have a name and e-mail address. What next?
You send them your e-mail marketing piece.
What should the e-mail letter say?
That is where most people make their biggest mistake. You should never send text messages as your e-mail marketing. Text messages are rarely read. And file attachments are almost never opened, especially now that people are concerned about computer viruses.
But if you send an e-mail picture, not as an attachment but as the actual e-mail message itself, people will probably look at it. And sending people your web page is essentially sending them a picture. You should send everyone the equivalent of your web home page as the e-mail message.
So you should send not just the link to your website, but the actual page — in other words, when they open the e-mail, your website home page appears?
Yes. You send them the actual home page — more accurately, a customized version of your home page, with the recipient’s name and whatever comments you want to make about their particular note at the top of the home page that they, and only they, see. Your home page should also contain links to other pages on your site that they can click on to get more information, ask for a quote and contact you personally.
Are you saying this personalized page is different for everyone who see it?
How do you do that?
There are software packages that will do it, such as “WorldMerge.” It can be downloaded off of the internet at www.bizweb2000.com
For example, if you have in your database John Smith who has a note on a mobile home, and Mary Jones who has a note on a small apartment building, and Tom Brown who has a note on a house, you can easily program the software to send an e-mail that displays your home page with a special message that is different for each of them. When John Smith opens your e-mail, he sees your home page with his name and something about his mobile home note and perhaps your offer to buy it. When Mary Jones opens your e-mail, your home page welcomes her by name and she reads her note on the apartment building. When Tom Brown opens his e-mail from you, he sees his name and your letter about his house note, and so on for every person on your list.
Think about the times you get personalized mail — especially if it is a note you own. You want to read on, you are wondering who these people are that sent this to you and how they know you by name and know that you own a note. When you include information about them, people read on. You improve your chances to build a relationship.
Of course, they are not going to sell you their note because you sent them an e-mail or because you have a website. They will sell their note to you because something happened in their lives that make it important for them to get cash for their note. Perhaps their note payor is giving them some trouble, or the note holder is older and the mortgagor pays three days late and they can’t handle that, or for some other reason they decide that now is the time to sell their note, and because they have read your e-mails and seen your website in the past few days, you are the one they call.
If they are upset about something regarding their note, or if they need the money, the person who was in front of their eyes last has the best chance of receiving that phone call from them. Your job is to make sure that person is you.
How much does all this cost?
Very little! Remember, you are not spending money on list rentals, stationery, postage, brochures, etc., and you can update your message at any time. Even fax broadcasting, which is cheaper than “snail mail,” costs an average of 17 cents per page. The e-mail marketing program is just a fraction of that.
Yes, setting it up takes some time. But once you have done that, you press one button and everyone on the list receives your home page personalized just for them and for their note.
What if a note broker doesn’t have a website?
Then it is crucial that they get one. If they have an Internet account already, for getting e-mail and access to the Internet, there is a 99 percent chance that the same company can set them up with a website of one or two megabytes, which is enough for a site of several pages.
It’s very important for note brokers to have a website in order to have a place to direct their e-mail prospects and to capture information from those prospects.
If nothing else, having your own website gives you extra credibility. But, more importantly, it allows you to e-mail full brochures to note holders that have very likely heard from no one else wanting to buy their note.
How often should someone e-mail their list?
Twice a month is a frequency I recommend. You have to keep your name in front of them without annoying them.
And be sure to vary what you send — change the looks of your home page, even if it has essentially the same content. Don’t send the same e-mail every time.
The whole point is to have your name on their mind when they make the decision to sell their note so they call you and not someone else.
When note holders are ready to sell their note, even if they have received several quotes, they will call the person they remember first, as long as the price was reasonable.