Dealing With Paper Buyers
by Theodore Hansson

Table of Contents
    Introduction
  1. Make Sure The Investor Will "Front" All The Closing Costs!
  2. The Seller Should Not Be Charged Any Up-Front Fees!
  3. Find Out How Fast You Can Get A Quote!
  4. The Investor Should Only Expect A Reasonable Rate Of Return!
  5. You Must Be Able To Decide You Own Profit!
  6. Make Sure You Get Paid Immediately When The Deal Closes!
  7. Make Sure The Investor Has The Money Needed!

Investors
"Buyer" or "Investor" mean the same thing, they can be used interchangeably. So does also "Paper" or "Note", when we're talking about mortgage notes.

The following are some guidelines you must be aware of when dealing with investors so you don't get "burned" and lose money on any deals.

Make sure you get fast, friendly, courteous service from whomever you are dealing with. If the service "stinks", so probably will the rest of their operation.

Now, let's look at some of the things you MUST be aware of when dealing with investors or paper buyers!

1. Make Sure The Investor Will "Front" All The Closing Costs!

Make darn sure they will pay for all the closing costs. Some investors expect you to pay for or be responsible for all the closing costs, such as credit report, title search, appraisal etc. If you are expected to pay for the closing costs, the investor will normally reimburse you once the deal closes.

But watch out here!!! What happens if the deal doesn't close??? You guessed it my friend, YOU are out all the money!!!

What we are talking about here could be a substantial amount of money for closing costs, maybe as much as $800.00 per deal. Only go into this kind of arrangement if you know exactly what you are doing and have some experience in it.

You should also expect to get a better "yield" from the investor if you are responsible for the closing costs.

2. The Seller Should Not Be Charged Any Up-Front Fees!

The seller of the paper or mortgage note should never be expected to put up any money or be charged any fees. He or she expects you to be responsible for any monetary outlay.

When you give a price quote to a seller on a note, always quote it net of any closing costs (inclusive of all fees).

For example if you offer to buy a particular note for $25,000, you tell the seller that you'll pay him or her $25,000 net. You will pay for all the closing costs.

But when you deal with an investor, make sure the quote from the investor is net of any closing costs. In other words, he'll pay for and is responsible for all the closing costs.

3. Find Out How Fast You Can Get A Quote!

Remember, in this business, time is of the essence.

I have personally lost several good deals because the investor I was working with at the time was very uncommitted and acted like we had all the time in the world. NO GOOD!!! Now I only work with the ones that have proven themselves to me.

You should expect to get a quote on the spot, and if that's not possible, surely within 24 hours.

Also remember, for you to get an accurate quote, you must supply the investor with all the necessary information and the information must be ACCURATE!!!

4. The Investor Should Only Expect A Reasonable Rate Of Return!

Make sure the investor you intend to work with only expects a reasonable rate of return on his money, not some fantasy figure of 50% or something ridiculous.

I have known some investors that have quoted me some absurdly low amounts for perfectly good notes. These notes were not delinquent or in bad areas and the payor had good credit history.

Also, watch out for "middle men". What I mean is investors that are not really the end buyer. They act as brokers and subtract their fee from the quote they'll give you.

Sometimes you discover not only one but a few "middle men" in there.

I don't have to tell you that when you run into a situation like that the quote they will give you will be ridiculously low! Everybody involved expects a piece of the money pie!

Try to stay away from scenarios like that!!!

5. You Must Be Able To Decide You Own Profit!

What I mean here is that you must make sure that the quote you get from the investor is what they would pay you if you were the actual owner and seller of your own note.

What this means is you will be able to decide your own profit by quoting the seller of the note whatever you decide on.

For example if the investor quoted you $27,500 for a $30,000 note. You will now be able to quote the seller something lower that $27,500. Maybe you want to make a quick $2,500 on this deal. You would now offer the seller $25,000 for the note.

Never work with an investor that offers you a finders fee if you bring them business.

Who wants to make a lousy $100 on a $25,000 deal! Not me, and hopefully not you either.

6. Make Sure You Get Paid Immediately When The Deal Closes!

I guess, this is quite obvious. You expect and want to get paid by the investor immediately when the deal closes. When the deal is recorded at the court house, then is when the seller gets his or her money.

You should be no different. You should get you cut then also. Don't let them string you along and pull something like "we only cut brokers checks once a month". NOTHING DOING!!!

They make money immediately because of you and you should be paid right then and there.

7. Make Sure The Investor Has The Money Needed!

Of course without the funds necessary to purchase the note, you can't make any deals happen and you don't make any money.

So, it's important to find out if the buyer has the money to invest right away in your particular deal when you come up with a note. You don't need anyone who is going to dilly-dally around and can't make up their mind if they are really interested or don't know for sure if they can come up with the money to invest in your particular deal.

That's basically it. If you are conscious about the above and look after you own interests and make sure you stay on top of things you should do all right.

If you are not happy dealing with a particular investor, just find another one that meets your particular criteria.

Good Luck! Go out there and make it happen and make some money in the process!

Just Do It !!!

Remember...

"You Don't Have To Get It Perfect...
You Just Have To Get It going!"

 

About the Author

Article by Theodore Hansson of Theodore Hansson Co. Theodore has helped hundreds of ordinary people succeed in their own home-based business, brokering mortgage paper. Visit him at http://www.thansson.com for FREE "how-to" information as well as a free subscription to his newsletter "Paper Profits & Extra Cash".


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