Buying notes

[Don Konipol]

Has anyone had any success buying or selling notes through a exchange platform, such as FCI?

[Dion DePaoli]

FCI is what it is. The other listing sites follow suite too. I have sold some notes never bought any through those types of platforms. I don't have the patience to search their database in the manner they expect. I would personally rather review a pool and within 2 mins have an idea of what I like/want opposed to still trying to figure out how to filter to a characteristic of the loan.

In my opinion, those sites do not because they can not, do justice for the assets that are listed. There is not one simple reason and it is not necessarily something they do wrong but more along the lines of the accumulation of a couple of different aspects colliding.

Much of that is User caused problems. Folks list their loans for sale for the sake of listing their loan for sale. There does not seem to be file content standards beyond the very basics. The pricing expectations on both sides are a bit off. It seems to capture more of the "why not, sure I will list" type idea than a comprehensive plan to liquidate the assets.

We have worked with Sellers liquidating their portfolio and every so often, the loans we are working on are listed and remain listed even once we are engaged. (I do not recognize it is an obstacle.) Mind you, I am talking about a legitimate engagement not a pool lost in broker circles. The sites just can not bring to the table the full spectrum of knowledge that comes with working with a good firm or broker, IMO.

I am not sure there is much they can do about it, it sort of is the nature of using a web page as a sales vehicle. Information can be posted regardless of correctness or completeness and no guidance is given toward price expectations and the transaction is not really managed. On the other side of the fence, there is no matching of file attributes to potential investors. So its more like a free for all than much else. I remember we had a file once which was listed on a site similar to FCI and I swear somebody out there was getting drunk every night and going on the site and bidding on our loans. Wacky bids at 3 am would come in nightly on the same few. Many were humorous. So, something so make sense, like don't let drunks at 3 am bid on my loans, can not actually be stopped. So we get a lot and I mean a ton of background noise which diminishes the effectiveness of those sites.

I think our expectation of the Note or Loan market is a little inflated in that regards. There are A LOT of new comers. A lot of folks who buy NPN's and think value increases with time. A lot of folks who do not understand needed and required file content. A lot of folks who, while they are entitled to bid what ever they want, are not remotely close to where the market is. These sites end up catering to them just out of existence. Honestly, those folks need assistance and the sites can do it.

A current example we have. We are working on a portfolio to be liquidated by an investor we know. The loans are listed. Same idea as above, more of the well let's see kind of attitude. One loan, has a couple of serous issues with it that a lesser experienced person may not even understand. A real person can drive that loan into the hands of someone who does understand it and can work with it while managing price expectations and paperwork. Reviewing this loan on a site will never do it justice and could be dangerous for a newbie buyer. I think the way it looks with the information scares everyone off. The book is judged by its cover, if you will. We had the loan for less than 24 hours before getting it in front of better more suited counter-parties. Within a day it went into trade.

I think the real recipe is two parts knowledge and one part hustle. A website just can't do that. And it is really that simple.

I think newbies are often looking for something that also does not exist. The Ideal Seller. Good luck. I think the best advice I can give a newbie looking for loans. Is look everywhere. Where you find the loan is of no consequence. How you buy the loan is what matters. If you do not know what you are doing, go team up with someone who does. Then it doesn't matter where the loan is from. The experienced Note buyer can buy from anywhere since they understand the asset. They will help keep things in line and they should know when to walk away. Perhaps to much of the same reason folk seek out agents to help them find houses.