Banks selling you a note?

[Daniel Mohnkern]

I just got an strange idea.  Is it possible to buy notes directly from regional banks?  And, do they generally sell notes at a discount?  My thought was, wouldn't it be interesting to get a loan from a bank as an investor in RE and then later buying that note as an investor in notes?  Is that even possible?  I could see it making sense if they were selling the notes at a discount.  Then, you could effectively get a discount on the real estate and pay no interest (to yourself).  Is that too far fetched?

[Scott Carson]

I'm going to contradict a few people because this is what I focus on in my niche of real estate.  Will banks sell you a note?  The answer....It depends!

Don't waste your time with the top 5-10 banking institutions. They won't sell you anything less than a $10 Million dollar portfolio. And its not often at that great of a discount depending on where the assets are located. If you look at the recent FDIC sales, you will see the % of FMV has been above 70% for a ton of the sales. Banks might sell you performing notes in the 90% of UPB range.

Now non performing is a different story for regional banks and where the assets are located. Wells Fargo might sell you a one off commercial NPN but it will depend on how defaulted the asset is.

I've bought plenty of one off, small balance commercial NPN's from "What's in your waller" over the past five years along with assets from Synovus (SE part of the country), WF, and other regional banks.

If you are looking for residential assets, there are those banks that will sell one off's but its a matter of dialing for dollars to find them.  Depending on value, condition, default rate and foreclosure time frame, these all come into consideration with pricing.  

If you are looking for assets in OH, MI, and some other states in the mid west, the answer would be closer to yes.  If you are looking for CA, NV, AZ, TX and GA, probably not as those markets are just too fast on the FC side.  

Some mortgage banks that are portfolio lenders will move stuff from time to time but you've got to follow up with them on a regular basis.  It's definitely a niche market and the market didn't exist prior to 2009.

In only 2 scenarios have I ever bought a note from the bank on a specific property that I was in contact with the borrower prior to being direct to the bank.  Otherwise, the bank provided me with a list (tape) that I could cherry pick from or do a mini bulk purchase.

All I focus on is buying non performing 1st liens from banks and hedge funds.  Its work and a longer process then fix and flip, but the returns are phenomenal along with the numerous exit strategies.  

Yours in success,

Scott Carson "the Note Guy"