What Not To Do When Buying A Note

[Chris Seveney]

Recently, we have seen an influx of bidders get loans under agreement and then after a month of due diligence (where it should take about two weeks) come back and try and fade a bid for reasons that make zero sense.

I know in traditional real estate people will put an offer and then get an inspection done to try and renegotiate the price.

For note investing, buyers should remember it is a very small circle of investors and if this is your MO, then it will not be long before you get blackballed

For example, if a loan has a balance of $100,000 and you will pay $80,000 and the seller has a value of $275,000 for the property and your bpo comes in at $260,000 - trying to explain tot he seller you need to fade your bid because there is $160k in equity not $175k is not gonna fly. Full equity coverage is full equity coverage. Oh and trying to fade it by $20k makes you look even dumber….

Just my rant for the day.

[Jamie Bateman]

Couldn't agree more. We have dealt with this recently as well. Super frustrating. We had 14 assets for sale in December and after tons of back and forth and waiting and lies, we ended up selling 2. 

Also, if you are given 3 weeks before bids are due, that would be a good time to check property-tax and other publicly available information, rather than trying to fade you bid after you've tied up the assets for a month. 

And don't back out of a deal because you were given the seller's BPO from 5 years ago and you chose not to order your own, even though the old BPO still shows plenty of equity and the property tax assessment shows the property value has continued to increase since 2019.

And don't ask if we can have one buyer's entity on the loan sale agreement and a different one on the transfer docs.

Finally, don't try to broker our assets while claiming for a month you are buying them for your own portfolio. Don't have the actual buyer contact me directly and tell me they can't close because they've been out of the country and they didn't know what was going on.