Note Buyer Interview With Americus Financial

We are pleased to bring you this Note Buyer interview with Mark Donoghue of Americus Financial Group, a national note buying company located in Spokane, WA.

What is the current focus of Americus Financial Group?

To maintain our reputation as the recognized leader in the purchasing of real estate notes nationwide. In addition, with our knowledge and experience we strive to assure that each transaction is fast, satisfying, and stress-free.

How did you get your start in the note business?

Buying and selling real estate in the mid 80’s. I was introduced to seller-financed real estate early in my real estate career and in 1988 was hired to purchase real estate receivables, structured settlements and lotteries for a multi-billion dollar financial services corporation until my departure in 2003 to start Americus Financial Group.

What unique benefits does your note buying company provide?

We do ALL our own underwriting, pay for ALL appraisals and we are the only investor to my knowledge that does not require the servicing to be released.

What type of notes or transactions will your company consider funding?

Each transaction (as long as it is secured by real estate) is reviewed based on the following criteria in order:

1. Equity
2. Seasoning
3. Collateral Type (SFR, Commercial, Land)
4. Credit

What type of note deals would just waste your time?

Simultaneous closings and “flips”

How do you handle commissions to note brokers or consultants?

They are paid at funding (when we close the transaction). Most fees are wired to our brokers.

What advice would you give to new professionals just starting out in the note industry?

This is a vocation/profession so treat as such – educate yourself and understand that you will ultimately be rewarded with the amount of time and effort you truly put into it.

What is the most common business mistake you see people make?

Requiring and gathering too much information from the note holder before they have the transaction even under contract.

Given the current economy, have you made any changes in the way you buy mortgage notes?

Yes we have –

• As noted above, we no longer purchase simultaneous closings or flips
• We require a minimum of 20% cash equity on most note purchases.

Where can someone contact you to obtain more information?

www.AmericusBuysNotes.com

Editor’s Note:  You can also view the Americus Financial Group listing in the current edition of the Note Buyers Directory for more details!  This updated directory is available for download in the Member’s area of the Finding Cash Flow Notes Training or can be found in the bookstore.

Sell Mortgage Note to the Payer? What about Me?!

I will never forget the first time I was asked this question by a potential note seller.

“Should I offer a discount to the payer before I try selling my note?”

I was silent for what seemed like minutes. In reality, it was only a couple of seconds before I replied but during those seconds my mind was racing.

Of course I was thinking…

“If the note holder makes an offer to the payer; I may never get the deal. Matter of fact, the payer will probably even pay the seller more money than I can as the note buyer. This deal is gone.”

On the other hand, better to get it over with than have the payer find out later and sideline the whole note sale.

“Yes” I responded, “It is in both of your best interests to see if that is a viable option first.”

First, here is the mortgage note deal…

• The note balance was around $73,000.
• I was not able to pay more than $63,000*.
• He decided to offer the note payer a payoff of $65,000

*(I have rounded the numbers to make up for both ease and my memory loss ?)

Of course, the reality of the situation is that it is rare the payer will have the ability to pay off the private mortgage – even at a discount.

What happened after that was even more interesting…

The payer declined on paying off the promissory note early. Although they were interested, they were not sure “how” they could come up with the money.

The seller came back to me a couple of days later and said he was ready to proceed with me for the $63,000 purchase price.

Now, a typical note closing will take about 3-4 weeks. It really just depends on how quickly some of the due diligence can be completed (waiting for title, appraisal, etc).

Anyway, we were just about to close (about 5 days away) when the seller called and said that the payer had the money and wanted to payoff the note.

At this point, things could have turned ugly for me…

1. The seller could have pulled out of his deal with me (even though we had a binding contract).
2. He could sell the note to the payer and leave me high and dry.

So what happened on buying the note?

Well, the seller told me, “Fred, we had a deal. If there is something you can do with [payer] after you complete this note buy I would appreciate it.”

I think the seller did right by me because, in the very beginning, I did right by him. Sure, that may not always be the case with every seller, but it was here.

In the end, I allowed the payer to payoff the note at a discount right after buying the note. I received one monthly payment and accepted $65,000.

I probably could have brokered the deal and made a few more dollars, but it was important to do the right thing. It may sound old-fashioned, but I really do think things like that come around in the long run. Call it “Note Karma.”

Do you have your own Note Karma story? Share in the comments below!

Will I Have to Sell My Note at a Discount?

The most common question among note sellers is also the one that most new note brokers hope never to hear.

Although I cover numerous ways and specific scripts for answering this question in the Finding Cash Flow Notes Training, I want to address it here from a 30,000-foot level.

When dealing with the note discount question, remember three important things…

1. “Discount” is not a bad word.

Hey, in a perfect world the seller would get 100 cents on the dollars, the note buyer would make a 15% return, and the note broker would make a couple thousand dollars for putting the two together.

But all is not “perfect.” The note was probably created because something was “less than perfect” in the first place.

Maybe it was the buyer’s credit or the condition of the property. Whatever the case, the note was probably not created under “ideal” conditions. The note broker’s job is to find a way to make it work and minimize the discount to the seller.

2. You don’t make the note buying rules.

Like I mentioned above, there are a whole lot of variables that go into the discount of a note being resold. It is important that you do not put yourself in an adversarial position with the note seller.

Even if you are buying the note with your own money, you need to be on the seller’s side. You are looking for a win-win scenario. As trite as that sounds, it really will get your more deals.

That is not to suggest you put more money on the table if they deal will not warrant it. Just create a deal that is fair for both parties and you can sleep well at night.

3. The note discount is not negotiable

Some people make some mistakes in thinking that this is a negotiable item – it really isn’t. The focus should be on the amount of money the seller will receive – not what they won’t get.

I like to refer to the offer as the “fair market value” of the note. In the end, people just want to be treated fairly – and that is just good business.

So the note discount does not need to be a taboo subject. It is the elephant in the room that should be addressed head one. The less you are shocked by it, the less the seller will be.

Note Broker Marketing With Note Appraisals

Just What is a Note Appraisal and How Can it Help My Note Broker Business?

I just finished up an Opinion of Value for a real estate note down in South Florida. It was the second request for a fee based note appraisal in the past several weeks, a service that has been growing in demand.

These requests primarily result from our networking efforts and presentations at Real Estate Investment Clubs and Self-Directed Retirement Account educational workshops. Since it is fresh on my mind it seemed a good time to share some insights on using Note Appraisals in your note business. Read more

Note Business Success in Five Words

We are often asked,

“How can I make it in the note business?”

That usually prompts us to ask a couple of questions to understand what, specifically, they mean by the question.

Some people want to Read more

Note Broker Fees In The Cash Flow Business

How much can a note broker make on a deal?

That’s the short summary of a cash flow business question we received last week from a Note Broker. It was an earnest inquiry and we wanted to share our answer in this edition of Real Deals!

I was just visiting your site and wanted to know what a fair % of cash flow a broker can expect from a performing package deal?

There are buyers wanting a performing MHP package I have available with only 2-3 yrs. to maturity and the smaller lender wants to cash out.

I understand from other brokers that 25% of net is reasonable as well as a smaller finder’s fee.

What are your thoughts? I appreciate your response.

Note Broker in Arizona Read more

Do I Need a License To Be a Note Broker In CA?

This is a common question with a straight forward answer.  Earlier this week we responded to this email inquiry and we’d like to share our answer with readers!

Note Broker Question:

Hi, Can you please tell me if you need a license to be a note broker in Ca.?

Thanks, Marie

Note Buyer Answer:

Hello Marie!

Thanks for visiting NoteInvestor.com. While I am not an attorney (so unable to give legal advice), I’m happy to share with you my knowledge and resources.

California is one of the few states that have specific laws relating to note brokers and they license them under a similar structure at real estate agents.

Here is some helpful information straight from the Q&A section of the Department of Real Estate (DRE) in California.

Q. – I am not licensed as a real estate broker or real estate salesperson and I am only going to assist private parties who wish to sell their notes (secured by real property) for cash to another party (investor), perhaps in another state. Is a real estate license required if I conduct this activity in California?

A. – The activity described, so-called note brokering, requires a real estate license if performed in California. This includes the solicitation of California note owners, whether in person, by mail, telephone, or other means of communication. One of the definitions of a real estate broker is:

“…a person who, for a compensation or in expectation of a compensation, regardless of the form or time of payment, does or negotiates to do one or more of the following acts for another or others:

.(e) Sells or offers to sell, buys or offers to buy, or exchanges or offers to exchange a real property sales contract, or a promissory note secured directly or collaterally by a lien on real property or on a business opportunity, and performs services for the holders thereof.”

There are companies engaged in the discounted purchase of certain mortgages, primarily those carried back by residential sellers and secured by the transferred real property. The companies hold seminars to recruit people to solicit and negotiate the sale of these mortgages. Seminar attendees are informed that they do not need a real estate license to engage in this activity. In California, this is wrong because the activity fits the definition quoted above. Source: http://www.dre.ca.gov/faq_mlb.html

As you can see from above, the California DRE is very clear in their answer! Yes, you need a license in CA to be a note broker.

California has also been known to actively monitor licensing in past years.  If you run an ad in a CA paper that you buy notes, it is very likely you will receive a letter from CA DRE asking for your licensing information.  It is safest to comply with the law or transact business in states without these requirements.

To you success,

Tracy Z. Rewey

The “NOT” so fine print…This information is not intended as legal or financial advice.  Please consult with competent legal counsel pertaining to your individual situation. We are not attorneys at law – nor do we play one on TV

 

Using Owner Financing To Achieve Your Goals

We are headed to San Francisco to participate in the Women in Real Estate Event on March 26, 2011.

This full day event is sponsored by SJREI, the bay area’s premier real estate investor’s association at the at the Sequoia Yacht Club in Redwood City, California.

Join women real estate investors as they share their success strategies at the event entitled,  Steel Toed Stilettos: Real Women Own Real Estate.  Here’s a look at the line-up and topics: Read more

Building Rapport for Note Brokers

Rapport (noun) \ra-‘por\ : relation marked by harmony, conformity, accord, or affinity

We’ve all been in this situation: A spouse or a friend asks you to attend a Christmas party, a wedding, or a company picnic where you know absolutely nobody. Worse yet, your link to familiarity heads to the bathroom and leaves you…totally…alone… Read more

Finding Cash Flow Notes Sneak Preview

Have you seen the sneak peak preview of Finding Cash Flow Notes?  Click here to watch the video!

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