Posted by John Behle on December 23, 1998 at 14:01:59:
With all the seminar mills and the focus on brokering notes, the industry has become full of “Bird dogs”. It grows year by year and becomes more frustrating.
Some continue their education and treat it as a profession, but most fumble around and then quit. The un-pleasant part is that in their fumbling, people end up very dissappointed or worse.
They are sold on having a huge list of investors. Some are not very active or even real. Others can be slow and not follow through well. The real investors on the list can get frustrated dealing with the “flippers” and their lack of expertise. Some then pay less attention or don’t even work with them.
The “Flippers” tend to over-promise and under-negotiate a deal. The funding sources then are left with a deal they cannot make because of the prices that were quoted (under-negotiation). Potential note sellers sometimes pass up a real buyer for a better price from an over-zealous, under-trained flipper.
The term I coined a few years back is the “Broker Broker” syndrome. They make themselves out to be brokers, buyers or even funding sources when they have absolutely no capital or capacity to close the deal.
Even some of the so-called funding sources are nothing more than brokers.
How do you tell the difference? Go ahead and ask them how long they have been in the business - personally, not their mentor, not their funding source or next door neighbor - THEM. Ask how they learned about the business, what funding resources they have and whether they have their own capital to fund deals. Those may seem like intrusive questions, but any real player will understand. Explain why you are asking if you need to.
How long does it take them to close a deal? If they make you an offer is it firm? Read their contracts carefully. Is it just an option? With an easy out for them? Are they looking to flip or assign the note? Are they willing to put up earnest money? All of these things can be a tip off. Not to say that others don’t assign, broker or option notes. I very rarely give over $100 earnest money, but there is no question to them that I am legitimate.
You can also check out a broker at the county recorder’s office. You can look under their own or company’s name and look at transactions.
Most note buyers and brokers do not loan against notes. They buy or broker only. Funding sources to buy and keep paper are totally different than funding sources to broker paper.