Tom:
When at all possible you want to deal with PRINCIPALS and not brokers. Principals fund deals with their own money or money that they control. They are investing funds for their own long term portfolio purposes and not necessarily to resell their paper. Like our firm, they make their own internal underwriting & funding decisions and are not subject to the whims of having to “pass the potato…” to another funding source.
Brokers are NOT in control of their own funds, they shop deals in an attempt to try to place them. In some cases that can work out great for a seller who has little in the way of establish contacts, funders, or the time to find a funder, etc.-however it comes at a price, namely the brokers fee for placing the deal.
Since Brokers do not fund deals themselves, and are not really purchasing the paper themselves, there is a tremendous capacity for problems to develop from misrepresentations, mis-statements, promises, etc.
Posted by Tom - WA on February 13, 2001 at 23:31:31:
I want to start in the note business and came across the website for Advent Mortgage & Financial. They offer a formalized Broker Agreement which will pay finders of notes 50% of the net realized. Seems like a pretty good way to get started without using my own cash. Their agreement is at:
Tom:
If they are willing to share their “Fee” with you, then they are going to attempt to broker the paper you might “bird dog” or find for them. Thats OK as long as they can produce closings. Many times though these kinds of outfits are not price competitive or their negotiating skills aren’t honed sharp.
I have found that often more consistent fees can be earned by “bird dogs” who are working with direct funders who more often can make a deal happen with a customer because they are the ones funding the deal, and can offer very competitive pricing along with a lot of different creative options.