Note business legalities - Posted by Tim (OH)


#1

Posted by John Behle on November 07, 1998 at 01:14:12:

I always get an option. I do that to record a Notice of Interest and cloud the title. I don’t sell the options, I keep them and close on the deal. I don’t like brokering or flipping notes. There are ten times the profits in owning the notes and improving them.


#2

Note business legalities - Posted by Tim (OH)

Posted by Tim (OH) on November 05, 1998 at 22:07:24:

I have been studying John Behle’s 5 day boot camp tapes. This is A LOT of information.

I began investigating the market in my area of Ohio and cannot find any ads in the paper or anything in the yellow pages for people that buy notes secured by real estate. This makes me wonder about the legalities involved in buying notes in Ohio. Does anyone buy notes or have worked with someone buying notes here? What are the legalities of soliciting for notes and solicting for investors via the classified ad, direct mail, etc.

Thanks in advance for your help.


#3

Re: John, can you comment on this? - Posted by Eduardo (OR)

Posted by Eduardo (OR) on November 06, 1998 at 14:54:14:

Tim–

Can’t comment on Ohio, but my understanding of the basic law underlying the buying and selling of real estate paper is this: You can buy paper all day long in any form anywhere and not run afoul of any regulating authority. However, if you become a seller of paper you have to jump thru hoops to become exempt of regulating in some jurisdictions and in others you are never exempt. The problem is that you may be selling a “security” and most states, maybe all of them, regulate the sale of securities to protect the public against unscrupulous dealers. So, if you sell paper you either have to prove that you are exempt from regulation, where permitted, or you have to be licensed by your state as a securities dealer in a manner similar to the licensing requirements for stock brokerage houses or banks. If I read him right, John Behle says he gets around this problem by borrowing against paper instead of selling it. So, you can buy with no worries, but you can’t turn around and resell to some one else (after restructering the paper or whatever) without checking it out with a good lawyer in your state as to what legal requirements you have to follow. John, can you comment on this? --Eduardo


#4

Yes - Posted by John Behle

Posted by John Behle on November 06, 1998 at 12:34:41:

I don’t buy in Ohio, but have been out there to speak to investment groups several times. There is no law I’ve ever heard of in any state prohibiting buying notes. There are a few relating to selling notes and advertising to sell notes. They don’t apply to advertising to buy. The videos goe into legal aspects, especially in California where there is the most controversy and the seminar was held.

The fact that there are no ads means one of two things. Either there are few buyers of notes or the ads have been un-productive.

In the easy financing market we have been in, less paper has been created in some areas, yet there is plenty to keep you as busy as you want to be. It is about marketing. Focus carefully on the finding and marketing sections in the tapes. The solution to today’s changing market is just a little bit of marketing savvy.

The bad news is it’s a more competitive and challenging market than it has been in the past. The good news is most people trying to broker paper have very little marketing knowledge and chance of competing with someone who does. They also have an extreme dis-advantage to someone with “table funding” (fast cash to buy notes) and the ability to move quick.

I’ve always geared my strategy similar to a friend of mine that is a specialist on management. He says “I don’t care if there is a 50% vacancy factor - that just means I can’t buy more than 50% of the rental properties - Because my units will be full and the others will be empty.” It’s the same with notes.


#5

Refinance like a property - Posted by John Behle

Posted by John Behle on November 07, 1998 at 01:11:27:

After restructuring, re-finance with the same or another investor to pull more cash out if you want. I am opposed to selling notes at all. I will broker or refer notes that I have absolutely no interest in, but they are few. My marketing and financing efforts are targeted to local paper that I can buy.

My philosphy is totally buy and hold forever.


#6

Or this - Posted by David Alexander

Posted by David Alexander on November 06, 1998 at 23:04:23:

Also, I believe, it’s what I’ve been told by other
people in the Note business. You always get an option
to buy the notes, so if you sell the option your not selling a security. Don’t quote as gospel just what I
have been taught.

David Alexander