Posted by John Behle on October 21, 1998 at 13:29:16:
I appreciate the emphasis you added. I just want to echo that. If someone is hyper-anxious about getting a deal closed, that can mean they are out to rip you off as often as it means they just need the money now.
There is due-diligence that absolutely must be followed and some that can happen later. I can close some deals very fast because I can do the due-diligence and not have to wait for a title company, appraiser or funding source. BUT - that isn’t the case for everyone.
For example, if I were to close without an appraisal, it is because I did my own. If I close without title insurance, it is because I checked the title out and am “self insuring” (which I don’t recommend for a novice).
There are things like obtaining a credit report that might not need to slow the process - to the point of losing the note. One example I used in the other post included checking the title myself, getting a copy of the title insurance from the sale, doing a drive by, checking comps in the MLS, calling to verify loan balances on two underlying loans and verifying that a previous third loan had been paid off.
The minimal risks I took on the deal were:
Relying on my own comps to determine value. With my background this wasn’t much of a risk.
Closing without title insurance. This would be a huge risk to most, but I know titles better than most title company researchers and 99.9% of attornies.
Closing without a release of lien (satisfaction of mortgage) on a previous loan that had been paid off. To me the risk was minimal because: A) I could tell by the loan papers that it had amortized B) I reviewed correspondence between the benficiary and the payor confirming the payoff C) The title company that closed the deal was doing collections on both the second and the third and verified the figures d) I talked with the previous beneficiary by phone and was confident there would be no problem with him signing the release. If he would have refused, a quiet title action could have cleared it cheaply.
I invest in paper because there are very, very few risks if the due-diligence is done properly. I advocate paper investment because I believe with proper instruction it is as easy, simple and safe as real estate investment. I could also demonstrate many ways that it is safer.
I like to open paper buyers’ minds to look at possibilities, but never advocate cutting corners or taking un-due risks. There is always a balance in the education process of the extreme of fear and conservatism and the extreme of shoot first, aim later, don’t worry I’m invincible.
Each has massive risks. I’ve seen people get burned, hit the wall and be devastated by foolish risks. That’s why many times I say “hey, that’s illegal or dangerous.”
Others need to be aware of the risk of inactivity. I think the statistics are still true that:
Out of a hundred people, many don’t reach 65. At 65, 2 of the hundred will be wealthy. Another 3 will be “independent” - and all that means is they do not have to rely on others for their subsistence. Some are in almost poverty level.
The rest of the hundred people either didn’t make it or have to work or rely on others. The risk of being in that 95% may outweigh a few calculated risks in investing, because no matter how you do your due-diligence in notes or real estate, there still is some risk.
I think the greatest risk is in not trying, but I will be the first to say to pass on a deal or avoid a risk, even if it appears minimal. I think my best lessons have come from deals I should have passed on, deals that could have been more profitable and most of all, the ones that got away.