Posted by John Behle on November 10, 1998 at 01:01:08:
I was asked about the note market as an entity, of
sorts. Could you give a brief description of what
it is like. Ie, is it dominated by a few or several
mortgage brokerage firms?
>> Yes, to some extent a part of the market is
>> dominated by just a few funding sources. They buy
>> from the brokers. No particular brokerage firm or
>> firms dominate the market. It is made up of
>> hundreds of small brokers and finders.
How readily can one sell
>> A good note is simple to sell. The challenge is in
>> finding the notes and sorting through the bad ones.
Are there different levels for buying/selling notes?
>> There are not any official levels. There is no
>> approved education or standardized licensing.
>> There are no offical “Designations” or evidence of
>> qualifications other than some used as a marketing
>> tool to sell seminars.
Some notes are only handled by companies like Metro-
politan Mortgage, while smaller local companies/indi-
viduals handle particular type notes, for example?
>> Nationwide note buyers like Metropolitan have to
>> have restrictions as to the quality of the notes.
>> They get much of their money from the stock market
>> and have to have a “performing” portfolio. They
>> and others can’t mess around with potential
>> problems or marginal deals. The good news is they
>> generally have better buy rates than the local
>> buyers. You need both. If you really want the
>> business to be profitable, you will focus on the
>> local business and leave the other to the “feeding
After buying a note(s), if one had to sell because the
underlying property developed problems sometime after
purchase, would it be difficult to resell the note?
>> Selling in a case like that would depend on the
>> problems. The first rule of safety is do not buy a
>> note if you wouldn’t buy the property under the
>> same terms. The money is in solving the problems
>> or worst case scenario taking back a nice property
>> at a substantial discount.
Can volume be easily accomodated, both in buying and
in selling. Mention has been made several times that
one can do all the notes "they can/want to handle."
What does that mean?
>> Handling a greater volume isn’t that hard - except
>> that the people that push you towards greater
>> volume are naive and narrowminded. Sorry, but it’s
>> true. Achieving profits through greater volume is
>> the hard way. I prefer to think harder rather than
>> work harder. The key is to DO MORE PROFITABLE
>> DEALS. The way that happens is educating yourself
>> above the other brokers. Buy and finance the
>> notes. Don’t get caught up in the fallacy of
>> brokering notes. It is a job - not an investment.
>> It has limits and will not provide for your
>> retirement or financial independence. Insurance
>> sales might be a better bet - at least there you
>> would get residuals. Buy and hold - don’t broker.
Can I buy/sell tens of thousands of dollars anytime, or hundreds of thousands, if needed?
It would be easier to ask this question verbally, but
I would like to be able to relate to someone unfamiliar
with the note market just what it is.