Brokering notes to Private Investors or to Self Directed IRA Account

Brokering notes to Private Investors or to Self Directed IRA Accounts was a strong theme at this past convention. I have always urged our broker relationships to take the leap and buy notes for themselves as I feel it will ultimately hone their craft further. The emotional swings that come along with Apulling the trigger@ on that outbound wire is something I feel all brokers need to experience.

When brokering to institutional buyers one simply gets the deal signed up to a Purchase and Sale Agreement, gathers up governing documents, pay history, declarations page for hazard insurance and contact information of all parties and forwards to the buyer for due diligence. Soon after a stipulations (stip) list comes back to the broker with items needed to complete the purchase.

When purchasing for yourself or ( working with private investors) you get to wear that hat as well. Nothing screams professionalism or garners referrals like pride in presentation does. Some of your institutional buyers may accept submission packages by fax or e-mail. A tabbed out file jacket with a cover letter with amortization schedules, credit reports, copies of recorded documents, etc. is the better route. Private Investors often show the deal to their tax council or attorney, so make it easier for all involved. (think referrals too). Make sure all of the documents are legible and complete, not cut off, etc. as these are the documents everyone will be working with up through funding.

For purposes of a submission package, consider the following:

Verification of physical street address, zip, etc. (does it tie back to the county tax rolls and can you pull up the property on Mapquest or Google/Yahoo maps? If possible, secure a current photo or street view of the collateral to further assist the investor. Print out the tax roll information and check that it ties back to the transaction properly as to owner of record, address, legal and description of improvements and that all taxes are paid current. Be sure to print out your efforts (street view, tax rolls, etc) and include them in the file.

  • Legible documents, preferably recorded copies. Read them line by line for the usual protective covenants.
  • Late payment fee.
  • Due on sale clause.
  • Provisions to pay delinquent taxes or forced place insurance or maintain HOA fees current and add to the loan balance at the default rate.
  • Discounts for early payoff (prepayment incentives).
  • Default interest rate for matured and unpaid amounts.
  • Personal guarantee/two income household.
  • Release clauses(s) or offset language (potential deal killer)
  • Reasonable third party fees to enforce collection of debt instrument

If the governing documents silent as to any of the above concerns, alert the potential investor. This is also a good time to make sure the original note available (the seller knows where it is) and that the payors pays by check, not cash. As to pay history, copies of checks are preferred giving us additional insight into the payor(s) ???? BILL I NEED SOME HELP WITH THIS SENTENCE.

It is strongly suggested you stick to transactions that closed through a title company or law firm with a closing statement admitting the same. Give them a call, are they willing to handle the escrow closing this time as well. Request a closing protection letter from the home office as to good standing, etc.

As our markets have shifted rapidly over the last few years I find that chain of sales price and ability to repay the loan are paramount to success. Do your best to admit as much to your investors. Where in the Acurve of life@ are the payor(s)? Relative ages, occupations, children etcY Two income households with job stability and tenure can offset lower credit scores.

Generate a T-Value amortization and call it ASchedule A@ as it ties back to the note balance per the terms of the note. Pay close attention to the note date and the date of the first payment (30 day cycle). If the note date isn=t exactly one month before the first payment due, was prepaid interest collected on the closing statement? Once you have settled on a price or buy rate yield to maturity, generate the investors ASchedule B@ that ties back to the basis of the invested dollar to term. T-Value really is a must have tool for the serious broker/investor. BILL, HERE IS AN OPPORTUNITY TO PLUG T-VALUE FOR SALE ON WEBSITE. WE HAVE ARRANGE TO ………STAY TURNED FOR AN OPPORTUNITY TO BUY THROUGH PAPER SOURCE AT A DISCOUNT.

A call to the insurance agent to verify policies in effect is also prudent and proactive. Region by Region other forms of coverage are also of concern. Flood zone and Flood Insurance, Windstorm (Hurricane/Coastal) and Earthquake are several other factors to check to see if the governing documents mandate those coverages as well.

Contact the payor for some live conversation prior to all funding ( in addition to an estoppel) to make sure we are not buying into any conflicts or counterclaims. This is also a chance to secure additional contact information and gauge their level of cooperation. Institutional Investors prefer to handle the payor interview/ estoppel verification directly.


Good Salespeople know what they are selling. The above concerns, properly addressed, will make for smoother transactions, less fallout, and stronger investor relationships, not to mention increased referrals.





Like never before, to succeed in this business we need to Apolish our apples@ as best we can. Getting to know our investors= comfort zones and preferences is imperative. As Henry Dvorken would say A Strive to Solve problems and sell into needs.@


This all speaks to a shift from being reactive to proactive in our day to day business dealings. Good habits take time. Pride in presentation requires desire and professionalism., so practice your craft in the direction of institutional buyers. Tune in to their concerns. Learn from their sheer transactional experience and don=t forget to buy for your own account along the way!


Leave a Reply