March 23, 2009
Let The Seller Beware...
Wait a minute - isn't that supposed to be "Let the BUYER Beware?" Normally, yes. Unfortunately, there are those in our industry who simply can't compete with the rest of us by staying above the board. Instead, they resort to bait-and-switch tactics that might trap a few unwitting sellers, but mostly just create lots of opportunities for the rest of us to rebuild sellers' faith in humanity.
I recently bid three deals for a note holder in Florida. None of the three were what you would call 'top shelf' notes. In all three cases, the buyers had put very little cash down at the time of sale, and all three sets of borrowers had dismal credit. In fact, not a single investor in the 'seller financed' industry would even price them. Thankfully, we know an investor that buys conventional bank loans that was willing to offer a price for each note.
The seller accepted our offer on the worst of the three notes, but said he had gotten better pricing on the other two. Unless this seller went outside the seller-financed community, I don't know how this was possible. I suspected he was dealing with a broker who had priced the deals with a pie-in-the-sky number, hoping to eventually place them with an investor.
Getting back to the deal we were processing: The value came back substantially lower than expected, so our low price was dropped even lower. The seller decided his other investor would be a better option for this note as well, and declined the reprice. "He'll be back", I told my business partner. "Nobody in the seller-finance community is going to buy any of those notes."
Last week I got a call from the seller. He said the other investor couldn't close the deals within his expected timeframe. That's a nice way of saying they weren't going to be able to fund his deals before the notes matured in 26 years. His other investor couldn't perform, just like I suspected.
Not only did we get our original deal back, but the seller accepted our pricing on the other two deals as well. He never would tell us who his other 'investor' was, but I'm pretty sure it was a broker who got in over their heads and gave us the opportunity to ride in on our white horses and rescue the deals.
It's regrettable some have to resort to the bait and switch to justify their existence. They put note holders through the wringer and cost them time and money in the process. To all disgruntled note holders out there, please know this: There are reputable companies out there who can help you. If you talk to someone about selling your note, ask them for references of other note sellers they've worked with. If their pricing seems out of line with the other quotes you've gotten, ask yourself if the pricing is too good to be true. The answer is usually pretty obvious.
If you've been 'had' by the unscrupulous and the unethical in our midst, give us a call. Our promise is to provide a fair price, to deal with you professionally at all times, and to meet your needs specifically.
Make it a great day.
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