April 21, 2009
Too Much of a Good Thing...
Every day, without fail, I receive at least one e-mail that reads something along these lines:
"Hello. I am in contact with someone who is direct with (fill in household-name bank, mortgage company, hedge fund, etc. here). Please let me know your purchase criteria and we can tailor-make a portfolio for you."
Now, anyone who reads my blogs or my editorials in the NoteWorthy Newsletter knows how I feel about the broker daisy chain. For those who don't, let me first explain the daisy chain. In essence, it's brokers who don't know who the actual sellers and/or actual investors are in a transaction. They simply muddy the waters by hanging around in the middle, doing nothing and expecting an equal cut of the big fat commission that surely will result.
Our company policy is very clear. If a broker contacts us and is not direct with the seller, we politely wish them luck and end the conversation there. NO EXCEPTIONS. If the broker is someone we know and trust and IS direct with the seller, we may consider working the deal if we can speak directly with the seller. Again, NO EXCEPTIONS.
If you are a note holder, please let me explain the hazards of multiple brokers in your deal:
1) You have to question the broker's credentials if they don't know who the end buyers of notes are. If they simply shop your deal to other brokers, the 'real' investors will see your deal literally dozens of times from all these other brokers, and likely price it very low or disregard it altogether. (hint: they already know that rule #3 below will apply to the deal)
2) All these brokers in the middle expect to get paid. Who do you suppose is going to take the hit to get all these people paid? YOU. What are all these middlemen doing to earn their fees? With the exception of the one broker who takes the bull by the horns and actually works on the deal, NOTHING.
3) Why don't the two reasons above even matter? Ultimately, the deal will never close. Repeat after me: THE DEAL WILL NEVER CLOSE. One more time so there are no lingering doubts that this kind of structure has a chance to fund...THE DEAL WILL NEVER CLOSE.
My message to note holders: Get some credentials on the brokers you deal with. Ask for professional references. Try to verify that the companies bidding on your note are really end investors, and not just other brokers who know some end investors. A broker you can trust is invaluable in your transaction - you likely won't be able to sell your note without the expertise and knowledge a good broker can provide. Most end investors will not buy the note directly from you - they simply don't have the staff to accommodate all the intricacies of the deal. Two or more brokers in your deal...well, you know what they say about too many cooks in the kitchen...
My message to brokers: Find out who the real buyers are. If you don't know, subscribe to NoteWorthy - it's pretty easy to figure out once you've read a few issues. Most importantly, please don't contact us if there are one, two, six degrees of separation between you and your 'deal'. We're not interested. See rule #3 above if you don't understand our logic.
If you are a note holder, give us a call at 866-762-1415 - we know who the end investors are, and we'll get you the best possible price for your note. Let the other note holders find out the hard way how futile the broker daisy chain is - while they're shedding tears of frustration, you'll be laughing all the way to the bank.
Make it a great week.
Our efforts stay focused on note holders. If you are a note finder, a note
broker, or anyone other than the actual note holder, please do not contact