FOR NOTE BROKERS
The Good, The Bad, And The Misconceptions
©2005 by Dan Gillman
NoteWorthy; August 2005.

I guess I have to start out with a little bit about myself. I have been in the trade one way or another for approximately twelve years. When I say "trade," I mean the private financing world and the buying and selling of mortgages. For approximately the last five years I've been president of Northeastern Capital Resources, Inc. We at Northeastern work with hundreds of note brokers scattered throughout the United States, buying first position mortgages secured by real estate. We take on residential as well as commercial, moving portfolios as well as jumbos. OK that's the end of the company plug.

At Northeastern we speak to many, many new brokers just getting into the business. I used the term note broker before and I should explain how I'm using it. A note broker is anyone who comes into contact with an investor, rehabber, real estate agent, or someone who calls and says "Hey I found, or have a mortgage and I was wondering if it is something you might be interested in purchasing?" A broker then presents that note to a funding source. I am not an attorney nor would I want to be responsible for anyone saying, "The guy at Northeastern told me," but I believe that when using a funding source, you do not need licensing to broker existing private mortgages. Check with your own attorney and individual state law to be on the safe side.

Please take note: Using the terms, "lender" or "financier" is a signal of a whole different ball game being played. If you don't know what I'm talking about- find out. A better way to position yourself is to say that you buy (or broker) existing note payments.

We specialize but certainly are not limited to what is commonly called carryback, seller held, or private mortgages. Without going into great detail, if a bank was involved, then it is not a private mortgage.

To all of you who may fall into the category of new broker I want to say WELCOME. It's a great time to be in this industry. There is money to be made and you can do it! We definitely have quite a few very successful brokers without much experience making a really good living. That's the Good.

THE BAD
It's not easy. I get a handful of calls every week. Someone tells me who they are, that they just finished some course and that they're ready! Then there is that long silence. I say, "OK, I'm ready too." It's so hard for me to believe that these individuals have avoided the big, hard question up until now, "Where am I going to find my first deal?" They talk about the website design they have been working on, their stationery letterhead, e-mail address, letters they are planning to send out announcing the opening of their company, logos and again they find a way to state, "I'm ready."

I pipe in and say, "Great, let's talk about the transaction you must be calling me on." Again there is that long silent moment. The new broker goes into how wonderful and educational the course was that they took. They mention they're now certified by so and so and at the course they recommend we contact companies like Northeastern and request a broker package. "How much will it cost to sign up with your company? Is there a mentoring program, some sort of agreement that we could sign guaranteeing I would work with them in return for their future transactions?" This is when I say, "Time out. Stop. Let's get rid of some misconceptions and take stock of exactly where you stand today - now."

Most of these individuals are not any closer to turning a profit than they were a month ago, and, in fact have made a substantial investment and created a new monthly credit card bill while tooling up, as it were.

MISCONCEPTIONS
We have all heard someone say, "Everything is salable," and so profitable. It's just a matter of putting the right two people together. Every buyer is looking for a seller.

Well, all that sounds nice and philosophical. I'm going to tell ya: forget the Atkins diet or the Jane Fonda workouts; you're going to lose plenty of weight following this line of thought. When you are told there are millions and millions of notes out there waiting for you, just remember not everyone who went to Alaska got rich. Finding good salable notes takes effort and a solid game plan.

Court house listings, telemarketing, direct mail programs have all changed as well as been beaten hard through the last five years, not to mention that each can be costly to do properly. On top of that you're now going to be competing with some large companies that have very deep pockets and can really afford to play the numbers game of mass marketing programs.

The internet: If it's posted, it's not a secret. Usually there is something hairy about the transaction and someone is having a hard time selling it. I can't tell you how many times a broker downloads something and faxes it to me for a quote along with their "non-compete" document for me to sign.

Leads: If you're working a broker to broker to broker chain, all I can say is that unless you are going to bring something to the table, whether it's experience, a face to the seller, file processing, or a purse, you are hindering the transaction. In my opinion your greatest advantage or asset over all the other companies out there is your own backyard, your face, your hand shake, your personal presence to the transaction. Make a list of people you know or should get to know who could be potential clients, such as sellers, investors, rehabbers, real estate people, lawyers, for sale by owners, developers, etc. Get creative with possible backyard contacts. Who do you know at the golf course? the Chamber of Commerce? Explain to the local postman who knows everyone and everyone's business what you do. Did your Aunt Lucy take back a note for that third cousin of your mother's sister? Does your Uncle Billy have any contacts who might prove useful? There is no exact formula for instant success but don't evade the big question, "Where am I going to find my first or next deal?"

On a slightly different note I have seen and known a lot of extremely successful companies that are very small operations, relatively speaking. You should measure the strength of your company not by the number of employees, nor the size of your building, but by bottom line profit. With very little effort a new broker should be able to understand the basic lingo and what is needed to present a transaction for bidding.

Find a copy of someone's quote sheet, and though it may sound silly, practice filling it out leaving no blanks. Understand terms like LTV, ITV. Conquer the five keys on the calculator. Be honest with yourself about the difference between a lead and a real deal. On a real deal you will typically have a signed contract in place with the seller. This gets the transaction off the market. You have seen credit and have whatever docs are available in your possession. Tell a national buyer who makes a living by servicing brokers that you have a Real Deal in hand and watch us fall out of our chairs to work with you. You don't have to sign up with, give away, pay anything or be adopted!

I'm pretty sure I'm in good company with a lot of other national companies who are in the market of working with brokers when I say the only way we can be successful is if you're successful.

I hope to hear from you soon!
Dan Gillman