Ep 169 – Due Diligence for Dummies Part 2

NCS 169 | Due Diligence

NCS 169 | Due Diligence

Scott breaks down and discussed the due diligence that you do after your bid is accepted.

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Due Diligence for Dummies Part 2

This episode is a continuation of one we did where we discussed due diligence. In the previous episode, as a quick little recap, we talked about due diligence on the front end, pulling the initial values, calling to check taxes, those kinds of things. We went through the note evaluation short checklist. What we will discuss today is, what do you do after your bid is accepted or countered? 

NCS 169 | Due Diligence

The OS method is, “Oh shit. What do I do now?” The thing to keep in mind is not to stress out.

The first step, which happens a lot of times, is when somebody gets their bid accepted, they have the OS method. The OS method is, “Oh shit. What do I do now?” The thing to keep in mind is not to stress out. One of the things I always see a lot of note investors do is they want to submit one, two, or three bids on a big tape and then all three of them don’t get accepted and they’re like, “I didn’t get anything.” This is why I tell people, submit bids on ten or fifteen if you can. Even if you don’t have the full amount of funds, you never know what’s going to happen during your due diligence process, especially after the bids are accepted and you’re looking through things that you may end up having to kill a few. I always say submit bids on more than what you expect and you’d be surprised what falls through the cracks. 

Let’s do a quick recap. We talked about pulling values and checking values initially online, we’re trying to get a realtor to go out and look at things. The minute you get a yes, if the seller calls and tells you, “Your bid is accepted,” or you get an email that the bid is accepted, you better get on your horse and get a realtor or somebody to drive by the property. The easiest way to get a realtor to drive by is when you could pay your realtor to go do it. You pay for a BPO if you want to. I think the best way to do is use a local realtor. There are some nationwide companies that offer BPO services. I’m not the biggest fan of those, the reason is they have their vendors and oftentimes those realtors get signed up for stuff and it’s their system that’s pulling the numbers. They’re probably not getting out of the car a lot of the time when they drive by to look at the property.

Anytime you have a local realtor go by and do a desktop CMA for you, after they’ve driven by the property and gotten photos for you is much better than having the nationwide company. It might take a little bit more work from you on your part to jump on Zillow.com or ActiveRain.com or Realtor.com to find somebody, but I think it’s going to be much higher value as far as giving the value to you in a much more clear and precise number. A couple of other tricks that we use to get realtors to go out, we jump on Meetup.com and look for realtors in specific areas. A lot of my students will use the online message portals that we use in our workshops through Basecamp.com to ask if anybody knows a realtor nearby who can do a drive by and take a look at it. Anytime you’re going to have a network of realtors, it helps. This is also why I tell most people, “Just focus on five or six markets to begin with so you’re not being overwhelmed trying to get twenty realtors in twenty different markets because it can take a while to get stuff.”

We do pay sometimes $50 to $100 for a BPO. Sometimes if we can’t get a realtor to go by and drive by, we will pay a company called WeGoLook to drive by the property. In a case where we have to pay $99 to WeGoLook to go take a look at it, I’m going to make sure that it’s got to be in pristine condition. While WeGoLook is not going to give you a true value, they will take a tremendous amount of pictures and photos of the property which will help you when you’re looking, “Yeah, it’s in good shape,” or “No, it’s not in good shape,” or “It’s not in the greatest of neighborhoods.”

If you can take the time to go drive by the asset or if you’re looking at ten or twelve assets in the same area, it might be worth just buying a Southwest Airlines ticket, jump in on a plane, flying up there for a day, looking around and coming back. Sometimes, it’s worth doing that if you’re buying multiple assets. If it’s one or two assets in different areas, get on the phone and get a realtor to do this. I don’t wait around for approval on a lot of things. A lot of times I’m having a realtor to drive by ahead of time, especially if I know that I’m one of the few ones bidding on the assets. If it’s up for auction or they’re submitting bids for a week or so, I’m not going to spend a lot of money on that because I don’t want to waste the realtor’s time. Once it’s approved, you better bet your butt that we’re getting on the phones getting realtors to go out, especially if we got seven days or less than two business weeks to close on the asset. Always get a realtor to do that. 

Another thing that you want to order immediately is an Ownership & Encumbrance Report. We talked briefly about this on due diligence part one because you’re not going to order that on the front end. One thing, I would not order an O&E until I literally get the contract in. The minute I get a contract up on ProTitleUSA.com, I’m going to reach out to Alex Goldovsky and say, “I need to get one of these ordered.” An O&E Report is not a full title report. An O&E is an Ownership & Encumbrance Report, which tells you what’s on that property with the most current owner. You don’t need to know the title going all the way back to when God created the earth. You just need to know going back to when that loan was created. An O&E is basically $85 to $100 roughly. It usually takes about 72 hours. The thing to keep in mind is the more rural the location, the longer it will take for your O&E. It’s also going to be harder for you to get a realtor to go out there. Try to avoid rural locations because sometimes there may be just one person in that county that has pulled the abstract for ProTitle. Why do I like ProTitleUSA? They do mostly O&E title reports for all these big Fannie Mae trades. They’ve been doing literally hundreds of thousands of O&Es over the last year and they’re a phenomenal company, easy to work with. Alex runs a really good ship over there in Pennsylvania. 

Pulling your title, that’s the third key element. We talked about values and we also talked about calling to check taxes on the front end too. It’s very important to do that before your bids are accepted so you know what’s owed. Some cities, states, or some counties aren’t always online so you’ve got to make phone calls trying to track the Pearls down at the county to get the information that you need. Sometimes it can drag on a little. It may take an extra day or two. If you get a tape on a Friday, you may not be able to get that answer until Monday or Tuesday of the following week. If your bids are due basically by Monday, just get a bid in and most sellers will understand that you’ve got to fade your bid down some. By fading a bid means reducing your bid. If they say the value is worth 80 but you’ve come back and find that the value is actually 60, of course you’re going to reduce your bid that you initially sent in by the numbers that you discovered. The idea is just to share that information. I’m a big believer in full disclosure. The only thing I’m not going to share is if the values come back higher than the hedge fund or the seller believes. I’m just going to say, “Yes, I can fund it ASAP.”

Besides pulling title reports and getting a realtor to put eyes and ears on the property, one thing that we really love to do is call the county to check out utilities. Calling to see is the power on? Is the water on? Not every county is going to be able to share with you the power company because once they deregulate it, there are a lot of other companies out there. The water companies and the sewers are still managed by the counties and the cities, so that’s a great source to go to find out if there’s outstanding bills, if it’s on time, if there’s a payment plan, those kinds of things. Oftentimes, the city or the county will be able to direct you to other, like the gas company, if it’s a gas property. That’s pretty easy to find out if it’s on or off. 

Another point to the BPOs is try to have your realtor take a picture of the power box. If there’s a glass globe on the outside, great, that usually means the power is on. If there’s no glass globe, but there’s a big gaping hole where that would go, I can guarantee you the power is not on. That doesn’t mean that they’re not burying extension cords to the neighbors and stealing power and water. I’ve had that happen in a few houses. Have them try to take a picture of the box available, especially if it’s in the side of the house. The back of the house is not always the easiest thing to do. Check in, making sure it’s good, paying for that. If you’re going to order BPO, the only thing you could order is an exterior BPO. You’re not going to be able to order a full appraisal because you’re not going to be able to get inside the property.

If it is a vacant property, it doesn’t mean you can’t peek in the windows, and if the door’s wide open at the back and it’s been vacant for a while, you might be able to get in. For the most part, you’re not going to be getting inside. This is why we like to focus on owner-occupied assets because if there are toys in the front yard or a flag outside or plants hanging and it’s in pretty decent condition on the outside, most of the time it’s in pretty decent condition in the inside. One of the things that we’d like to try to do is try to get the realtor to drive by at two different times. One, sometimes throughout the day, if there’s no car at home then they peek in the windows. Then try to go by either early in the morning or around 5:00 or 6:00 at night to see if there are cars at home. If there are cars in the driveway during the day, they may not have a job. If there’s not but there’s a car at night, then they’re probably working somewhere. 

NCS 169 | Due Diligence

Once your bid is accepted, oftentimes the seller will send over an electronic collateral file. We call it a soft file.

When you’re looking at the collateral file, because this comes into play with the next aspect of due diligence, is once your bid is accepted, oftentimes the seller will send over an electronic collateral file. We call it a soft file. They’re not going to send you the hard physical file, they’re only going to send you the electronic copy. You can dive and look into that. If you don’t have the borrower’s name, then you’ve got the associated contract for deed. You should have the borrower’s name if it was a non-performing note. That’s when you’re doing your internet sleuthing, jumping on Facebook or LinkedIn to see if the borrower has anything. It’s when you’re doing a Whitepages search to see if there’s a phone number that is coordinated. One of the things that I do, we’ve talked about this early on, is I’ll make a phone call just to see if it’s a working number. If they answer, I’ll ask for the borrower’s name but I’ll just say I’m calling to try and track somebody else down. I don’t talk to him about buying their note. Do not talk to the borrowers about buying their note if you don’t own it yet. That’s a big violation and you can get fined for that. 

When you’re looking at the collateral file, you want to make sure the collateral file is complete from the seller. That means you’re going to have the original note, copy of the deed, copy of the mortgage, all associate assignments of mortgage, and allonges that go along with the assignments for every time that note has been sold. If the note has been sold four times, you need the four assignments of mortgage and at least four allonges along the way. An allonge is just an endorsement. What used to happen is the banks would sign the back page of the mortgage when they ship it off. With servicing companies and everything going online, they had to come up with a different type of endorsement. Basically, an allonge is just a single-page sheet; it doesn’t have to be notarized. It’s just endorsing, like signing the back of a check. If the note’s been sold four different companies and it’s coming to me, I need to see four assignments. If there’s an assignment or an allonge missing, don’t freak out. Just talk to the sellers, “Is this missing? Is this in the hard collateral file?” Oftentimes electronic files that have been scanned, they’re forwarding over the old scan from maybe a sale or two ago when the newest assignments have not been put in the file. You want to try to have the seller scan everything in the collateral file and send it over.

Don’t worry if you don’t know what the hell you’re looking at, there are companies out there like Richmond MonroeOrionCSC, that will actually do a collateral view for you. Richmond Monroe is probably the most well-known at it. They charge $25 a file just to look at your collateral file and tell you what’s missing. This is something you want to do definitely at first if you’re not used to it because it’s important to see what’s in the file. If you don’t know what to look for, have a professional, pay the $25 and Richmond Monroe can usually do it relatively fast, 48 to 72 hours. I would not have your attorney do it because they’re going to charge you $125 to $245 or $250 an hour to do a collateral view and they’re not getting around in a timely fashion. 

You checked collateral, you’ve got property values, you’ve already checked taxes, you called on utilities. What else can you do? Servicing records is an important thing. This is why you always want to ask who’s servicing the loan. Oftentimes, the seller should be able to provide you with servicing comments, servicing notes, to help you identify. There are many times we’ve bought notes and when we see the servicing notes, the borrower showed interest in doing a loan mod, the borrower expressed interest in short selling, the borrower is willing to deed the property over. We’ve seen things on the servicing notes that a seller has missed and has the good stuff for us. That’s one thing you always want to do, have your servicer take a look at it or you look at the servicing notes and read the files.

There are some great things you can miss by just looking through a collateral file, especially when you see notes of hardship letters or what’s going on with the file and the borrowers, especially if they’ve never filed a short sale file or try to get a loan modification. There’s often a lot of information that tells the story behind the story. A great nugget that you can get in the collateral files, if you get the original loan application from the borrower, it will show up about half the time. It’s not a requirement, it’s not a deal killer if you don’t get it, so don’t kill your deal if you don’t get it. If it comes in there, that gives you so much relevant information of the borrower. Where were they working, their social security numbers, their previous creditors, what they had in savings, retirement. It’s literally everything beneath the kimono for the borrower. You can check and see what were they working, what happened before it happened, do they own another real estate that’s attached to them? That comes in handy as well and you can go from there. 

Another thing that I would look at too is just do a quick appraisal search for the borrower’s name to see if they own any real estate in that same county. That can work in your favor when you’re buying this asset and working out with a borrower. In some cases, we have found borrowers had a rental portfolio. We used that leverage and say, “You need to work with us, otherwise we’re going to foreclose and what we don’t get, we’re going to slap a judgment against every other property you have here.” That makes them come to the table and make things happen. If the borrower has filed bankruptcy in the previous, jump on Pacer.gov and pull the old bankruptcy file. That would tell you a lot of information as well because the borrower’s got to disclose what they owe, all of their creditors, what they think the property is worth, what do they have available. That’s a really cheap piece of due diligence to download a government file to find out what they think the property is worth and all that other items. 

If you start seeing the numbers change or values differentiate, some of the things is worth $100 and you think it’s worth $75, you’re going to have some conflict there. What I recommend you do, if you’re countering, is to provide a lot of information. Provide the BPO if you got it, provide the desktop CMA, provide the photos to the seller. Show them there’s $4,000 of back taxes owed, not $400. The more due diligence you provide to the seller, the more they’re going to respect you and take into consideration your counter or your bid fade to make sense. Most of these asset managers have hundreds of thousands of assets they’re working through on a regular basis, some hundreds a month, sometimes thousands a month. They’re not going to have a chance to review every single asset. Depending on what they’re pulling their values, if they’re just doing a quick high-end, they have a lot more flexibility in that. 

Sometimes, some sellers have assets under consignment from a bigger seller where the seller doesn’t want to deal with Bob and Mary Smith on a one-off basis. A seller or a broker in this case, I work with many brokers who are legitimate, not joker brokers, they’ve got a specific hard price that they’ve got to try to get, maybe it’s a flat 35% of UPB across the board or 60% of values. The more information that you give them on your bid and the asset, the better it works in your favor. Not only will the seller respect you, but they will also understand that your bid is solid so that your bid comes in with all those information. They got some bid that’s crazy overly priced. They may realize that that person hasn’t done as much due diligence as you had, and their bid’s probably going to fall out later on once they really do the deep dive with their due diligence. The biggest thing I can tell you with this, always get photos, always have a collateral view if you can, always pull an O&E. An Ownership & Encumbrance Report will tell you if there are other outstanding liens there you got to wipe off. This has helped us reduce our bid down. It will also show other liens, like if there is an IRS tax lien. Don’t worry about that, it doesn’t justify killing your bid because you can have that IRS tax lien removed. It just takes a little bit of extra 30 to 60 days to get done. The other thing that you can’t come off is property taxes, sometimes city liens, and things like that. Hard taxes of property as well won’t go away so you can offer to reduce your bids by that. 

We have a question, “Speaking of sticking to your markets, how do you feel about Arkansas?”

I don’t have a problem with Arkansas. I just don’t see a lot of assets there. I see a little bit in Little Rock, I’ll see some in Bentonville around where Walmart Corporate headquarters are, but honestly I don’t see a lot of stuff in Arkansas. The biggest things I will tell people about specifically markets is if you can find a market in a bigger city, one of the major metroplexes, that’s great. In a city that’s got a major college, it’s even better. If you start getting down to small sub-10,000 people towns, you’d be very careful about it. That is why you always want to talk to a local realtor to get more information on that asset. Just because you get an asset of pretty looking property, if it’s in this podunk town, doesn’t mean it’s a good thing. Arkansas is okay, I don’t have a problem with it, just depends on where you’re buying in Arkansas. Easiest thing to do is check how many people live in a city, how many people live in Little Rock, Arkansas and just see what it says. I know it’s silly but you’d be surprised how many times people don’t realize that Google is a massive god of information. 

A couple of things to keep in mind is you got to look at your timing. I know a lot of people are like, “This due diligence sounds great, but what about raising private capital?” You should always be marketing, ABM, always be marketing. The beautiful thing is if you do your due diligence right, your due diligence will act and will help you raise capital. If you’re brand new, I’m sure you’re sitting there thinking, “Do I only have three days or seven days to raise capital from the time it gets accepted?” In that case, yes. If you’re sharing your information and what you got going on in the life of Joe Blow note investor or Nancy note investor, sharing on social media or sharing, “I’m making offers on eight and here are pictures of those eight.” Before you get offers approved, you’ll start getting people interested in what you’re doing. You’re getting investors teed up and ready to roll. I see so many note entrepreneurs who wait to send an email onto the database until they get a yes, and it just delays them raising. Then they are in a stressful mode trying to raise capital up to the last minute. That’s not the best thing to do.

NCS 169 | Due Diligence

You’ve got to do the little things on a weekly basis to really help you market while you’re doing your due diligence.

If you can market ahead of time, if you get your private investors ready to roll, share what’s going on, network what’s going on, and you’ll often find that you have people then ready to write a check for you when you’re ready, versus, “I’ve got to go now, I’ve got to raise capital,” and then you’re already two weeks behind the eight ball because now you’re doing due diligence and trying to raise capital at the same time. The two don’t always work well because especially working fulltime, you don’t have time to raise capital. You’ve got to do the little things on a weekly basis to really help you market while you’re doing your due diligence.

Who would rather just get an email from you saying, “I got a deal. Can you fund my deal?” No. The idea is setting up your process, “We’re working through a hundred assets. We submitted offers on twenty of those assets. We got ten countered back. We’re settling on these five. Who’s ready to roll?” That’s four potential emails that are going out there talking about your story over maybe a two-week period. That’s going to get you to that magical email where 80% of the sales are made after the fifth contact. That’s the initial aspect.

If collateral file comes back good, the value is good, the taxes are good, then you’re closing. The seller will provide you wiring instructions. They will actually send over a contract, usually it’s somewhere between 10 and 21 pages long. Don’t flip out, it’s normal. You have to buy yourself a day or two of extra once you sign the contract, just to have them, “Have your attorneys review it.” One thing to keep in mind is how fast your seller wants you to fund. If they want you to fund within 72 hours after you’ve signed the contract, you’ve got to be very careful about this. This is why you need to know where your money is coming from beforehand. If it’s going to come from an IRA account, it may drag on a couple of days because of transferring funds or getting things set up, and that kind of stuff. Be mindful of that, especially if it’s coming in on a Friday, you’re not going to be able to get much stuff done Friday. It may take Monday, Tuesday, and then fund Wednesday of the following week, versus trying to fund on a Monday beforehand. We had that happened before. The seller sent us a contract and they sent it to us on a late Thursday evening. I was out of the office, didn’t see it until Friday morning and I’m like, ” I’m not going to be able to fund this by Monday. It’s going to drag out until Tuesday or Wednesday.” They’re like, “Why?” “This is the reason why.” They’re like, “Okay, it’s fine. Let’s just get it done.” 

The beautiful thing is to communicate what’s going on. Your database is doing due diligence on you as well as you doing due diligence on these assets. How do you build confidence? You share what’s going on, you share the values, you share the collateral file, you share the Rentometer view of what the rent rates are in the market or what the true value is. That becomes a nice solid file for you with everything you have that you can provide to a funder or your Shark Tank to get people to fund stuff because you’ve provided confidence that you actually have done your due diligence. When somebody wants me to buy an asset, “Did you pull this?” “No.” “You have a picture of the property?” “No.” “Do you have a street view picture?” “No.” “Then, what the F are you doing? You’re just wasting time.” If you have not pulled that initial information, “If you called city, if you called and checked taxes, did you have a realtor driving by?” “No, no, no.” ”Then that’s my answer to you whether we’re going to fund the deal, ‘no, no, no.” But if you, ’yes, yes, yes,’ let’s talk about these numbers. Let’s dive into that and then go from there.” 

If you’re making ten offers, you’re probably going to end up with somewhere between one and two accepted that you’re going to be closing on. That’s a lot of information, a lot of assets that you don’t close on, but that number gets better over time. If you make ten offers, you may get one or two accepted that you end up finally working through, that you end up closing on. If you make ten offers and get ten accepted, you either offered too much or you’re an anomaly for the most part. A lot of people overthink that aspect of things. Like I said before, a lot of people won’t make multiple offers because they only have so much money. If you only have so much money and get more accepted, then take and do an opportunity and send an email out to your database. We have that happened just recently. Somebody only had enough money for one of the four assets they finally get accepted on. I’m like, “Close that one. Are you doing an email blast out to the rest of your assets in the data base?”

Use those approved assets as opportunities to raise capital. If you have any good pictures, “I got this approved. Here’s where it’s looking at, it could be a 20% yield that we could split. It could be a performing note.” If you’re looking for 10% of your money and it’s performing to you at 20%, great. Get some of your cheap money in at 10%, get them paying their flat interest rate of 10% to them and you’re keeping the other 8% to 10%, and you have basically infinite return on investment for you. A lot of people struggle with that. Another thing that a lot of people don’t realize is if you get an offer accepted, use your network, use your database, “I’ve got a deal accepted. I can’t take it down. You might be interested in jumping in and paying me referral fee or a wholesale fee?” There are plenty of opportunities to close on notes.

What you do not want to do is go through all due diligence, get a seller ready to sign for contract, and then tell them that you don’t have the money lined up. “I got to raise capital now.” You should have been raising capital all along. You will potentially burn bridges by not doing the right things in raising capital on your process. We had that happen. Somebody emailed me, “I’m trying to close this deal tomorrow.” I’m like, “Did you send an email to your database?” “No.” “Let’s go through the numbers. Do the numbers make sense? You’re paying $0.65 to $1. Is it paying?” “Yes, it could be a re-performing note.” “What’s the yield off the re-performing side?” “Six.” “That’s not a good interest rate. You’re not going to be raising any capital with that. Why did you make a bid on that?” “I like the property.”

Liking a property doesn’t make a lot of sense if the interest and the ROI is not there. If you’re going through your due diligence and your numbers and you’re figuring your stuff in your ROI calculators, if the numbers don’t make sense, don’t try to squeeze a round peg in a square hole. Just move on, kill it. If you find that the hedge fund’s valued at $100 is inaccurate and yours is at $50, tell them why. If they tell you nobody wants to go to $100, then don’t do the deal, just move on and say next. Next, next, next. Don’t be discouraged. I know some people who’ve made 30, 40, 50 bids before they ever got their first one accepted. Sometimes it takes time. If you’re not getting stuff accepted, then you need to get on the phone and talk to somebody. Talk to the seller, why was my stuff not accepted?

Some sellers are selling assets that they have to sell at a price that just doesn’t make sense for us. I’ll give you an example. My buddy over at Jim Wright Capital Managers, Jack Kirby. Basically a BK Chapter 13 fund. They’re buying these notes that are BK Chapter 13s at basically performing note prices. Not every one of these continues to perform. Some of them will drop off. The minute they become non-performing, he’s got to try to sell these off. They’re selling it to a point where they can’t take a loss. They’re trying to get some later make an overpriced bid on it. A lot of them don’t make sense, “They’re non-performing, I’ve got to foreclose. I’m not going to pay $75 of the value.” He gets that, but they’re offering it up for sale for somebody that might be interested. If it doesn’t make sense to me, just move on. There are some sellers I don’t buy from at all, but it doesn’t mean they’re bad guys.

One thing important to keep in mind, is if the seller tells you your bid is approved, get a contract ASAP. This is one thing I do not like that happens sometimes in the industry, is people will get bids accepted and suddenly come Monday or Tuesday, the asset got sold off. We have one particular seller that pulled shenanigans like that and we will not do business with him anymore out of Southern California. We would send bids out to our Mastermind members to get bids accepted and suddenly between Friday and Monday, all the assets were sold over the weekend. Not once or twice, but over a dozen times. When it happens more than that, then I’m lied to about things, we don’t play that.

NCS 169 | Due Diligence

Another big thing to keep in mind too as you’re getting ready to close, it’s okay to ask for references.

Another big thing to keep in mind too as you’re getting ready to close, it’s okay to ask for references. If you’ve never heard of the company before, ask. I’ve got four or five people calling us, “Have you heard of this person that I’m buying a note from? Have you heard of them? They have a cheesy website.” Talk to somebody, “Have you heard of this individual? Have you heard good things about him? Have you not heard good things about him?” Always double-check on that aspect. Last thing you want to do is wire money into a black hole that you’re not going to end up seeing the money from. That doesn’t happen very often unless you’re just not paying attention to who you’re dealing with. If you’re finding that bids are being overbid, sellers are selling stuff above what you’d pay, just move on. Find another seller, there’s plenty out there. 

Another thing that you will want to check on is call to check how much insurance is going to cost. Call Ross Diversified Insurance out of Orange, California or jump on and check out REIGuard.com. Find out what it’s going to cost for you to put a force-placed insurance policy on a property temporarily. That can help you and save you a lot of money in the long run. If the borrower’s had insurance on the property, you can always have that property removed off your policy and get a refund for the insurance you paid. It’s going to be helpful for you in the long run to have that and know what it is and have that ready to roll in place the minute you fund. 

Another thing that you may want to look at too as your closing, is you have to reach out to your servicing company, get that relationship set up whether you’re using Madison Management from New Jersey or ClearSpring or somebody like that. Get that set up before you fund so that it will make it easier when the servicing transfer happens. If you’re going to use a special servicer like the Law Offices of Daniel Singer or Polaris to work on your assets, get on the phone with them ahead of time. I would even potentially send the list of assets you’re getting ready to close on to them so they can start pulling some initial numbers. If you’ve got any phone numbers from those borrowers or anything you came across the collateral file, send that to them because that will help them be much more effective in getting the right party of contact right at the door.

Today is an anniversary of sorts. It’s not a great anniversary. Today being Patriot Day. One thing I always try to remember is where I was on this day sixteen years ago. I was actually working for Enterprise Rent-A-Car fresh out of college. I’ve been married for less than a month, a couple of weeks actually at the time. I remember how I felt when everything happened. I think it was unfortunate what happened, it totally is. I don’t believe that everything was a conspiracy by the government to make it happen. It’s sad that exists. I think we see more of that happening throughout the world with terrorist threats and things like that. The biggest thing I can tell you no matter what your politics is if you see a police officer or first responder or some of the military, please thank them. You may not always agree. There are bad apples in every bunch, but the bad apples are minority, not the majority of personnel out there.

We have people that are out there fighting for our country, fighting on a street by street basis to some cases to make America as safe as possible. There are some atrocities, I get that. There are some police officers I would not shake their hand but 99% of the people out there are good people who show up every day and they’re willing to do a job that most of us are not willing to do. To those past and current military and past and present first responders, we want to thank you for what you do. I just want you to know that we are big supporters of our first responders and our past and present military. If you are interested in taking one of our Virtual Note Buying Workshops, please email me personally at Scott@WeCloseNotes.com. We’d like to comp you in to our next virtual workshop as our way of saying yes in giving back to you. No cost, but it’s our way to say thank you for making America safe and give us the rights to do what we do on a daily basis.  

The biggest thing about due diligence, get on it, don’t be lackadaisical about it. If you’re having a hard time calling realtors and you have been waiting for a realtor to respond in 72 hours, fire their ass and get somebody else to do it. If it’s taking longer than you expect for an O&E to come in, that may be a red flag to you. If it’s in a smaller community, you probably need to cancel that bid. Your ROI calculators are important but you also got to put in a fine line on this. Remember we talked about this on the first part of due diligence. The numbers can make sense but if it’s in a freaking podunk town and it’s 300 days on the market, kill it. Move on to something else. Don’t do a deal just to do a deal. The more due diligence you do on assets, the better you can get at it, the more you’ll understand it, but don’t close on a deal just to close a deal. Don’t chase bad money with good. I know a lot of people get so tied into their business model that they’re not being flexible. Be flexible. 

One of the things I look at the ROI calculators is if it’s going to be a performing deal, great. It’s going to work out great. It’s also going to work out if I would take a foreclosure or deed of lieu. Those are the most important things. I also look at rental numbers. Some people like to hold a portfolio. You might get a lot of portfolio. You’ve got to realize if it’s on a longer foreclosure process state, it’s going to take even longer. It may make more sense to sell as an REO and get rid of it, get that money back in and double down with two different assets. What your numbers look at, be smart about the asset, don’t get OTSC syndrome, “Oh, that’s so cute,” #ohthatssocutesyndrome. Keep that in mind. Look at your numbers, get the documents behind it to make it and come up with the collateral file, a good due diligence file for you. The more you know about an asset, the more effective you’re going to be able to talk about the deal and your funding sources will also be much more confident in what you’re doing, and will want to fund a lot more deals because they know your process and they see your process. 

We hope everybody has a great day. Go out there and make something happen. Thanks for being a part, thanks for the questions. We’ll see you all at the top.

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