EP 699 – Real Estate Investment Options: Get Your Due Diligence In One BAG With Dickie Baldwin

NCS 699 | Real Estate Due Diligence

NCS 699 | Real Estate Due Diligence

 

As anyone in the real estate industry will tell you, due diligence is critical when making investments. In this episode, Scott Carson talks with Dickie Baldwin from Baldwin Advisory Group (BAG) about the different services that they offer real estate investors when it comes to performing due diligence on their real estate investments. Dickie shares the different vendors, products, pricing, and timelines for ordering services and products from BAG. This episode is taken from the recent Due Diligence Masterclass that Scott Carson taught.

Watch the episode here

 

Listen to the podcast here


 

Real Estate Investment Options: Get Your Due Diligence In One BAG With Dickie Baldwin

Before I dive into the actual deal, I want to bring on one of our vendors. I want to bring him on first to go through some things and discuss some of the different due diligence things he offers up that his team of experts and professionals do. Some of you guys may know him already. He is our good buddy out of Montgomery, Texas, outside of Houston. It is our good buddy Dickie Baldwin from Baldwin Advisory Group.

He is the chief bottle washer at Baldwin Advisory Group, been in the real estate note mortgage industry for many years. He got started when he was like five years old. That’s why he’s such a young dapper-looking good guy. He has more hair than most people do because he’s so good at what he does. That’s the beautiful thing about it. Dickie, talk a little bit about the evolution of BAG, and we’ll dive into your PowerPoint that you’ve provided and go through there for everybody.

First off, I went into the list of visitors, and fortunately, some of them are in the BAG network. I hope this will not be repetitive to them that they may pick up some more info that they may not know about. One thing that I’ve learned is you learn something new every single day. I do not care how long you’ve been in the industry.

Talking about that, as Scott said, I have been in a very long time done everything from being a realtor to a loan originator. For the folks in the mortgage realm, I did a broker correspondent and warehouse lending and put up some mortgage net branch operations across the country. I did some title search industry and have been in your guys’ shoes as an investor. I retired in 2018 because I had turned 70 and decided that after about three days of conversations with Scott, I would develop Baldwin Advisory Group, better known as BAG.

I kicked BAG off at a mastermind that Scott put together years ago and had questions asked to me by the audience that I had no clue about because Scott and I thought about by a couple of days before. With that being said, I realized that I don’t care if you’re a brand-new investor, walking in and learning from Scott, or a more seasoned investor like several people are on this show. You needed a place to go to get something done. Your time is money. If you’re not confident in knowing all the different arenas, that’s why BAG is here.

The whole scenario is a typical investor, and I’ll call them a small investor, may do 2 or 3 due diligence deals a year. By putting everything together into one bag, it gives the brand-new investor the opportunity to be playing with the big boys. What I mean by that is I went to the vendors I’ve worked with throughout the years that don’t like working with a one-off. They want somebody doing, and this is everybody’s goal to be doing hundreds and hundreds of deals at a time.

By the development of BAG, you, the brand-new investor or a small investor, are able to take advantage of what I call strengthened numbers. I’ve gone to the vendors. I am the actual client with the vendors. If I get one deal from Scott, one from Laura, and one from the bill, all those mount up to a lot of strength with a vendor. This is what BAG has done for not only the brand-new investors but the guys that are sending me 50, 60, 70, and 80 deals at a time to assist them in their due diligence. That’s the nutshell.

That’s the beautiful thing. When you started this back in 2019 or 2020, it was the whole point. For those who don’t know a Rolodex or a database of contacts vendors, you help folks shop like they’re able to shop at Walmart, where you’re basically Sam’s. You’re helping them get a little bit of a discount in bulk because you’re the one ordering it. The vendors are working with you. There are no extra added fees or costs above what they would be paying individually. You basically helped them have that access.

I would say the speed of completion, too, because when you’re working with a company that’s used to doing a lot of BPOs and a lot of other things, they’ve got the systems to get these things delivered versus trying to go out and find it all yourself and order it from somebody. It takes 7 days versus 2 or 3 days out there. You also are very good about bird-dogging your orders, following up, and making sure things are getting completed. Make sure that we’re happy with the vendors and that they’re doing what they say they’re doing, too.

I’m only as good as what the vendors are. If I put you with a bad vendor, I’m not helping anybody.

The reason we had Dickie come on first here is because we’re going to cover a lot of different things throughout the day. I wanted to bring it up. A lot of people like, “I’m going to watch the first hours, and I’m going to pick and choose.” I want to make sure that you have Dickie’s website and contact information saved. Most of the time, this is how the conversation goes with Dickie, and a lot of investors like, “I need to pull this. I need to talk to you. Call BAG. I need to pull this. Who do I need to order this? Call Dickie.”

Dickie puts you in the right spot. He’s your one-stop shop for everybody. Therefore, if he does it, he will also find somebody for you to go from there. Dickie, I know you’ve got a PowerPoint you wanted to share with everybody to bring up and walk through the different things you’re doing for due diligence. Feel free to bring it up.

I’m going to start off with the PowerPoint, and we’ll go to the website. I put this little PowerPoint together after working with one of my clients. I’m showing the progressions of what can happen to your advantage by doing the due diligence. Baldwin Advisory Group goes by BAG and one BAG for all your real estate services.

I’d like to start with the first thing, and Scott mentioned this in his earlier presentation about BPOs, valuations, etc. There are different ways that you can go about finding that value. You can do Zillow or RealtyTrac. You can try and find a local realtor that understands investors. There are a lot of realtors that don’t like working with the investors.

With that being said, I’m going to show you the first thing, which is a BPO or Broker Price Opinion. What are the advantages of coming to someone like BAG in order to do a BPO or Broker Price Opinion? You can get on the internet, try and find a local realtor, have them go out and take a look at the property and give you a value.

In most cases, in my experience, when you try and do that if you’re lucky enough to find a realtor to do that, they’re going out to the property for one thing and one thing only, and that’s hoping to get a listing more so than a true value. By coming to the BAG, I’ve got third-party vendors that have vetted agents all over the country. I can do both residential and commercial. You might say we’re talking residential here because commercial can be a different can of worms.

In the Broker Price Opinion, what they do for you is go out and take a look at the actual property. They come up with an as-is value. If there are any apparent visible exterior damages, they can adjust, keeping in mind that they are not contractors, but to give you their best guess as to if the painting was done or a siding was done, what is the as-is value? Before we get into the meat of a BPO, I get calls all the time, “Please have the agent go and look in the window and take a picture.” That isn’t going to happen.

Why won’t that happen, Dickie?

We have had some agents chased off with guns. Everybody totally understands what an exterior BPO is. I can do an interior BPO as long as I have a lock box code or a POC, which is a Point Of Contact. In the note industry, 99.9% are going to be exterior BPOs. The agent will be taking the pictures from the street. They won’t go in the backyard or on the sides primarily for their own protection.

With this being said, a BPO is where an agent will go out and take pictures of the subject. Through MLS and, in some cases, other sources, they will find three comps, hopefully, within the neighborhood that they can use and make adjustments for. I’m not going to go into great detail on the things that an investor needs to look at when they do a BPO because there’s a lot of information on this, but the proximity to the subject, you to be less than a mile, if at all possible.

A lot of times, they’re not comparables to the subject, but they try and find comparable sales that are within the neighborhood. These are all the descriptions of the bill, the rooms, etc. They will make adjustments for the value or the cost. They will also get three listings in the neighborhood. Once again, they, the proximity of the properties and once again, make adjustments. That is where they derive a 30-day quick sale, a property as-is or repaired, and any comments the agents may have about the properties.

This is another advantage to using a third-party vendor that has vetted agents because a lot of the forms and formulas that are going to the local agent may not have. Once this report is completed, maps of where the subjects are and different views. This house happened to be on a corner. They were able to get some side views, the street view. Here are pictures of all the comps, the three sole comps, and the three listing comps to come up with the value. What happens after this?

The agent gives a report to the third-party vendor. It then goes into a quality control that will review this BPO. If, for whatever reason, QC does not agree with the comps, distance, pictures, whatever, they will send it back to the agent for revisions. Sometimes, it goes back and forth 2 or 3 times. The whole point about using a system like this is an extra set of eyes, which I think is absolutely huge when you’re trying to deal with value.

There are times when the client may not agree with the value. I am, and the vendors are more than willing. If you have verifiable comps that you can support, please give them to me, and the reports can go back in for revisions, whatever it happens to be. You’re drowning because your house is a three-bedroom. Compared to a five-bedroom, a lot of times, that doesn’t work.

You’d need comps within the last six months. You don’t want to pick up a comp that’s been sold three years ago when there’s another activity. We all know that values go up and down. We’ve had a significant increase in values over the last couple of years. Who’s to say what’s going to happen in the future? This is a BPO. Scott, are there any questions on this?

One thing I wanted to bring up here, and I love it that you brought this one. One of these comps is 8 to 12 miles away on this actual BPO here, which is a great example of a lack of potential solds in the last 90 days. That’s definitely something to take a look at too. I know Laura’s working on a comp in Cleveland on one where the property they’re looking at is across the side of the tracks from where the comps were pulled. Do you ever see that sometimes happening where comps are not comparable in some cases to boost a value or a purchase?

That’s why we try putting as much information together to help you make that decision. We got the listing which is twelve miles away. It could be divided by railroad tracks or a highway.

NCS 699 | Real Estate Due Diligence

Real Estate Due Diligence: Your time is money.

 

This is why it’s always important to trust but verify, ladies and gentlemen. If you’ve got a BPO in the collateral file, the seller is providing a BPO. Look at the dates. I’ve seen funds put three BPOs in a collateral file, and they go value off the highest and the one that’s got two comps and aren’t even close to where the property is at.

We called them on their bluff, and they’re like, “Okay.” I’m like, “Come on. You can’t do this. You wouldn’t be accepting these comps if you were buying, but you’re trying to accept them and use them for selling.” It’s like Dickie says. Quality control is important. Not to trust the BPO by what’s on the very first page, but looking and doing a deeper dive into it.

In all fairness to a BPO, you can have two agents like you’re going to have two attorneys in a room, and there may be a variance. I will be the first one to be right in the middle of a transaction. If one agent says a property is worth $29,000 and another says it’s worth $100,000, I’ve seen that. The key to this is that this is done by vetted agents. The third-party vendor pays these agents to go out and do one thing and one thing only, and that’s to get a value, not to get a listing. To me, that is huge. If they have an agent that continually does not meet the standards of the third-party agency, they will take them off the panel.

What’s it cost for a BPO these days?

Typically, an exterior BPO, as long as it’s not rural, is $100. That’s for an exterior. What’s happening now also because of gas prices and everything that’s going up, especially on the rural, I’m seeing the fees not get excessive, but $135, $150 strictly because of drive time.

That’s an exterior. If it’s an occupied asset and people are hanging out on the front porch, that realtor’s not going to get out of the car and take photos. It will be a slow crawl drive by.

That’s a great point. They’re given the choice of occupied, vacant, or unknown. I had one that the agent came back vacant, but there was an ice chest. There were chairs in the front yard. I personally sent it back to QC before sending it to the customer. They went back to the agent, and the agent put a full, which maybe he should have, but he didn’t, but it was corrected, comments about the subject property that the doors were wide open. This was all trash. The people had walked away.

The agents make their best guess as far as occupancy. Let me caveat another service. If you are concerned, and we’ll talk about the depth of it, I have another service called door knocking, where I have armed individuals who will go knock on the door and find out if a property is vacant or occupied. That’s another service, and we’ll get into it.

Besides BPOs, what’s another service?

Real quick, this is an exterior. We’re talking pricing. If I do have that lock box and the POC either-or, I can do an interior as well as the exterior for $130, typically, as long as it’s not rural. They will go in and take pictures of every single room. Scott, you’ll agree that a property may look good on the outside and have a real, real high value, but the agent hadn’t seen the inside. If ever available, try and do an interior, but in the note industry, in most cases, that’s not an option.

If you have the ability to get into it, legally, not breaking a window, where there’s a lockbox or somebody there to meet somebody to show. We’ve had borrowers that individually pull up an interior BPO, but 99% of the time, it’d be an exterior, and that’s why we’re going to talk about some of the things we do online.

I worked with a lot of banks and lenders that came to me to do either an exterior and/or interior BPO. Typically, these are hard money lenders, but they want that analysis when they’re loaning out monies. Let’s talk about the next product. Let’s say you are okay with the value and don’t want to do a BPO. What are your other options? I’ve got a product called an AVM, which is an Automated Valuation Method where they will come up with a value of more or less of a neighborhood, not the specific property.

The AVM can also be tied into what is called a property condition report. These pictures are done for a property condition report, but the ABM has the maps also. What I personally like about the AVMs is it’s got a lot of pertinent information about the subject that’s available on through automation. It will have a whole bunch of houses that have either sold or been listed within that area.

In some cases, you got to do a lot of reading on this, but here’s the subject. It will show the list date like this was in January of 2021. It was a listing. It’s sold for $72,000. It may not be an exact comparable to the subject. Sometimes there are pictures, sometimes there are not, but it’s a breakdown of each and every comparable through the automated valuation method. It’s pretty massive.

I’ve got a lot of clients that are okay with the value, but they want to see more about the neighborhood. This report can be tied into a property condition report, or they can be separate. You can do an AVM and a property condition report. When you do a property condition report, it has pictures of the subject and then answers these questions. Is the property visible? Does it appear occupied? The location, the property type, does it have a garage?

It’s a very basic question. There are lots of charts that come along with it, but these are their pictures from the property condition report. My vendor requires the people, and I say people because a lot of times, these pictures are not done by agents. They’re done by firemen who have days off or handyman or somebody who is picking up extra money. The property condition report typically is only $45, and the AVM is $25. Any questions on these?

No. It’s a great way to look at some stuff on the front-end side. What’s the turnaround time for a BPO on average, your property inspection reports, and AVMs?

Typically, on the BPO, once again, as long as it’s not rural is 3 to 5 business days. I have turned these around in as quickly as two hours on the property condition reports, but you should plan around 24 hours.

Let’s set some 24-to-48-hour timeframes on there. Two hours is great, and that’s over-delivering.

We can do that.

You’ve seen it happen. If it’s out in Pottsville, Arkansas, it might not be two hours. It might take two days. Keep that in mind, everybody, if you ordered it on a Friday afternoon, it may not come until Tuesday the next week because of things. Let’s try to have some common sense when it comes to ordering things.

These are some great products as far as valuations. To me, a picture is worth a thousand words.

You showed some great photos that people can use to pull it off and help with the marketing. To help add to the fact that it is occupied. We see that there’s got a trailer and emotional equity where there’s stuff on the front. There’s landscaping or a flag flying on the weekend. Something that looks nice and that helps you in raising capital market that deals with your potential investors to fund the deal at the same time while you’re going through your due diligence aspect.

Here’s the thing. Some people say, “What happens if you don’t have that under contract or the deal falls through?” That’s a beautiful thing to go back to your investors and say, “We’re doing our due diligence deep dive, and this asset didn’t pass the test because of A, B, or C.” That doesn’t show a sign of weakness. It shows a sign of strength that you said, “We’re being cautious with your money. This deal didn’t make sense,” and go from there.

I might also mention Scott. I’ve got a lot of clients that have performing notes that they are receiving monies like clockwork. As you very well know, most note investors don’t invest in their own backyard. The client on this one lives in Arizona. These pictures are in Indiana. He’s not going to get on an airplane and fly over and take a look at this. I do have a lot of clients that have portfolios that, about every six months, will order a property condition report to see what the property looks like.

Once again, a picture’s worth 1,000 words. If that house was being trashed on the outside, you could pretty well figure it’s going to be trashed on the inside. The next thing on the due diligence is I didn’t realize I’m the best BPO valuation service for 2021 and 2020. Two years in a row, I was nominated and voted in by investors all over the country that BAG is the place to go to get a BPO. It made me feel good.

We’ve got an idea of the exterior and interior value of the property. You can send a property inspection report or do an AVM. One thing you didn’t mention in the AVMs is a competence score. Can you go back and talk a little bit about what that is? I know somebody is going to ask you a question about that if they don’t understand what that means. I want to highlight that because it’s something that works in your favor or doesn’t work in your favor. The confidence score says 50. What does that mean, Dickie?

NCS 699 | Real Estate Due Diligence

Real Estate Due Diligence: In the broker price opinion, agents go out and look at the actual property, and come up with an asset value.

 

This will scale from 0 to 100. They’re saying that this property, through all their automations of the neighborhood, this property is around $55,000. You can feel more and more confident the higher this competence percentage gets to. Most of them are anywhere between 50 to a hundred. It’s very seldom I have anything below 50. This is saying they’re estimating through automation and all of these different comps that we had that it’s $55,000. It’s saying a quick sale is $38 800, and for a 90-days sale, the suggested list would be $55,000.

Your AVMs will be basically AI for the most part, and your BPO is going to have those set of eyes looking at it and doing a little deeper dive.

On an AVM, they do not go out and take pictures. This picture is part of the property condition report. This particular client ordered a property condition report in conjunction with an AVM. That’s why this picture is in here.

Otherwise, it wouldn’t easily have a photo.

Keeping in mind, if you want just an AVM, you can do that. If you want just the property condition report, you can do that or put them all together. The next step in due diligence, which is absolutely crucial, is. I hope everybody understands these are there for your benefit. This is what you’re going to be doing. You’re going to be analyzing all of these different pages of documents and ordering BPOs from Baldwin Advisory.

What is a title report? It can be done online, which the vendors that do these have subscriptions to the different counties, county seats, whatever, to gather this information. Are you able to gather some of this online? In some cases, yes, but not to the depth of what the title search vendors can do. It can be done online and also by an abstractor. An abstractor is an individual that does this day in and day out. They physically go to the courthouse and find all recorded information.

You may be able to get some things online yourself, but once again, in most cases, not to the depth of what a title search can do. You’re going to hear the term O&E, Owner, and Encumbrances. That was the term used back in the old days. It’s more of either a current owner search, a two-owner search, or a full search. A current owner searches, basically what it says. It’s the information recorded about the current owner. A two-owner obviously goes further back into deep history. A full search, I’m doing four full 40-plus year searches for a client in Illinois.

The full search goes back to the creation of the property, all the way back to that. A two-owner search is what you’re going to pull most of the time in the note industry. We always like to do a two-owner search, especially if you’re buying a contract for deeds, a note, and the name does not match with the county records is what you’re buying on note. If you want to, definitely take a look to see what happened with that. Is there a quick claim? Is there a foreclosure tax sale?

Back in the old days, the O&E or Current Owner Search was the norm. As these loans start selling, as Scott said, or have a contract for deed, you want to make sure there are no hiccups. If you recommend, what people ask me every day is what should I order? If it’s a performing note and it hasn’t bounced around from company to company to company, I personally feel that a current owner is okay.

What is the cost of this? Typically, I’ve been able to have a nationwide fixed price, and obviously, things are going to be changing because of gas and all that again, but you’re looking at $85 for a Current Owner Search nationwide. I tried to get a fixed price because it’s so difficult if you have, like, this deal is in Indiana, and it’s in Vigo County. The way that it’s typically done in every state, every county has different pricing. My vendor agreed if I could come out with a set price when you’re looking at your due diligence, you’d know that I’m going to be spending about $85 to do a Current Owner Search. And I’m going to be spending about $100 for an exterior BPO unless there’s something about it.

I totally agree with Scott. The two-owner, for me, is the way to go because most of these notes are trading hands after hands. They’re contracts for deeds, etc. This goes further back into deep history. This product is typically $100. For $15, you get a lot more information. A lot of times on the two owners, though, they will charge for copies, and we’ll get into the copies in a minute.

Scott, I’m sure this has happened to you too. You’ve had so many people say, “I can go to the courthouse and do this.” What is your time worth, people? I live in Montgomery. It takes me an hour to get to Houston. If I’ll go to Harris County, how long does it take to drive there to go through stacks and stacks and stacks of documents that you may or may not know what you’re looking for? You get them copied. You come home and start looking at them.

“Wait a minute. I missed something. I got to get back in my car.” Outsource it to the people that are professionals and do this every single day. What information are you going to be getting? Details about the property, the current owners, the tax information, the deed information, and all the different changes of deeds. It will show if there are any judgments or liens and gives legal descriptions. My vendors do this little thing. This is a quick shot on the taxes.

A lot of vendors don’t offer this little sheet. Here are the actual documents from the county’s tax assessors. It’s a breakdown of the previous and current taxes. Were they paid? Were they not paid? This is a little write-up, which a lot of other vendors don’t offer. This is all the information that is in the title search. You are talking documents, Scott. There are 80-some-odd pages of recorded documents that are part of this search. Every one of them is important.

You’ve shown three quick claim deeds showing a transfer of that asset from one individual to another individual. That’s part of checking the deeds. You can see the quick claim is Home Opportunity, LLC to Onyx & Shadow Equities. That’s an important thing to know that that was transferred. It’s probably a contract for deed. That’s what you easily see in a transfer. It was transferred from Home Opportunity to Onyx & Shadow Equities. They could probably know the entities properly.

It’s a lot of paperwork, but as Scott said earlier in his presentation, you’re going to be going through documents. Here’s another thing, if you don’t understand all of this and have somebody like Scott to help you, I also have a service called Collateral Review that we’ll go through these documents and basically tell you what you do have, what you don’t have, and what you should have in order to make an intelligent decision. All of these need to be recorded. If you don’t know how to record it, BAG can also help you get this recorded.

You are showing the recorded documents here, so I want to make that clarification. This was provided to go on our search because this is stuff that is already recorded. And you see the stamp up there. What Dickie’s talking about right in there is if you’re buying it and you get the quick claim deed or the assignment sent to you from the seller and need to get it recorded. He’s got the third-party vendors to help you record it at the county. Sometimes, they’ll do it electronically. Sometimes, you’ve got to send it in. Sometimes, you physically have to walk it in.

It varies from county to county. Some counties are very specific in how they transfer docs, whether it’s got to be on 1 or 2 pages or three-inch spacing at the front or two notaries or witnesses. That’s why it’s important to take a look at these and understand if what you’re seeing filed with the county looks a little bit differently than once it provided you as far as witnesses and notaries and stuff like that. You may need to get that assignment, quitclaim deed, transfer doc redone, or fixed corrected.

Due to what’s happening and in costs, a lot of these counties realize that they can make money off of these copies. Hard cost is the direct cost of what it costs the vendor to get this information obviously is passed on to you, the investor. There were 50-some-odd pages of documents that go with that title search, but let’s assume that you are looking at a collateral package, and there is a title search already in there that was done. This client is selling the note to you. You can do what is called an update. It used to be a year. It’s being narrowed back down to about six months that we can do an update of that previous title search and show anything that has happened since that day. This little report typically is around $35.

That’s cheaper than the $100 or the $130 to do that, but that’s one thing to keep in mind. Something less than six months old pays the $35 if it’s the same vendor.

Yes, all of these things are our costs. We’ve talked, Scott, about approximately $200 to do the standard title search in BPO. Those two items could literally save you thousands of dollars in mistakes.

That’s what we said at the beginning. Your due diligence is your insurance policy, making sure it’s a deal, not a dud. There are other things you look at. If you’ve got a new BPO on, they’re happy with that, great. You may not be ordering a new one. You’d be reviewing it or maybe doing an AVM, but these are the two biggest staples of what it comes to doing your due diligence. We’ll walk you through some of these as well, too.

Those are the beginnings. The reason I put this PowerPoint together is an actual case with a client. I’m not going all the way back to the top, but the BPO and a title search originated in February of 2021. In August of 2021, this client was selling this note as a partial. He did the BPO and the title search back in February to show the buyer who was going to be doing the partial. He ran the AVM, property condition report, and this title update in August. I even recommend to people that have notes that they can update the title search because you never know when a lien may have slipped through and been recorded against the property.

That’s the thing I wanted to ask you on that. What things do the title reports or title updates not cover? We’re talking utility liens or utility bills, or what’s not covered in that?

In most cases, because they’re not recorded through the county, our water and sewer code, and municipality liens. There are other services that are available that you can order through BAG. There are some places where they can put liens against the property. Here’s what happens when a property is sold. That’s when the actual title company will contact the water, the sewer, and those districts to make sure that there are no liens. If it’s not recorded through the county, it’s not going to show up on a title search.

That’s one of the why we always tell you to call the utility to the districts as part of your due diligence. See what’s owed because a lot of times, those water bills will follow along behind it in some cases. You might be getting a cheap asset because there’s a big water bill, specifically buying a lot in Baltimore, Michigan, or Chicago. There are so many cities that have had some blight to them. Sometimes the water bills are pretty excessive because the copper’s been stolen, and you’ve got an indoor water feature.

I want to show you one other product that I am thrilled about. In this update, you can see all of the new information that has been recorded. That’s part of the update. The next product is what I call a tax deep dive. It is a separate product from the title search. You wouldn’t want to do it all the time. This little product runs $35 plus any hard costs. Once again, whatever the county may charge to release the information.

NCS 699 | Real Estate Due Diligence

Real Estate Due Diligence: A BPO is where an agent will go out and take current pictures of the subject. Then through Multiple Listing Service (MLS) or other sources, they will find three comps they can use.

 

Here’s an example of where it can be used. If you have a title search and it shows that there had been a lot of delinquent taxes, and they’re all of a sudden paid, it’s. They don’t typically show who paid those taxes, which means it could have been a tax sale, which a lot of times isn’t recorded. In this little deep dive, you can go in for taxes. That’s all it does. It’s a good caveat if you want to dive into the taxes, and I’ve got some clients, Scott, that, in their experience, they don’t run into that many liens on a property. They will order a deep tax dive.

It’s definitely important, especially if the names have changed. I’ll give you an example. In Wayne County, Michigan, they’re going to want you to sign up to be able to access a lot of their online information. There’s a membership. Paying for a property tax statement can save you time. Scott asked a question about he’s busy during the day. He doesn’t have a lot of time to pick up the phone and try to track down and call a tax office across the county to talk to somebody about it. This is that $35, $40 that will help you get that done and run while you’re working your full-time job.

This report went into a lot of times more details in 2021. 2015 through ’19, property taxes were paid to avoid going to a tax sale. This is one example. I’ve got to mention it, and I’m glad I pulled this up. You have to do what’s called a mail-in to get a tax cert in four states. That’s a tax certification. Those states are Pennsylvania, Massachusetts, New York, and New Jersey. A lot of times, the real live tax information will not be on a title search because it is going to require a mail-in to get the tax cert because the information online may not be the final say.

It totally makes sense. That’s why you always double-check with that. Dimitra asked for a tax deed sale to wipe your first position note out. The answer to that is yes. You have tax certificates in tax deeds. The tax deed might be out, and you have to know what’s going on in each state. Some states will have a redemption period where you can come back in.

Here’s what happened. A lot of times, taxes will be sold, and you’ll have a period of 1, 2, or 3 years before the person that bought that tax certificate, like in Florida. Tax certificates are sold where you’ll have three years to come back and pay off the taxes, or they can enforce a tax sale that wipes out your first lien with the enforcement.

At the tax sale, it gets bid up above what was owed taxes. That overage goes back to you, but you don’t necessarily want to lose. That’s why it’s important to look at your taxes owed and reach out to people using the service because if they’re not paying their mortgage, they’re probably not paying their taxes and their insurance. You don’t want to invest in something and have your investment get wiped out by a tax sale. It’s always important to know we have bought notes in South Carolina. It had gone to tax, but there was a one-year redemption period.

We purchased a note from a fund knowing that it wasn’t going to tax it like a month earlier, but we knew we got a big discount because we had to pay $8,000 in taxable. We paid that $8,000 tax that reinstated everything, and we were fine to go. You have to know what’s going on state-by-state redemption period-wise and stuff like that. Each state is a little bit different.

The caveat like on this particular property in PA, look at all these links. Here’s a breakdown because what happens in a lot of states taxes are turned over to a tax service collection agency. I’m not going to read every line of this, but the unpaid taxes went to Jordan Tax Service, which does all of Pennsylvania.

We’ve also seen this too, Dickie, them foreclosing and taking the property back. During COVID getting judgments and going in after the entities to collect deficiency judgments from the banks and collecting their taxes directly from people’s accounts.

Here’s one that shows this particular property was a tax sale. This one gives the last day to redeem. Do you understand why I call this a tax deep dive?

Yeah, that May 2nd date is coming up fast down there at the bottom.

Sometimes if it’s available, they will put who bought the delinquent taxes. Scott, one last thing, if I could, I would like to show you the BAG website and quickly go through other things once you may already have the asset. Baldwin Advisory Group, www.BaldwinAdvisoryGroup.com. There’s my phone number and my email. Scott likes this. Even though I’ve got a brand-new website built, Scott likes this one better, but this is a breakdown of the different services offered by BAG.

We’ve discussed the BPO and the title search. People that are coming to the website can go and read more about what a BPO is. Although there is an order form on the website, I personally, Lauren and the folks that deal with me on this call know that I like to have an email tell me what you want. In that way, we can start a chain on that particular property. This is simple to fill in given the information, the subject property, is it an exterior or interior?

I do a lot of full appraisals for my lenders. Hit submit, and that immediately comes to me. Each one of the different services has in order for them. Here’s something that I want everybody, please, on this call. If you have not already completed it, go to “REO and Notes.” Basically, what I do is with this form, it’s dated. You give me your contact info. You let me know if you’re a buyer or a seller. Are you a private or institutional group?

If you want notes, you check off performing/non-performing contract for deed, residential, commercial, or bulk individual. As Scott mentioned, what specific states do you want? I’ll tell you in a minute why I need this information. Any comments you want to put in? If you’re an REO buyer, you can check off what you’re looking for.

Any comments hit submit, and this comes to me. Why do I have this form? I’ve got sellers in my network who periodically ask me to help them sell their assets. I will say I do not distribute tapes if I ever get them. The reason I do this form by states, let’s say that Scott completed the set form and he’s a buyer and wants a non-performing note in Idaho.

Karen is a seller. She’s got a non-performing note in Idaho. I simply put Scott and Karen together. I don’t get in the middle. I don’t chase documents. I don’t tell you what color the house is. I don’t talk pricing. I let you work it out between yourselves. If a trade goes down, how do I make money? I collect a point on the selling side. It’s a win-win for everybody. Any comments, Scott, on that?

Question for you on this. We mentioned something a little bit earlier on your collateral review when someone got the copy of the collateral file. What’s the price point for a collateral view and turnaround time on that, Dicky?

Typically, it is called the quick view. It was around $35. For the underwriting, it can go up to approximately $150.

By underwriting, that’s where they’re looking at the collateral file and making sure the assignments are there. The deeds are there. They’re basically making sure you have everything in there that you need to be able to foreclose or what you need in buying that note.

They’re basically reading every single word of that collateral package. I do have attorneys in my network, which are typically charged by the hour to do a collateral review. It’s a great source.

Having somebody that’s doing it, a third party versus an attorney, can save you a ton of money. It’s $250 an hour is the minimum that attorneys charge. Whereas a full deep dive in the collaborative that you said it was $130, $150. It’s well worth the time. You don’t know what you’re looking for, and you get a PDF it’s 1,500 pages deep.

You got ten files. Please, everybody, if you are interested in selling and/or buying assets, as Scott says, my Rolodex is big, and I’m here to service you. If you need to originate a seller finance mortgage and I’m excited that this particular vendor is now also going to be able to do it, and it’s almost a finished, traditional origination night nationwide, which is huge.

You got property preservation in case you need a loan.

For instance, I’m working now on three California properties where not only did I do an occupancy check, but if they were vacant, we went in and changed the door locks. We put a lock box on and took pictures of the interior as well as the exterior, and put a bin to clean all of the trash out. If it was visible, any repairs that might be needed. I do winterization in the wintertime. Scott, you’d be surprised how many investors have vacant properties in the north. We’re in Texas. We don’t know what winterization is.

Let’s think about this. What if you have a vacant property down south where the spring has already come, and the grass is growing? It’s a vacant property, and there’s trash out there. What’s going to happen, Scott? Are you going to get code violations? Here’s a little lawnmower. We can go out and cut grass. I’ve got various money lenders, titles, and escrow. I don’t want to get into depth on this, but Scott, I hope that at some point in time, you talk about lender title policies, which I believe in the note industry being able to do a traditional closing or the lender title policies.

That’s one big thing about owner finance that a lot of people try to go. They skip off, and I’m like, “No, if you’re going to originate, get your lender title policy. It’s so important. It adds value to that owner’s finance note.

NCS 699 | Real Estate Due Diligence

Real Estate Due Diligence: An abstractor is an individual who physically goes to the courthouse to find all recorded information.

 

After twelve months and that thing season, you’re selling that for almost par. You run into a situation in which you need a title curative. In other words, there’s hair that needs to be cleaned up from reading the collateral review or the title.

A great example of this, especially the release tracking, we had this happen multiple times in the past when you buy notes. Banks sell notes. They don’t always go back and release. Sometimes, they’ll forget to release the existing lien that was refinanced out. We’ve had that happen with Capital One, Wells Fargo, and some of these other things out there.

You’ve got to go back and say, “We’ve got to track down who can sign off to release this lien. That’s still in place that needs to be released and removed from the title aspect of it.” When you pull your title and see liens that are outstanding still on the title, this is a great way for a vendor to reach out to. What’s it cost for title curative and release tracking on stuff like that? How’s it run?

Absolutely. We’ve already talked about collateral review assignments and recordings. Instead of keeping your files in a cardboard box in your bedroom, we can store originals. You need mortgage servicing. If you want to open up a self-directed IRA, got tax issues, I’m real proud of this real quick. Scott has utilized this product. I have, and it’s growing an investor-based, investor-friendly realtor network, where many other realtors, there are a little over 100 now.

The goal is to have one in every major city in the United States. The realtors try and vet them. Since you’re out of the town and they’re your feet on the ground, they can not only list and sell, but many of them, through their own hands or through their local, can do a lot of the preservation.

They can change those door locks or clean an empty house out. A lot of times, it’s a lot cheaper than the traditional property preservation vendors. I do want my realtors to be able to make money. I hope that all investors realize that these are people too. If they drove from their office to the property and inspected for you, they should be compensated in some shape, form, or fashion. That’s friendly. At any rate, if you’ve got a realtor that you have worked with, that you’re extremely comfortable with, and they understand the investor world, please let me know.

I will definitely put them in my network. One of your investor buddies, because we’re all family in this industry, you’ll be helping somebody else out. I’ve got a full network of investor-friendly real estate attorneys that do foreclosures, evictions, etc. Skip tracing is on here. Scott can tell you from previous. There are a lot of scammers out there, and I’ll be the first to admit I had a scammer that collected upfront money and went dark, but they are no longer part of the network.

We can take care of the basic skip tracing main phone number and email. There is a new box that’s coming in, but a lot of the other services, I mentioned door knocking, which is huge. I can do a one visit for $60. That’s where they will go to the house. Find out if it’s occupied. If you’ve got documents you want either handed to the occupant or left on the front door, I can do that. They also take a picture, or you can do a three visit, which is $80.

The three visits are if the place looks like it may be occupied, but nobody’s there, they’ll come back the second time. If nobody is there the second time, they’ll come back a third time at various times during the day or week. They will also leave documents. It’s really difficult a lot of times to get the direct contact info from the occupants. The latter typically is introducing yourself, “Please make payments to so-and-so.” If you need to CPA, I’ve got a nationwide network. There are a lot of brand-new services coming in that are going to be available all the time.

Let me real quickly explain how BAG makes money. This product and this product and everything that falls in there, I am the actual client. As I told you, a typical investor may do five BPO’s a year. BAG does hundreds of them monthly, same with a title search. These are privately labeled under the BAG logo. I am the actual client, but because of the volume I do with each of these entities, I can pass on a great price to everybody, be it an individual or the guy who has given me 50 deals at a time. I’m invoiced by these people. I, in turn, invoice you and pay the vendors. Typically, I do not send an invoice out until the job is completed.

Knock on wood of the 5,000 plus BPOs that have been done, and I’ve had one person stiff me for it for $100. I’m here to help you. I feel good about that. All of these other services listed, if you need any of these services, I’d directly introduce you to whoever that vendor is. I’ve got so many vendors and so many products.

Unfortunately, I don’t get into the details about each and every one of the services. That’s why I put you directly with whoever that bender is to discuss their pricing, turn times, etc. When it’s all said and done, you pay the vendor, not me. Full transparency, I do have referral agreements with my vendors, but because of the volume I do with these, I do several hundred referrals monthly, so they don’t raise their price to pay Dickie. That’s pretty much what BAG is all about?

I got a question here, Dickie. Do you have a price sheet where you could provide to us that we could throw in there so everybody has a bit of an idea? We covered a lot of information there. You have a price sheet that we could upload the manual and everything for everybody to have there.

I do have the set prices as we talked about on the BPOs and title searches. Keep in mind that there are always instances, but I will never proceed if the price is higher than what I’m telling you because an abstractor could be charging copies. As we can see in the title report, how many copies are they going to be? We don’t know. How much are they going to be? Every county and state is different. Some of them charge $1 a copy. Some of them charge $0.50 a copy. I can give prices, but keep in mind that if it exceeds that, I will not proceed, and I’ll get your permission to move forward.

Two questions for you. First, let’s start with David’s question. David asked the question, does the collateral review underwrite result in an opinion on whether this will be a good investment or the end result of that? No, they’re not going to give you an opinion. It is up to you to decide what you see. They’re simply going to show you if everything is there or if there are any deficiencies as far as missing documents. I’ll get one of these back, and you’ll say, “All the assignments are there from A to Z to transfer, but they’re like, “A lounge is missing.”

In that case, I’m okay going in closing because I know I’m going to lounge created very quickly and pretty inexpensive, but there’s an assignment missing, which I’ll share on this one deal at work. We’re waiting on assignments. We’re not going to close until the assignment is cured. That’s what that means. You have to make the decision if it’s a deal or no deal. That’s why you have the collateral review to identify if there are any missing holes that would stop you from foreclosure, the transfer, the docs, or the transfer of the assets correctly?

I was going to support what you’re saying because you may have more risk tolerance than what that collateral review does. They don’t want to be blamed for making a mistake by telling you to buy or not buy.

Nobody is going to tell you to buy or not buy. That is ultimately up to you what to offer and whether the numbers make sense for your investment. You have to realize that everybody out there, you’re the final say. A question for you here. Have you thought about using Transient for skip tracing and getting signed up with them?

No, I have not because I could look into it. The sources that I had. Once again, in all transparency, Scott got involved with this individual way back when.

It wasn’t a lot of money. It was a little bit of money for them to pull some information. They didn’t return the information, and that’s okay. It’ll happen with vendors, and Dickie was the first one to come and say, “Let’s get this fixed. I got somebody else new. Let’s test them out.

In that period, I have a vendor I’m signing their contract to where I can go because of the volume I’ll be doing. They’d given me access to where I could go and put the people’s names and things like that. We’re going to test that out to see how that works.

What about Pacer reports? Are you able to pull bankruptcy reports? Where’s that done on the website?

It would fall under the title arena. Keep in mind that if a bankruptcy obviously is recorded, the front pages will show up in the title search.

I didn’t know if you had the plan or were able to log onto Pacer.gov to download the reports as far as the plan.

We can go in through the title service. Honestly, I don’t do that many of them, but yes.

We’ll talk a little about that later on as you’re going through stuff here. Dickie, once again, thank you so much for coming on and going through some of the different ways to order this stuff, to secure their investment, help answer those questions and identify if they’ve got a dealer.

NCS 699 | Real Estate Due Diligence

Real Estate Due Diligence: A typical investor may do five BPOs a year. Baldwin Advisory Group does hundreds of them every month.

 

We make a good team.

It’s the same here. Thanks so much for coming on.

I’d like to say for the folks that are on here that are using BAG, thank you. I appreciate it. For you that have any questions, please, do I work a lot of hours? What I tell everybody, Scott, and I told you this, I only work half a day. If I can’t get it done in twelve hours, I’ll start working the next day. I try and get back to everybody as quickly as possible. I’m here for you. That’s all I can say.

Check it out, BaldwinAdvisoryGroup.com. Add it to your favorite list or star that. Dickie and I talk weekly. If it’s not via email, it’s definitely on the phone going through different services and stuff like that.

Please reach out through LinkedIn and Facebook. If we’re not already connected, let’s get connected.

Dickie, you’ll be coming to Austin for our Note Mastermind.

I’m looking forward to that. I want to swing from that chandelier again.

 

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