I need feedback on note buying situations I have been running into
Someone sent me this email and I thought I'd post a response for everyone
Kent , I need some feedback on some situations I have been running into:
1) In General, if I come across a residential note with a credit score of 500-550 or so
Should I pass right off the bat ?
Don't pass on anything right off the bat, even in this confused real estate market. There may be extenuating circumstances that can help the transaction or give you more reasoning to pass on the transaction. In other words don't pass on any transaction the comes across your desk without a thorough review from all angles .As you know, probe with open and closed questions to determine other needs, wants or factors that will help the decision process.
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I remember you mentioned a weak score could be offset with a good pay history. Is that true?
Yes, for example, if I we're buying a note for my own account, with a weak credit score, but I liked the collateral and the terms of the underlying debt, if there we're any, and I felt comfortable with the expected risk I certainly would buy the note and have done so.
But in the same breath I should say that I have turned down similar transactions.
Of course, with institutional investors your flexibility on questionable notes is restricted to the investors underwriting requirements. Each investor has their own particular interest when it comes to adjusting or tweaking their underwriting standards or parameters when purchasing a note.
To determine those parameters I usually submit the quote and if the investor turns it down, I then called to discuss. Allowing me to determine what their favorite type of collateral, acceptable credit score and note structure for future reference. Then I know what kind of notes to submit to that investor in the future.
Always submit clean, easy to read and thorough submissions
Please, only submit clean, easy to read and thorough submissions to your investors. Should your business model require their money to buy notes for your success, you are only as good as your investor. So you must keep them on your team and you will if your submissions are alwaysprofessional.
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Posted in Real Estate Post Date 04/05/2016