Note Closing Costs / Another Mobile Home Deal.. - Posted by MichaelR (NoVA)

Posted by Bud Branstetter on October 31, 1998 at 08:52:57:

The contract I use calls for 10% of the note amount. I’ve not had to use it. But you must be ready to file if you do get bypassed. It’s sort of reminds them that they signed a contract if they want to hold out for more money. Otherwise you have no leverage if they decide to wait.

Note Closing Costs / Another Mobile Home Deal… - Posted by MichaelR (NoVA)

Posted by MichaelR (NoVA) on October 28, 1998 at 10:54:05:


The first part of the question is on closing a note deal. Can anyone recommend an escrow company that has reasonable rates for note deals?

On a flip, where do I collect a fee or commission from? Is it similar to a SFH flip, where I just negotiate a spread between the two parties and take a check at the close? or is it actually a “commission” where I am paid by one of the two parties?

Second, I’ve made contact with a mobile home broker who lost his source of financing (private) for mobile home buyers that don’t qualify under Greentree and the other mainstream MH paper buyers.

He wants me to provide a regular source of financing for him, has one deal waiting on a note buyer, and 6-8 waiting in the wings.

I have about 7 contacts that I have made so far to purchase my other note deal, and am going to them with this. But, if anyone here can recommend someone…or offer a pointer as to how best to handle this type of deal…I would appreciate it.

I’m especially interested in non-compete agreements so I can protect my source. Would this deal be easier to do than the other flip I proposed? The originator of the note will not accept recourse, although he will agree to collect, repo, and/or resell a repo’d mobile home.

Thanks in advance. I’ve got about 24 hours to get an answer on the deal he has waiting now.


BTW - I am overflowing with note calls now…so I am VERY motivated to figure out the details of this stuff. :slight_smile:

Chislers - Commissiondectomies - Contolling notes - Posted by John Behle

Posted by John Behle on October 28, 1998 at 12:26:52:

I don’t flip deals, I borrow from investors and stay in the middle. I have total control that way. When I did flip deals at the beginning, I almost always just did a buy/sell. A double (simultaneous) closing where I bought the note for $6000 and turned aroung and sold it for $8000. If handled correctly, the buyer does note need to know what you made. They only see their side of the closing not mine. One time I had investors see the other side of the closing. They were getting an 18% return on a very good note, but acted put out that I had made two grand. That’s the last time I’ve allowed an investor to see what I make.

Taking a commission has a couple problems. First, it may be against state laws in some states. Utah considers it a securities violation, so that is why I always did a buy/sell. The other problem is maintaining control of the investor and letting them know what you make. You may show the investor 10 notes that they turn down for the one they take - yet they only see the profit (compensation) related to the one deal - not the hard work that went into getting it.

Another potential problem is that in the past some note buyers have used their knowledge of your commission to “Chisel”. Some know you can give up some profit to them and use that against you. One of them changed their tactics after I placed a call to them and asked “is this your policy?”

There is much less chance anyone could go around you and perform a commissiondectomy if you have a right to own the note as opposed to a commission agreement or “non-circumventure” agreement. This helps also with the payor. They at times can find out the note is for sale and arrange to pay it off themselves at a discount. If you have a commission agreement, you may be out in the cold. If you have a right to buy the note (like an option agreement - recorded to cloud the title) then they just pay you - if you allow it.

Marketing - Posted by PBoone

Posted by PBoone on October 28, 1998 at 11:42:10:

Congrats on the deals, I would like to hear some of your marketing details.

John…you’re near angelic…and… - Posted by MichaelR (NoVA)

Posted by MichaelR (NoVA) on October 28, 1998 at 18:00:50:

Here is my next question.

I understand the basic premise behind notes, but for the most part am a complete note newbie.

  1. I like the idea of being loaned money based on the note, but don’t think that is an option with the deal I am doing now. It is being brokered another level after me, I believe.

  2. I’m sold now on a double closing. I also realize that I have to get my option to purchase in writing. I was holding off on that until I had a buyer, as I had no idea what price to negotiate to. Any source for an option agreement? I’d be happy to order a course, but I need to answer this particular case tomorrow. Can anyone send me a simple agreement, or would I be okay modifying one of my real estate option contracts?

  3. Are there any courses/resources available on attracting private investors? Obviously, this would be the preferable situation - as I’m getting plenty of notes, and would prefer to go directly to a principal rather than through a multitude of brokers. I am concerned about doing this in a legal manner, and don’t know where to turn.

  1. If anyone can point me in the direction of an investor who is interested in a regular source of mobile home paper written to their specifications…please let me know.

Thanks for all the answers.


Re: John…you’re near angelic…and… - Posted by MIKE

Posted by MIKE on October 31, 1998 at 09:04:30:


State form would work fine - Posted by John Behle

Posted by John Behle on October 29, 1998 at 03:16:01:

The state approved form works fine. I took our state option form for real estate and just added two clauses. The first details the terms of the note that I am buying and provides for my verification. The second does the same for any underlying loans. The seller is also stating that they are the terms and it functions as my “Estopple letter” for the seller.

As far as working with private investors, the only course I know of is my video course. It has almost a full day on funding notes - primarily though private investors. When i started, that was the only option, so I’ve been at it a long time and refined it well.

Re: State form would work fine - Posted by Bud Branstetter

Posted by Bud Branstetter on October 30, 1998 at 09:47:28:

I can’t say I’ve seen a Texas State option form. I also expect a state form would not have two important paragraphs or clauses. The first guarantees that the cost of the appraisal will be reimbursed by the seller of the note if the appraisal or other problems prevent the sale. The second clause calls for liquidated damages if the seller trys to go around you or decides not to sell to you.

Re: State form would work fine - Posted by daveh

Posted by daveh on October 29, 1998 at 08:15:33:


Where can you get a “state option form”. Title co’s, Board of Realtors, etc???

Also, I’ve heard from a number of experienced note buyers not to work with private investors due to the legal liability. Only work with institutional investors particularly if you are new in the business. What’s your opinion?

Finally, I know there is at least one institutional investor in the mid west that offers credit lines to brokers to buy notes themselves. Have you done this and what do you think of this option?

P.S. Your forum here is simply great! Thanks a $million$

Prevention versus Recourse - Posted by John Behle

Posted by John Behle on October 31, 1998 at 14:01:35:

(Continued from “Details” post)

I focus heavily on prevention when it comes to the loss of time and costs also. Little time goes into an offer before I have an option signed. Once I have the option, the “due-diligence” begins in a time and cost saving manner. This applies to local notes. It is much more difficult when distance is involved - which is part of why my strategy involves local notes.

Once I have an option signed, I do a title check. This is just a quick check to make sure the note is in the position it is reported to be, there are no current or past payment problems I don’t know about and there are no problems (like already having sold it to someone else - or borrowed against it). This might evolve into a full abstract of title going back to the date the property was built, the last new first mortgage or possibly the date of creation of the note. There are reasons for each level that I can’t go into here. At this point, I am just looking for problems that would prevent the sale or that need to be solved. Firteen to thirty minutes are spent and days of costs and hours of time can be saved. At this point, I record the notice of interest to block a sale to anyone else.

I do a quick drive by on the property for pictures and general impression of the property, occupants and neighborhood. I use a digital camera for the pictures and have them immediately for myself or an investor. If the property is a bread and butter type SFH, then it can be simple to establish value later. That’s part of why be re-imbursed for the costs of an appraisal are not that important for me. Sometimes I do not get a full blown appraisal and when I do, I already know the value. Basic information about the property or an old appraisal gives me the ability to run comps on the MLS or free internet sites. The driveby may just take a few minutes and finding comps, about 10 minutes.

When the courthouse is nearby the recorders, which is most of the time, I may also check the payor and note seller for judgements or lawsuits. I can also do this on the internet. Judgements or lawsuits on either could affect the sale and clarifies their motivation.

In all, I could be ready to buy a note in a couple hours with no capital invested, except a recording fee and a couple bucks of gas. If the deal won’t fly, I’m not out a thing. If I then need appraisals, title insurance or anything else, there is little risk of loss.

I usually pull credit on the payor immediately. Not that their credit is extremely important, just to identify problems and risks. My decisions are based ont the property value.

In cases of large or odd deals, I will build in some protections for my costs on the due-diligence.

One reason recourse doesn’t mean as much to me is 99% of the time I have found it to be useless. They sell the note to someone else or back out of the deal and I’m left with recourse against someone who usually can’t pay. I’ve covered my major risks in my preliminary due-diligence, so there are seldom problems. They can’t sell to a legitimate buyer because of my notice of interest and any problems with the title, property or payor are known within a couple hours. I rely heavily on what information they have available at first, like past title reports, appraisals, closing statements, etc - - - - BUT! — that is just to save time and identify problems at first. I DO NOT rely on any information provided by the note seller, payor, Realtor or anyone else for the final due-diligence. I’ve seen supposedly knowledgeable note brokers and funding sources scammed by relying on phoney title reports, appraisals and closing statements. That is one of the reasons I suggest everyone learn the basics of doing the due-diligence on a note deal themselves. Relying on others ends up being either costly or risky.

Deals failing - Posted by John Behle

Posted by John Behle on October 31, 1998 at 12:41:09:

Our state form (UTAH) has a similar clause that I re-worded a little. Clauses to protect you from any costs and time advanced are helpful. I had an attorney work up a form one time that was 17 pages. I rarely use it, but it is included and explained in my videos. My strategy is prevention - not recourse. Not that you have to choose between the two. To me, prevention means everything and recourse means very little.

I use an option agreement instead of a purchase agreement to record a notice of interest or notice of option - to “cloud” the title. (This could be done with a purchase agreement also). No matter how binding or “toothy” my agreement is, I have still had them sell the note to someone else - at first. That is why I record the notice. Any intelligent buyer will search the title and be stalled in an attempt to buy the note once I have my option. I also make that very clear to the note seller. More on this in another post.

Liquidated Damages - Posted by Marvin Seawood

Posted by Marvin Seawood on October 30, 1998 at 23:08:33:


How much damages do you feel are appropriate?


Board office - Posted by John Behle

Posted by John Behle on October 29, 1998 at 18:37:47:

In our area, I can get the forms through the Board of Realtors, Title Companies or some office supply stores. I recommend - YOUR - state form, not mine or some other state. Unless your state form is wholly in-adequate, it should be able to be adapted.

I agree totally that you should not broker or flip notes to unsophisticated private investors. I don’t flip notes. I keep the note and borrow from well cultivated investors secured by the note.

Check out the rates on the “Broker Line”. If they work for you, then it’s a good resource. My funds come from investors and other lines of credit. I don’t use the broker line, because I don’t need to.