It could give you new revenue streams and more importantly, make my investing life easier!
I’ll start off by saying that I have many strengths. However, talking to humans to get what I need from them is probably not at the top of the list (but I am working on it). For all my due diligence work prior to purchasing a note, I prefer going to a website, requesting the service, paying for the service (if required), and moving on to the next thing in my day. However, one of the most important tasks that we as note investors have to get done is to establish the true value of an asset. Not doing so accurately could result in a less profitable or unprofitable deal. Now, one could get a rough estimation of a property’s value by going to Zillow, Redfin, Realtor.com, or other real estate-oriented websites. But the algorithms that are employed to calculate values from data are often incorrect, depending on the city/state and the neighborhood where the home is located. Not to mention the fact that none of these algorithms have the ability of knowing the physical condition of the asset. So that means at some point I will need to talk to an agent, because they know their respective territories and have insights that a generic RE website could never have. Yay. Woo-hoo. I can’t quite contain my excitement.
We note investors often are looking at assets NOT located in our respective backyards. They may be located in towns, states, and regions that are unfamiliar to us. The real estate agents that operate near these assets are likewise unfamiliar to us. Unless we have a referral from another investor, we basically have to pick one randomly from the dozens or hundreds that serve a particular area. But that has perils because not all agents are equipped to deal with investors. Most are better suited to give assistance to retail buyers instead. But even those who SAY they are investor-friendly need to be vetted because to them real estate investors are flippers and buy-and-hold folks. Many, like the general public, have no idea what note investing is. After all, there are ZERO note investing shows on HGTV.
So, back to my issue of talking to humans to get what I want… This has been my dilemma. On one hand, I wanted to quickly obtain basic information about an asset or neighborhood. But to get it, I had to talk to an agent who didn’t know me from the next fella AND who didn’t know what a note investor does or why I was trying to talk to them in the first place. Note investors, particularly non-performing note investors, are completely different animals altogether. Although we do share common needs with other RE investors, here are THREE paradigm shifts that agents need to make when working with us.
- Unlike other forms of investing, the real estate agent is not central to our deals. Don’t get me wrong. Their role is key, but they are just ONE of many on this ALL-STAR SQUAD being created hundreds of miles away.
- Although we care about a home’s value, we are buying the debt, NOT the home itself. Last year, I sent an email to an agent in a large Midwestern city requesting certain information – current as-is values, ARV numbers, and rent comps – for a house I was doing due diligence (DD) on. She did complete that task but she also took it upon herself to see if the home was for sale. Naturally, it wasn’t. Not a huge deal, but it was indicative to me that she did not understand fully what I was doing.
- You (or your team members) CAN be compensated for any due diligence work that you do on our behalf. But what you charge has to make sense to us. This has been a MAJOR point of contention with agents. A lot of non-performing note investors will offer a future REO listing months in advance if the agent provides DD assistance. And that used to be more effective in years past. But agents are becoming increasingly cool on that compensation promise, particularly those serving major cities. Look, I get it. We all have to work and be compensated. But, at the same time, agents must understand the process of the non-performing note investor and also retain perspective. During our DD phase for an asset, we are looking to spend as little money as possible. After all, we may end up not purchasing that asset! I’ve had agents decline to work with me because they did not see how they were going to be compensated and did not want to do work for free. Now, that’s interesting considering that they often take retail buyers on who never end up buying anything! On the other end of the spectrum, I previously have had agents charge up to $300 per asset to take pictures and/or provide a broker price opinion. That simply will NOT work, especially when the assets under consideration may not be worth all that much. My advice to agents who wish to work with note investors: Offer a price that is palatable for us (e.g., under $100) but take steps to ensure that the time spent performing DD is minimal.
That is all I have for now. If you are an agent, I encourage you to start learning about mortgage note investing. There are quite a few online resources and a few local meetup groups out there that will give you the basics. That way, you will be prepared when a note investor like myself comes calling or emailing one day. When you are ready to get started, go to http://www.terreva-investments.com or contact me at 310-896-5162. Stop leaving money on the table!