- October 1, 2019
- Posted by: august19
- Category: Podcast
What is an ideal note? This is one of the many questions Chris Seveney & Gail Anthony Greenberg answers in today’s show. They describe their note preferences, typically those that have very low risks. When closing deals, one must make offers, to begin with. Chris and Gail tackle one query on the number of offers you have to make especially when you are new in the business, as well as what establishes a good deal flow. Know more answers from these guys as they answer questions related to finding decent deals, CFD, toxic asset list, and so much more.
Listen to the podcast here:
Open Mic Night: What Is Your Ideal Note?
We’ve got a lot of questions. We’ve got people coming in and asking us, so why don’t we start hitting on some of those in the typical fashion on open mic night? We like to cover an abundance of topics. Last time we started on one topic and went onto partials. This is time for our new audience to interact with us and try and get an understanding or ask questions that they may have that we can hopefully try and answer for you. The first one that came through, Gail, I’m curious what your thoughts on this, “What does your ideal note look like?”
I’m a little different now because I’m in the rental acquisition phase. I probably would have answered this differently before. Everybody wants equity. I’ve had very good success in making big gains from selling houses after I get them back. That was a streak that was running for a while. Lately I’ve been stuck with houses and I’m having a hard time selling. Previously I would have loved a house that was underwater, so I would definitely end up getting it, whether it was a CFD or a note. Lately, I’m not so sure what it is that I want. I do love Michigan and Indiana, which we should probably stop saying that because everyone will just go shopping there. I like Mississippi too. My ideal note would be in one of those three States that I just mentioned. Tennessee is another one that I like a lot. It would be obviously a nice house, wherever it is and highly resalable. It would either have a ton of equity if it’s a note or it would be something in an area that I would like to own if it was a CFD. You probably have a very clear set of criteria that you can now share.
It’s interesting and I always think about this. There are two notes that pop in my head right now that are ideal, that I’m happy for. The first one is a deal that I took back the property and I am seller financing it to an investor. I’m in the deal for X. I’m selling it to her for X plus Y plus I’m giving her some money to rehab it and then financing it to her over a period of time. It’s ten years with a five-year balloon. It’s an investment loan. She’s not owner-occupied. She’s going to use it as a rental. We worked out the arrangement. The cashflow is probably going to be about $150 to $200 a month for her.
For me, it’s going to get me a double digit return. It’s a borrower who has an 800 credit score, using it as an LLC, which has about five properties in it. She’s from the area. I’ve done two other deals with her. From that perspective, I see that’s ideal because it’s very low-risk. It has lots of equity and it’s assisting another investor in building their portfolio. It’s a woman who is probably five years younger than me with a family and kids and she’s trying to be like the rest of us entrepreneurs who try and get cashflow for the future and for her kids.
That’s your exit strategy though. What did that note look like when you bought it?
It was a CFD that the borrowers were performing and then they ended up getting separated and I ended up having to take the property back. The second one is I’ve got an asset right now that was a CFD where the borrower was not paying the taxes and it was like three years of taxes behind, which totaled to about $6,000. The reason why this happened was the borrower wasn’t living in the property. They tried to sell it to another individual, which is a 74-year-old woman who didn’t realize it. When I went to go to forfeiture on them because the tax wasn’t being paid, I found out the story on this. I’m in the process now of helping a 74-year-old woman who probably put about $25,000 into the property, added about $50,000 of equity to the property in getting this put into her name.
I’m going to give her a mortgage note for her and she was afraid that because nothing was in her name, that I literally could have charged her anything I wanted for the house. I took the balance that was owed and kept it at that payment and so forth because I don’t believe in that equity was hers. From that standpoint, I call that ideal because it’s a win-win where I’m helping a borrower and also on the flip side, it’s also making a return. In that perspective, I don’t get greedy in those fences.
It seems like you’re also illustrating a very good point that ideal notes are more often made than found. You took a pretty sketchy situation with a lot of complications to it and your own happy ending. It’s that of perseverance and the willingness to work through it that produces great results over and over again. We’ve talked a lot about how people want ideal situations right from the get-go. It’s not like they were ever abundant, but now it’s gotten a lot harder to find those.
Another question that came through is how many offers do you make at a time attempting to get one deal? I would phrase this as somebody who is getting started. From the standpoint of when you get started, how many offers should you make? Gail, I’m curious about your opinion on this because I have my own opinion.
I know that people are taught to make ten offers to get one asset. In this situation, know your sellers because there is a seller that a lot of people buy from who literally you can make an offer immediately and he won’t take any other offers. As long as you’re the first one to make an offer, you’re going to have a chance to bid, counter and rebid until one of you gives up or you buy it. When you have a situation like that, you don’t need to make a lot of offers. You just need to make fast offers. There are other note sellers and this is more typical who will give a deadline of a week or whatever to make a bid and then we’ll gather in all the bids and then will award it.There are other note sellers and this is more typical who will give a deadline of a week or whatever to make a bid and then we’ll gather in all the bids and then will award it. Click To Tweet
In a case like that, I think it’s far less likely that you would get a note. I personally, from some sellers, have never gotten the note because I’m too much of a cheapskate from them. I don’t think you should make tons and tons of offers with the first seller that I was talking about because it just ties things up. He’s good about putting things in reserve once you make an offer. It’s unfair to other people to make a ton of offers on a tape. If you’re like Chris and me, you just buy the whole tape and then everyone else is disappointed. That’s all I have to say on that, Chris.
There are two things. One is yes, Gail is a cheapskate because she bid on some assets that I ended up buying, so I knew what her bid was.
We bought them for about that price. Yes, you’re right. I shouldn’t have expected to get that price for a handful, but we’ve got to try.
My comment on this is I think I agree with Gail. I wouldn’t be putting in like ten or fifteen offers if you’re looking to get one. I would say put it in three or four offers. Realistically, you’re probably not going to get four, but if you got one or two, then you work through it and try and get those funded and so forth. When I started, I was using my own money, which I recommend. I had $50,000. I would bid $30,000 worth of assets and if I got one, great. If you have $10,000 or $15,000, bid on two assets that are $7,000, $10,000, $12,000, whatever is in that range and stuff. I’ve heard people bid on 25 assets and go back and forth with the seller because he countered on all of them and trying to come up with bids on all of them. I forget who it was, but I was like, “How many can you buy?” They’re like, “Three.” I’m like, “Why are you going back and forth? Pick the three you like and just close on them.”
I remember who that was. I asked you what has become of that guy because he’s completely disappeared at this point.
As a follow up to this is a question, “How long do you wait to get a response before moving on?” It depends. A lot of times they may give a bid date. Usually, it’s within a week after the bid date. If it’s an individual seller, after you give a bid, usually I’ll wait three days and say, “I want to confirm you got my bid. Can you let me know what’s going on?” If you don’t hear from them, then move on. It’s usually about a week.
Don’t be shy about checking in. Don’t harass them. It’s fine if you haven’t heard in five business days to just send an email saying, “I’m checking in to find out when you might be letting us know.”
Don’t harass them every single day and when it comes to date to fund the deal, you disappear. I would put in three to five, five max. It also depends on the seller too. If I put out a tape of assets and you came to me and said, “I want to bid on these five but I could probably only pull the trigger on two.” I’d be like, “I’ll look at the two that look the most realistic for you.” I’ve had people do that where I had ten assets for sale and someone says, “I want to bid on these five but I can only bid two.” I prefer somebody do that versus I’ve had people bid on seven and then I’m like, “I’m going to accept these five and here’s a counter on these other two.” They come back and say, “I can’t buy those five.”
I think sellers like to know the buyers better. When you feel like you’re in this big giant crowd of people that are all trying to get something, the reality is that although these tapes get circulated to thousands of people, there is only a handful that buys and there are tiny groups that buy regularly and buy anything over a few at a time. If you’re serious about being in this business and wanting to have a better deal flow, you should get to know the sellers a little bit and let them know what you’re trying to do, what your level is. Chris and I are selling a lot and we’re very happy to meet someone who’s just starting out, who would like some guidance and wants us to know what their goals are. It helps us understand. There could be times when we get things and if we know that you’re looking in a particular state or you like a particular asset, we would even let you know first about something before we put it up somewhere.
For the person who asked the question, they put an offer in on something on PaperStac that I had and they put the reason for where they came up with the number and stuff. It was a legitimate made sense offer and the only downside to it was somebody else had already jumped in and bid on it and had it under agreement stuff. I was like, “Yes, you have the right mindset and you’re in the ballpark on it.” You can use that formula we use with performing assets across the platform, which I think you mentioned you learned from our podcast. The other thing too with sellers is don’t be silent and only communicate when you bid. Get to know them. Certain sellers who we would buy a lot from, we could be sitting next to them at the airport. I wouldn’t even know it because he likes to keep himself seclusive, but just let them know what it is you’re looking for. Like Gail said, what is it you want to buy? People all of a sudden have something and be like, “This person was looking for something in that area. Let me shoot it to him first.”
You can also even ask them what bids they’re looking for and find out if you’re in the ballpark at all. They won’t always tell you, but lots of times people who are brokering, there’s a minimum that they want and they hope to get more but they’ll tell you lots of times what the minimum has to be.
The other thing too is it is a small business. What I’ll mention is sellers will remember you if you don’t close on a deal and they’ll remember you if you do close on a deal. Reputation is key. It’s that critical process as well. That’s why it’s better to get to know the seller too and say, “I can pull the trigger on two but not these other ones.” If you’ve got five accepted and you can only afford two, don’t play the game of trying to string it along and hope the Hail Mary comes into can fund the five. Go back to the seller and say, “I can I can only take two.”
Like every other relationship, having honesty and being forthright goes a long way.
David asked the question. He has a CFD. It’s going to be paid off next year and he’s never gone through the process and he’s wondering what that process is of shutting down the note or closing out a note or a CFD.
First of all, read the land contract and see what it says on how the transfer will be done. Normally they say by warranty deed, which if there are any liens on the house, some of which could have been caused by the actual borrower who’s living in it. It’s good to know when you first buy a CFD if there is something like that looming. I bought one in Gary, Indiana, one of Chris’s favorite towns. It had a $20,000 municipal enforcement lien from a completely different town. It was one of those put on it because the seller had racked up these code enforcement liens and they were then put on every property that they owned in Lake County, Indiana. When I bought that, I knew potentially that I would have to wait the twenty years that was mandated in Indiana for judgment to fall off. When I wrote a new contract to sell it, I stipulated that it would be twenty years and if it was before that, it would be a quitclaim deed, not a warranty deed. As far as transfer tax, it depends on where the property is located. Some areas don’t have property tax and usually on a quitclaim deed, there’s never any transfer tax.
I’ll start with CFD. Read the land contracts and see what type of deed it is. It’s just the same processes as you bought it. You issued them the deed. They’re technically responsible for recording it, but I think it’s going to cost in Indiana $50 or $100. I would just do it to put it back and get it in their name so you know it’s done. That’s pretty much the process. As part of Indiana, you do have to submit the SDF, the Sales Disclosure Form. On a note it’s different. On a note, typically you have a certain period of time to issue a satisfaction of mortgage. Typically when it gets paid off, you have to issue the satisfaction mortgage, which says, “This loan was paid off.” On title, if they ever run a title report, it still doesn’t show that loan.
That’s something that’s important that you have to do. Other than that, it’s it on the note. If they’re refinancing the note, then there’s a lot more documents and stuff you will have to sign. I’m in the process now of having a note get refinanced and had to get them to pay off and everything else and sign some affidavits and stuff. Even CFD, it’s like selling the property and I may have you look at the stuff. The big thing is on the note, you have the satisfaction of mortgage on the deed. It’s what type of deed you are issuing them.
I’m curious, Chris. I don’t think either one of us has ever gotten to the natural end of a CFD though. I have a performer right now that will wrap up in twenty months. I’ve been buying small balance.
I had one paid off.
It paid off; it didn’t mature. They didn’t reach the maturity date. This is what I was about to ask you. It does say in a lot of these land contracts that you will give them a warranty deed at the end, the deed of trust. What do you do if the current borrower has liens on there or judgments that would prevent you from giving a warranty deed but it’s their fault and not yours?Like every other relationship, honesty and being forthright in real estate investing goes a long way. Click To Tweet
There are two things because technically they’re in default of the land contract. They were supposed to keep the property maintained and not have any liens or judgments against them or the property while they’re responsible for it. If it’s something because of you, then you have to carry it. If it’s something that was caused by them, then I could do one of two things. You could, as part of the closing process, have them pay off those items. You could have them quitclaim-deed it to them as well. If it was me, I would probably work out a deal where I would quitclaim deed it or do a special warranty deed. Typically I think their special warranty deeds, not a warranty, but you have to check. If you did a special warranty deed with a rider excluding certain items within it, from that standpoint, that’s a good question. Hopefully, that answers your question. The transfer taxes in Indiana aren’t super expensive. They do have to be paid. Typically, it will say in a contract to who pays them but a lot of times I just get it taken care of from when I’ve had a few that I’ve had closed off.
We have a question, “Why do you think we’re having a hard time selling when the market changes?” I don’t think there’s a hard time selling assets. It’s a process of selling things and I do think there’s a lot of people who window shop in this industry and aren’t buying. It goes back to that first question looking for the ideal deal. Part of the challenge I think people need to realize is a lot of people talk about returns and so forth on a lot of these deals. Essentially a lot of people are looking at an ideal deal of I want a $200,000 house where they owe $50,000 on it. They have a 700 credit score. I want to get it at a 12% to 14% return. That’s not going to happen. It’s ideal, but it’s not reality. Your return is based on risk and the lower the risk involved, the lower returns. On deals like that, you’re going to probably be at 8% to 10%, but you could also get on a partial and things like that. I think people were still thinking, “I want to get 18% on a performing CFD.” It’s not there when you’re buying one or two assets. If you bought ten, maybe you could you can get it that range, but buying one-offs or one or two assets, you’re going to be in probably 11% to 14%, 15% depending on the asset type.
That was informative but what she was really asking is why am I having trouble selling houses that I have done? This is a unique situation. I have one that has a massive foundation problem and that one’s in Mississippi. I have another one in Georgia that I got when I was much less experienced. We had an out of town realtor who looked at it and it turned out that he didn’t know the neighborhood very well and it turns out to be like a pretty Gary neighborhood. Plus the house was vacant a long time. It’s a CFD. A forfeiture in Georgia and it took over a year to get the house back and that whole time there was some damage to the roof and there’s water damage on the inside now. The house is in bad shape. I’ve had houses in bad shape that have sold very well, but it was a situation where inventory was very low in the neighborhoods. I didn’t have to do much of anything other than put everything in a dumpster and clean it out. There’s not any way to predict that. First of all, you don’t know that you’re going to end up trying to sell it and then by the time you have it available to sell, there’s no way to know that it’s going to be a good market for you when you are ready.
Her other question is if I make them personally sign a personal guarantee from financing it to an LLC. Yes, I do have a personal guarantee clause as well that they do sign.
Why should they be any different? We have to sign them.
“Is it unrealistic to hope to find decent deals on Texas notes? I have a friend who only wants to buy in Texas. The question is what do you consider a decent deal and is it performing or non-performing deals you’re looking for? I’ve got six assets right now I’m going to be selling in Texas that are performing notes.”
What are you looking for? What kind of yield, if it’s a performer? If you want a non-performer, what features are you looking for?
He said, “12% performing in Texas has been available in the past.” I’m not sure if that’s realistic now. We’ve got six we can show you. Contact us and we’ll send them to you and then it comes back to what are you considering decent as well? Are they $300,000 properties? Nope. Have you got other properties that are probably 50% equity in them? They probably are from that standpoint. Dave says he’s got a second lien in Texas that is performing that he’s considering selling as well. It goes back to ask people questions on things. “Anyone have this or any of that?” You’ll find it’s interesting, I got an email from someone saying, “I heard you’re buying notes. Are you interested in this?” It’s out of the blue. I wasn’t, but it was something that somebody just shot my way.
I have things that I haven’t put up for sale, but if someone asked me, I would tell them what I’ve got. I think most people pretty much are always open to an offer.
Especially if it was something that you acquired that was non-performing that you’ve held in a while and it’s performing and stuff here. You’re more apt to liquidate it than something that you may have just bought in or something because there might not be that much spread. Dave mentioned about having to go back and read the contract. That’s something I don’t think people talk about enough is on the CFDs. Why do people look to see the chain, the assignments and so forth?
One of the things I highly recommend you do is read the land contract. There are some interesting things that can pop up in there and so forth, like certain things that occur. I’ve seen that’s only in contracts dated 2011 but it talks about the borrower being responsible for anything before 2005. The reason being is because of our own property and did a deed in lieu and then got it back on land contract. There are other things like if they default and going in acting as a renter. I’ve had many instances where people default. They think that they just go to a renter and like, “I’m a month a month renter on $300 a month. This is great because I can just rent this place for $300 a month,” not realizing they are on a month to month and $300 is not going to be a perpetual monthly payment of rent in the property.
I had a thought when we find things in the land contract that we’re not happy about. You can just amend a land contract too. You can do an amendment of things that you don’t want to have to live with if the borrower agrees.
We can do a loan modification on it that it has as well. He can do a cancellation with a new land contract in instances where there’s something that is a little screwy or you could do a cancellation and move into a mortgage note. One of the things that I think you and I have learned a lot about in the last probably six to twelve months is being creative on some of these issues. We talked about previously that were on the toxic asset list that we look back now. It might not be so toxic now that we’ve learned some of the nuances and things.
I talk about ideal deals being made, not found. There were a lot of things that we would’ve completely avoided before. A few categories of them, like collateral issues, a lot of them can be corrected. As far as things like contract issues, I remember the things that we were talking about early on were loans that have payments that are too small that you can’t make any money by the time you pay the servicing costs and everything. It doesn’t work. The numbers don’t work. You’ve pitched borrowers on just shortening their contracts and upping their payments and sometimes people are on these things for ten years. A payment that they could afford when they started was very low but now some people, their incomes have gone up and they would welcome the opportunity to be done quicker and pay less interest. There was an awful lot that you can do. We’ve concentrated on rehabbing houses, but rehabbing loans I think is in terms of the paperwork and the terms and different things like that. It’s a big unexplored area where there is so much potential to turn bad deals into good ones.
I’ve had one that the borrower’s payment was $95 a month and it was going on forever. I reached out to them and said, “Can you afford more?” They said yes. I said, “Approximately what?” “We’ll probably spend $200.” I said, “If you do $200, I’ll knock your interest rate down by a point.” We’ll go from, I think it was a ten on down to nine and by you doing this, I showed them the calculation of they were going to save $3,000. For me on the flip side, also the revenue that was coming in enough for wanting to turn around and flip this thing or just holding the yield almost doubled as well, just because of money that was coming in. Instead of having 35% of it going to servicing costs, it was like 15%. It makes a big difference if you can do that as well.
Someone is asking for some more examples of things we’ve learned to overcome that we thought were impossible on the toxic asset list.
I’ll start with the caveat of when they’re performing. The assets or the borrower is making payments. Missing an allonge in most states is not a big deal, but if you’re missing an assignment or there was something within the land contract that was signed before the person had the deed and so forth, an example you can do is if the person is behind, instead of offering them a modification, do the cancellation of land contract and give them a brand new one. When you cancel a land contract, any issues that were with it also go away, especially if it’s not recorded. If it’s recorded, that’s a little different animal. That’s something you have to look at. If it’s an unrecorded land contract and there’s potential issue with it, it’s getting that borrower and offering the borrower something in return for it.
The reality of it is the essence of the deal hasn’t changed. They wanted a house at a certain price and you’re paying. That’s what you’re still giving them, but you’re cleaning up documents that also helps them later on because there’s not an assignment that’s missing. It’s recorded, but how are they going to get a deed at the end of the day? Gail and I were looking at some assets, doing the due diligence that unfortunately the land contracts had been sold three or four times, but one of the deeds never got recorded and it’s still in the name of an entity that no longer exists. They went bankrupt because the fund was running a Ponzi scheme and there’s no more receivership. This poor borrower, I don’t know what they’re going to do once they pay this thing off because how are they going to get the deed?
Because the company in that habit, they probably have to sue or do a quiet title or something but that’s a mess. A lot of times these things aren’t recorded. That’s the caveat that, I’d say. If you are missing assignment or land contract and it wasn’t recorded, you go back to the borrower and work out the deal and say, “We’re trying to clean up all the paperwork.” One of the things I’ve done is to offer them to put them on a mortgage or note. If you’ve been paying in the last five years, let’s get rid of this land contract and review the equity in the property you’ve been paying on the deal. I’ll give you a new mortgage note, especially if borrowers had given it up as a deed in lieu at a point in time. If they had been there for a long time, they want to title back. We’ll be doing backflips more than likely to get that taken care of. In the past, yes we did put stuff with that in the toxic asset list.
We bought a pool. They’re all performers. We’re putting out for sale the ones that have good paperwork, but phase two is that we are simultaneously working out the paperwork issues on other ones so that is there and in good shape when we put them up for sale. Some of them cannot be cured in a conventional way. We have contracts for deed that we will be converting to mortgage notes. Chris found out very exciting news. We don’t even have to put people through like a borrower qualification process. We can do a light version.An ideal note is one that you make money on. Click To Tweet
It’s light because you’re not changing the payment. You’re not changing any of the terms. It’s just a transfer and these were originated before the ability to repay came out. From that perspective, it’s more of a simple transfer versus having to go through full-blown in the MLO process. That’s what our MLO has told us.
We’re taking a very messed up chain of assignments or deeds and making the borrower very happy by giving them the dignity and prestige of going from a land contract to a mortgage note where they’ll be the true owner of the house from the get-go. Just rebooting the whole thing and with minimum fuss and bother. That’s a great example. When you buy those notes from sellers, they are aware that there are paperwork issues, so they’re already like finding mold in a house that you want to buy to flip. They’re aware that there’s a problem and they’re waiting for you to discover it and ask for a cheap price. If you know how to fix it, you can buy it at a cheap price and do very well. Old is gold, as we say in the flipping business.
You mentioned a good component too is when you convert these to mortgage notes. In Texas, I know in Michigan and other locations too, once they get on the deed, they can get a lot of homestead exemptions and lower their taxes. I’ve been doing that in Michigan where I’ve been converting a lot of my land contracts where they have a long history of performing into the mortgage note so the borrowers can then get the taxes. Here’s the other interesting thing. Part of it too is when you convert some of these things, they get the reduction on the taxes. Sometimes they can get their own insurance or reduce it. A lot of times they may pay a little extra per month work, keep the same payment they were paying that will then go more towards a principal. It brings in more money at that time. You just got to be careful. You don’t want to increase that principal and interest payments just for that because then you get yourself back into that MLO process.
I want to say also that apparently in Michigan, there is a statewide requirement that I had never even heard of. I got a letter from Oakland County, which is where Pontiac, Michigan is. Apparently all of Michigan though no one’s ever press the issue, the owner of the house has to either have it a homestead exemption because they’re occupying the house or they have to have like a rental. It has to be designated as a rental or as vacant. We were told this about a house in Pontiac, they can get the homestead exemption if they just will either register record their land contract or a memorandum of a land contract, which is not much. It’s a one-page document staying that there is a land contract but not giving all the details of the land contract.
I know Pennsylvania has certain things too where if it’s on a land contract when you acquire property, you either have to register it as a rental or tell them it’s on land contracts and like I said, if it records, a land contract, they can get off of it. It is usually a $100 per year fee for that as well.
They want you on record as like, “State your business. What are you?” Even though this is Michigan-wide, have you ever gotten this letterpress about the CFD?
I don’t recall if it’s a Michigan, but I’ve gotten letters before where it’s like, “This is not owner-occupied. You either need to register as a rental or vacant,” or stuff like that. I got one in Lake County.
It’s like Gary, Indiana once again. The one where the lender doesn’t exist, that is an incurable problem. That is like the only truly incurable problem we’ve seen.
We did not buy those, just to be clear. We tossed those back because the reality is the seller can’t sell them to us because technically the contract says he has to transfer the property title to us. He can’t transfer title to us. If there are issues, it could be a problem if the borrower decides to take it to court and challenge loan. Any loan you buy, whether all the documents are in line or not in line, the borrower can take you to court over. That’s why I’d say when you try and clean stuff up, you want to incentivize them and there are many ways to incentivize them. Converting it from a CFD to a note I think is a huge incentive for any homeowner or a person on a contract because they bought that and wanting to own it at some point in time. They just couldn’t get the financing for it through the bank. They’re under CFD giving them what they want. I don’t know why they wouldn’t take it. There are things like that especially when the nonperforming.
Think about it, if someone’s three or four months behind on their mortgage and you say, “I’m not going to foreclose on you. Let’s do a modification and in that paperwork include anything that needs to be updated.” Tell them, “Here’s the deal and this is what we’re doing and stuff.” They’re more worried about, “I get to keep my house.” A lot of those things that you do clean up, it’s not anything that negatively affects them and it doesn’t negatively affect you in that sense. It’s not like you’re giving up something like you’re increasing the interest rate or extending them a loan or adding payments to it. It’s clerical items that are getting cleared up that helps them at the end of the day so the title is clear.
When they do pay it off, it’s something that they have and don’t have to worry about it. Back to that original question, on the stuff that was toxic, we tossed those. Those are the ones that we tossed back. There was also some, for example, that the seller had $200,000 in liens in Cook County that didn’t make sense. We toss back stuff like that. The rest of the stuff, if it was missing an allonge, that’s not a big deal unless you were to foreclose and go after them a deficiency judgment. In most states, your attorney will tell you don’t even bother doing the allonges on CFDs because it just confuses the issue.
I will mention that we did put out five assets up on PaperStac. In the near future, we’ve got about 25 more assets that we’re doing some cleanup on. Once we get them cleaned up, we are going to be putting those out for sale as well. Pretty much all of them are performing assets that we’re going to be putting out. For people who are interested, we posted some locations where they are so you can start looking at some of the information. Our goal is to provide these with to the borrower as well as include a lender’s title policy as well on the assets. Not only will it be the borrower have a deed, but also a lender’s policy. That first position note is getting insurance on it as well.
That’s an ideal loan in a box.
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