Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!

Understanding Indicative Bidding

GDNI 71 | Understanding Indicative Bidding


Gail Anthony Greenberg and Chris Seveney take us into the process of a seller’s mindset, particularly that of understanding indicative bidding. With indicative bids, many people have so many interpretations of it that it causes a number of issues between sellers and buyers. Gail and Chris put in their own experiences of straightening out indicative bidding agreements gone wrong. Avoid those things yourself as they give out great advice on what to look for before putting in indicative bids with somebody.

Listen to the podcast here:

Understanding Indicative Bidding

How are you, Gail?

I’m great. I can’t believe that you would call me super busy since I only have one job and you have how many?

I lost track. I was thinking that I was doing something. I’m like, “I’ve got to do my homework,” because school started.

On top of everything else, you’re pursuing a Master’s degree.

The class I’m taking is on multifamily and affordable housing, seeing I spent pretty much most of my twenty years in the multifamily side of housing. It’s cool though because it’s about putting a deal together and understanding the different phases of putting near the numbers in the financing together and how to manage the capital stack.

Which is new for you because you’re usually the guy who manages the build.

In the last years, I’ve been involved in putting the capital stack together. It’s very interesting because it goes into talking about property management, what to look for, what questions to ask when you’re outsourcing property management. It’s the full gamut of the whole process. There’s probably a lot of stuff we’ll be sharing with a lot of note investors as well because a lot of us do end up getting a property back or keeping it as rentals or have rentals. As information becomes available, I’m going to happily share all that with people.

Chris, you are a living example of the positive way that hyperactivity can be channeled if it can be harnessed.

I’m not even completely fully hyper yet still.

You never took the Ritalin they prescribed for you. I live in a state where pot smoking recreationally is legal.

I’ll be the first to say I’m from Massachusetts where it’s legal there now, but I can honestly say I have never smoked weed in my life. I never had an interest. Don’t ask me when I started drinking booze because I have a number one in front of it, but I was a teen at least.

I am personally aware of quite a few degrading incidents from your life. Let’s be clear, he’s not a Boy Scout but this is one area he has not ventured into.

I never had an interest. Enough about pot smoking, that’s not what we’re here to talk about. We’ll talk about a topic that could have some correlation with that.

Some people resist all change or change that requires them to do something. Click To Tweet

We feel that people have been smoking pot at times in conjunction with this activity.

The activity is indicative bids. What is an indicative bid? What does it mean? Talk through the process as a seller’s mindset. Most note investors are typically buyers and you come to a point where you start selling more assets, which I’d say it’s been a few years now that I’m finally at that point, as well as you too, Gail. We’ll give our feedback, the people, in regard to understanding what an indicative bid is because I think people have different interpretations on it. Would you agree?

Yes. I want to make it clear. First of all, for this and the next one, we are abandoning our usual “what just happened” format because we’re doing two very tactical and I hope helpful podcasts with some actionable information. This is the first one.

The next one, the “What just happened?” is going to be the entire episode.

People can be prepared for the “What just happened?” in your life as a note investor gets bigger and more dramatic as you follow the path and get more skilled at this. Step onto the roller coaster and here we go. First, you have to learn about indicative bids. This was inspired a little bit about me complaining that I had a person interested in buying one of my notes up on Paperstac. She offered a slightly lower amount of money. I came down a little, she came up a little and we agreed on a price. After the due diligence process was underway, I assumed that everything was going along normally. She came back to me and said that she couldn’t make the numbers work. This is very puzzling because I was selling a conventional note. I’ve had a $55,000 UPB and I was selling it for $24,000.

What state?

In Alabama, Birmingham. This house, I was selling at a non-performer price. Less than 50% UPB, yet there had been quite a few payments over the time the year, two years that I own this thing. It was a sub performer. I was selling it at a non-performing price. This person who admittedly is new somehow, at the time she was agreeing on a price, had not figured out whether the numbers worked or not. I don’t know. There was even this long delay where I had to wait where she got her own BPO and her BPO matched my BPO and that she still wasn’t comfortable, like indicative bidding. I have to say for people who are new, it feels very uncomfortable to them. I don’t know why it’s so uncommon. It seems to be very fraught with emotion and difficulty. I can’t remember how it felt back at the beginning. Chris, perhaps you can remember or know what this is all about.

For me, I look at it in the same sense of putting an offer on a house. If you’ve ever bought a house, you put an offer in and if everything comes back and checks out, you’re ready to buy it at that number. That’s the philosophy I’ve always taken with me. Sometimes stuff comes up that you find out during due diligence, but if the BPO, title report and the taxes checkout and the area’s pretty much what has been assumed and so forth, if based on what it may say on Trulia or some of these other things, the expectation from me is you’re closing on that deal. If there are things that come up like there might be additional taxes, which could feed the bid or the house is abandoned or the houses on a street that on Google looked like all nice houses, but now they’re all abandoned and you don’t want to invest in the area or something, those are things that I can see either fading a number or walking from the deal. It’s the fact that the numbers don’t work. That to me, that’s bad.

That’s a bit of research and calculation to do. You don’t make an offer and then be like, “I can’t make it work at that number.”

Especially when they countered and accepted. You bet went back and forth on the numbers. That’s what’s even more baffling to me in this situation. The person went and ordered a BPO and everything else. The person spent the money. Honestly looking at it without knowing the full details of it, Gail, and I’m playing devil’s advocate, it’s a $55,000. Mid $50,000s UPB, BPO in that price range, paying $0.45 on the dollar in Alabama. That’s right where the asset should be. You’re going to have to spend a few grand to foreclose. You have the year of the borrower to redeem, which I never do. A lot of times you can Cash for Keys. Even if taxes are $2,400 plus foreclosure, they’re in the thing for $30,000, even if it’s sold for $40,000, it’s still a 30% return. There’s still plenty of play in those numbers. I’m scratching my head on how you couldn’t make the numbers work on that one.

It’s been a while, but it still little left me with a bad taste, I have to say. We talked in a lot of times about longevity in this business and relationship building in this business and how small this world is. I am prepared to understand a little bit if this person is new, but you’ve got to be more careful because you cannot trample relationships early on. You need to build. You can’t tear down people. It’s not good.

One thing that I’ll offer to you because I’ve ran into this situation as well, was somebody was ready to walk on a deal with me because they wanted to convert it to a note and mortgage and want to fade the bid because of that. I got a little snippy, which I can do and be like, “If you all reduce your risk, that’s at your expense, not mine. What I ended up doing was the person, I give them kudos because they picked up the phone and called me and I was going to reach out to them.

Usually before you explain that part, explain what happened, what their issue was and what was going on.

GDNI 71 | Understanding Indicative Bidding
Understanding Indicative Bidding: You cannot trample relationships early on; you need to build.


In this one, it was a land contract that was missing an allonge. The collateral wasn’t clean and it was missing a few documents in the collateral. The title itself, the transfer of deeds, everything was in line, but it was an asset that it was performing but if it ever did go to non-performing, there were a few things that would need to be done to get it taken care of. The simple solution and instances like this are to swap the borrower over to a note and mortgage and then the land contract gets canceled, it gets wiped out. You’re starting with a fresh new document. It’s a way to clean up the title. That process costs a few bucks where you may have to spend $350 or whatever to get the borrower ability to repay approved even though they’ve been paying. From there you have to create a mortgage and note and get it recorded and stuff like that. Sometimes you can get the borrower to pay for that. Other times you can do it as a courtesy.

The person wanting to go that route of putting it on mortgage and note, which I give them kudos to coming up with that because it is something that some newer investors aren’t aware of. They want to bid by it. When the bid was provided, all the collateral, everything was provided, a title review was provided. It wasn’t a surprise that this needed to be done, but they had an attorney confirmed that’s what should be done. At the end of the day, when they want to fade a bid, I said no. They picked up the phone and called and then was like, “What should we do and try and work things out” What I ended up agreeing to is I said, “I’ll give you the documents, the mortgage and note documents.”

Everything you will need to convert this, no expense involved.

I’m in the process of doing it on several assets already in that state and I’ve already paid an attorney to give me those documents. I’m like, “I’ll give them to you. You still need to get the borrower to the ability to repay or $400 or whatever, but not $2,000. You take that, pick that up. I’ll give you the documents from there and you’re good with that.” They came back and said, “Yes, they are.”

What I did in my case was she said, “The numbers don’t work.” I said, “Tell me what number it would work at.” Her response, I remember, were at $24,000. Her response was, “I can’t make it work with an investor. I could only buy it on my own and I only have $10,000.” This is like being a child, going to the drug store to buy a bottle of Coke and you only have $0.25 and you’re like, “Is this enough? I put my quarter on the counter. Can I buy this bottle of Coke?” It’s like, “It’s not about whether you have enough money or not.” This whole thing, it felt so unprofessional. That was my big complaint about it.

Here’s what I would do. I’ll go back to that person and say, “Can you show me your calculations on how this doesn’t work for an investor? I’m perplexed because I buy assets all day long at this price point in judicial states and 99% of the time, I don’t have issues. I’m curious, what are you trying to get for return? What are you factoring in? I know you’re newer to the business and I’d be happy to help you.” I’ll say, “Is it the fact that you don’t have the money? If you don’t have the money, just tell me. Don’t make up stories.”

You can’t find an investor. Like you can’t get anyone interested. Lots of people, particularly people who have made offers to me on Paperstac. Their indicative offer is not based on all the collateral checking out. It’s based on whether they can now find an investor who will say yes. People aren’t upfront about the fact that they’re going to shop the deal around and it’s very conditional on being able to get somebody excited about it. When you’re new, you probably don’t have a big pool of investors. You don’t have people who have already had a great experience JV-ing with you who are just waiting for the next deal presented to them. It is a bit of a slog at the beginning. This person’s going to be embarrassed to hear us talking in this way, but we’re talking in an attempt to both vent. That’s from on my part, but also to educate and to make you a better investor. Honestly, I had noticed this person and had taken an interest in her for some other reasons and was going to reach out to her about some things. This whole situation made me feel like, “You’re on your own. I’m not going to extend myself to help you.” If she came to me like anyone else, I would try to help her. It was a bad situation. Thank God I hadn’t told my investor who owned the note that we had a buyer. I wasn’t going to do it until the cash is in hand.

That’s my note and bolt for this. I’ll bring it out right now is if they’re an asset or somebody’s refinancing or whatever the case may be, don’t tell your investor until that money hits the door.

It’s tricky because we are in line with our obligation as JV partners or partners that JVs together. We have to consult our JVs about particularly major moves with their assets. I think like me, you probably talk to them in advance. “I am listing this note. What’s your minimum if I get an offer? Do I need to check with you?” I have permission to go ahead and sell it without saying to them, “I’ve got somebody who wants to buy it.” Sell it and contact them and say, “We have money.”

I’ve got one where I’ve got a borrower who at one point in time was saying, “The only thing you’re getting from this property is the ashes that are left over to getting them to reinstate.” Now they’re looking through finance and they had asked, “Can you provide any assistance or assist us by knocking a few bucks off if we refinance?” I play it as, “Let me think about that. Get back to the investment group on this and we can get back to you with an answer.” I called the investor on this and went over to numbers one of them and said, “What can we do for a discount that we’re okay with, but entices them to try and refinance us out of this deal?” It’s a property where they could get financing for and just a matter of their credit and stuff.

Give them a giant interest rate, 26% like a credit card.

We went back and said, “If you want to refinance this, we’ll knock X amount of dollars off the UPB,” which is enough to cover their closing costs plus like put two points down on it. That’s the way we phrased it is, “You’re going to go from a payment of this to that if you can get this done and we’re paying it for you.” It’s almost at a point of why wouldn’t they do it? If someone comes to you and says, “Instead of paying $700 a month, we can get you to pay $500 for the same house. It’s not going to cost you. It’s going to save you $200 and the overall amount you’re going to owe is going to be less. Are you okay with that?” If you have anyone that tells you no, then I don’t know what to tell you.

People do say no unfathomably. Some people resist all change or particularly change that requires them to do something. It’s a great idea. Those early payoffs and that velocity of money is one of the secrets of moving fast and building wealth in this business. I know people who when they get the contract for deed, if they have a borrower with a pretty good FICO score and has the capacity and a good decent income. If they need help, they’ll even enroll them in a credit score building program and go. I’m in the Philadelphia area. There’s a woman I know, she has rentals and she does lease options with her renters. As soon as they sign the lease option, she enrolls them in a credit score improvement program. She’s a real wheeler-dealer. It’s a multilevel program, a marketing program that she’s involved in, so she gets them under her name and these programs.

There is such a wealth of opportunity to those who are willing to deal with a little bit of complexity. Click To Tweet

She’s making a little money from them working on this. She might even pay for it for them because what her goal is to get you financed out and to be able to sell the property quickly. I wanted to say if I may, is now going back to the person who wanted a discount because of the fuzzy title on the asset that you were selling. You showed him how with some very simple documents he could fix everything he was worried about. I want to say in general to all the people, particularly people who are always looking for those very nice clean deals that seem to be becoming harder and harder to find. There is such a wealth of opportunity to those who are willing to deal with a little bit of complexity. Someone told me once, “People who are willing to invest in difficult states with long foreclosure timelines and high taxes like New Jersey, they have all the deals to themselves because everybody else is avoiding them completely.” You and I had our first experience together with troublesome assets when we bought a very small pool of six very troubled assets.

We were willing to spend the time. More me than you since there was just a lot of research, which as a trained investigative journalist came very naturally to me and is the thing that I love to do. We were willing to hunt down these very difficult to find borrowers to get them to sign cancellations, they had already abandoned the properties, they were long gone. Some were seemingly in hiding from their creditors like the lender. By finding them and using different tactics to get them to take our calls or answer us back, we got some amazing returns. People, do not be so frightened of these collateral issues. Educate yourselves about how to fix them. Except for Chris and me, you will have that world to yourself because we are willing to take those on. Seemingly not many people are at this stage.

There’s a very low level of risk, but it’s more putting in the elbow grease and putting in work.

It’s a lot of time.

It’s time and effort, but you can crush it by putting in the time and effort. It’s like waiting on the long foreclosure states and just bidding accordingly and letting him know that there’s not a lot to do on those assets because it’s foreclosure, it’s going to take eighteen months. It’s sitting out there, it’s not like you need to manage it. It’s that your money is tied up and making sure that it’s in a position where you can expect to get a very decent return versus where your money could be in numbers.

Back to also your story, back to the indicative bids component to this is a few things that I always recommend. First of all, if you’re putting in an indicative bid, understand what that means, which we’ve already gone over. Secondly is I’m of the opinion, and other people disagree with me but don’t be putting in bids unless you’ve got people who would be interested in funding a deal. First, you need to have people who may have some money. Second is send them a note. “I’m looking at this deal. Here’s the 30,000-foot view of the asset, what I’m going to try and get it for. Would you have any interest?” That’s what you should be doing before you put in a bid is have a soft confirmation, similar to putting in an indicative bid. Have an indicative agreement with somebody where the money is coming from.

I think a smart way to start. We have a friend, Melanie Jacob, who’s a great role model at this. Melanie and Phil, her husband who invest together out in Michigan, have been educating people. Ever since they started in this business, before they’ve had a deal, offered a deal, try to get money out of anyone, they’ve been educating people about what note investing is. Let me, first of all, create a very well-informed and clued in group of people who I know have money and are probably interested in branching out into real estate. Once you see who are following along with your lessons and who’s paying attention, asking questions, wanting to know more, then you can cultivate those people into people that you can say, “When I have a deal, do you want me to contact you? How much money do you think you would like to venture on your first outing?” Try to get a real sense of people’s comfort level. A lot of people will tell you, “I have $100,000,” but when you call them, are they going to hand it over?

They may not know themselves until you ask them, “I’m ready. Where’s the $100,000?” They’re going to be like, “I’m not comfortable with this note investing. I don’t know enough about it.” You want to get to know your pool of people that you think will fund deals and just bring them along and make sure they have a comfort level before you start pitching deals to them or making indicative bids based on the idea that they will find. Chris, I think this might be helpful. When you’re making an indicative bid, it is contingent on certain things being as you expect them to be or turning out to be. What do you consider the things that are reasonable to either lower a bid or withdraw a bid?

Taxes and liens.

Like a bid much more expensive than you thought.

Collateral. Whether or not the collateral is clean or not. If they provide you that information upfront, then you should bid off of it. If you have a tape with no collateral attached to it, then if it’s missing assignments, allonges or something like that, chasing that information down could be a potential reason and it’s very different between a land contract and a note. That is something that could be a cause to reduce a bid.

If the company that you need the allonge assignment from is still in business, is it safe to assume you’ll be able to get it?


GDNI 71 | Understanding Indicative Bidding
Understanding Indicative Bidding: Do not be so frightened of collateral issues; instead, educate yourselves about how to fix them.


If they are no longer in business, is it safe to assume you will be able to get it?

No. Most likely you’re not going to get it.

If there is a successor company, will you be able to get it?

Maybe. Even depending on, again, who the entity was. That’s one of the reasons why one of my secrets is I love using Orion is because they do this for so many corporations, especially the major players, that instead of trying to hunt somebody down, it’s a major fund. It’s like, “Do you have signatory authority for them?” “Yes.” “I bought this. It was missing this. Do you have the copy or can you create a new one?” “We’ll create a new one.” It’s done.

It’s not about that before. A lot of times you’ll see Orion, which is now called MetaSource, as the preparer of the documents from the company that you need a document from. It’s very easy to call them and create it.

There’s still time and effort. That’s a bit of maybe a $200 to $500 fee. It’s not a $2,000 fee. We talked about taxes. We talked about title.

If there’s a giant tax bill, then you have to bail. If it’s modest, you can ask them to make a reduction. Maybe you split it, maybe you try to get the whole thing knocked.

Here’s the thing that people always, sometimes when they run these O&E reports, they’ll say, “Taxes, it will say due.” The due date might be two weeks from now or and it’s a nonperforming asset. If that’s the case, then typically a seller’s not going to fade that bid. It’s typically on delinquent taxes, meaning that the taxes were due. It was due six months ago. That’s delinquent. If they’re due September 1st, they’ve been delinquent. A seller won’t fade in that instance. Just people understand that because I’ve tried that and I’ve gotten shot down every single time. Another is BPO. If they gave you a price of $75,000, it comes in at $50,000. That’s typically a way to fade your bid from that perspective because it’s not worth. If the UPB was only $20,000 and they said it was a $70,000, it’s only $50,000. You’re not going to work a fade because you’re basing off of the UPB anyways and there’s still the equity. That’s another thing to look at.

There’s equity coverage. There’s enough equity to cover your debt.

The last I’d say is demographics in the sense of you looked online, it looked like it was a decent area. Trulia didn’t say anything. You send somebody by and there are people dealing crack at the front of the house or it’s a drug house or next door is a drug house. That would be something that, “It’s too rough for me.” I had one where it found out the house was a drug house and it’s like, “I want to sell it and said here’s the reality. It’s a drug house and I don’t deal with drug houses.”

Selling back, Chris, those are earnest entrepreneurs trying to make their way in the world. Who are you to question whether they make it worthwhile or not?

Something like that. Somebody says, “I don’t do drug houses,” I understand. I get it. If the house comes back and somebody came back and said, “I didn’t realize it was the 75-year old lady who’s I’m going to have to foreclose on her,” I’d be like, “That’s not a reason to bail. That’s where you work something out with the borrower, but that’s why you’re getting it at $0.45 on the dollar.

We should say that the relationship that you have with sellers, if you want an opportunity in this world, is sacred. You have to do anything you can to not annoy, fluster, disappoint sellers and, and not nickel and dime about things that you can correct yourself. Generally, don’t be like cranky pants. Nobody likes that and nobody wants to toss great deals to people who always have issues. One of the things that you can do to always be a good buyer and not get a bad reputation is for things that you are genuinely concerned about that are real deal-breakers. If your worst concerns about an asset turn out to be true, like you’re not sure you can get a document, you can’t get a lost document affidavit. That’s going to be vital when you go to foreclose. You can create side letters with sellers where you ask them to sign a very simple note that says it’s part of your purchase contract that just says, “If I cannot resolve this or if the number for the taxes that can’t be gotten right now turns out to be higher than this,” the seller will either pay it, fix it or take it back. You’re the master of the side letter, I have to say, Christopher.

If you want opportunity in this world, the relationship that you have with sellers should be sacred. Click To Tweet

I’ve done a lot. The biggest thing about all of this, it’s about communication. It goes back to communication. More importantly, building a rapport with that seller in the sense of knowing that you’re going to close and knowing that sometimes you may take on a little hairy of an asset. If there’s something comes up and not just walk from every single deal because then you’re going to have the reputation of this person going to bid and then walk. It goes a long way and your reputation. It’s a small business. If you look at the number of people you buy from, most of us can name them all on a hand, one hand. If you get blacklisted by that person, it hurts.

I think when you are willing to take on something, buy something from them that they need to sell, they know what’s problematic, most people won’t buy it. You become in a way like a problem solver for them, a problem-solving arm, and you do get rewarded. For you and me, I’d say a lot changed for us after we bought that problematic pool of notes. Admittedly, they gave us a great price on it, but I don’t think they were confident that they’d be able to sell it at all. They were hugely relieved to sell it right before the end of the year.

Even the ones where we took those three or four assets, I had dozens of them that are toss always in it. It’s they pretty much we’re begging people to like, “Can you take these twelve and I’ll give you a great deal on these other ones?” It’s something that you’re focusing on the numbers. These twelve, assume I’m not making any money and if I put any money in, it’s going to be a paper loss, but I’m buying this one instead of paying $30,000 for this one. I’m buying it for $15,000 and I’ve got five into the other one. I’m still $10 ahead of where I would have bought that one asset. Looking at things at a pool is extremely valuable for people to understand that. When you start taking some of these assets, and I’m not telling people to take extra risk. By no means am I saying, go out and do something stupid or high risk?

What I’m saying is look at things globally in a big picture and if you can buy one asset for $30,000 or five assets for $35,000 and if you would’ve bid on two of them at $45,000, you’re taking on three assets. They wouldn’t want to give you a discount. They’re paying you in some of these instances to take those assets because they need them off their books. People are like, “Why would they do that? They want to close their fund and the people who manage that fund and all the investors don’t get their final checks until that whole fund is closed. They have to sell so they can close that fund so they can then distribute the final returns to the investors. That is why.

Didn’t you have an amazing experience with a second that they just threw in for $100 or something?

While those two seconds they threw in, one of them, they ended up buying back because they own the first. The other one, it was a line of credit that the borrower passed away. They first foreclosed and sold it. I got a check for $7,000.

It can happen but it doesn’t always happen. The moral of the story, the takeaway for me is you have to put yourself in a position where these miracles can happen. To do that, you have to be willing to spend that $100 sometime on something that you think is ridiculous.

My moral is that I’ve made a 7,000% on a second. Why am I still buying first?

That’s a good offer, Chris. Leave more for the rest of us.

I want nothing to do with seconds. I’ll leave that up to Bill McCafferty, Martin and that group. One last thing I want to say is a lot of people talk about in our Notes and Bolts group, I highly recommend you go join it because we had a discussion about getting information about the banks and what banks are selling and so forth.

Whether to pay a high price monthly fee or do it yourself.

Do it yourself for free. The programming behind it, which is very simple. You might pay someone to do it, but it’s done. If somebody wanted to see the list without all the other added benefits that some software programs have, which they go above and beyond pulling bank information, they provide a lot more information and data. I don’t want to say it’s by no means equivalent to what they provide. It’s the bare-bones version. If that’s what somebody is looking for, I recommend go join our Facebook group because we’ve got some valuable information on how you can get that information.

Chris is giving away the way to pull the quarterly bank information and see who’s selling assets. You can either spend a ton of money buying a commercial product that does this or join Notes and Bolts and get it for free. Not for free because you have to give us a review. It doesn’t have to be a positive review. If it’s not a positive review, it will be a very big conflict about whether we give you the software or not.

GDNI 71 | Understanding Indicative Bidding
Understanding Indicative Bidding: Put yourself in a position where miracles can happen.


The other thing is you could hire a programmer to do it yourself, but that’s what we’ve already done.

Reinventing the wheel is no good. I’m saying it should be a good review. I certainly hope you would say nice things. Everybody, thank you again. Hopefully, this has been helpful. Now you know a good, compelling reason to join Notes and Bolts from the Good Deeds Note Investing Podcast Facebook group.

Thank you all.

Important Links:


Love the show? Subscribe, rate, review, and share!

Join the Good Deeds Note Investing movement today:

Leave a Reply