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Keyhole Financial


The Etiquette of Buying Loans

I recently had the experience of brokering two lists of non-performing seconds for two sellers. I started my conversation asking each seller what they were expecting in terms of pricing. I don’t like to go through the preparation of brokering loans if the seller isn’t going to accept any reasonable price offers. Like all my selling clients, both sellers expressed they wanted the highest prices available. When we got more specific, one of my sellers had a strategy with his pricing. He would only sell if his prices were met so that he could buy more of a specific type of loan he wanted. The other seller didn’t have the time necessary to work his loans, so he just wanted out. It seemed he’d be more flexible with his pricing.

The next step for me was to work and analyze the loans, put them in a specific logical order and send them out in an email blast to those clients who I felt would be interested in these types of loans. On my emails, I’m very specific as to how to place an offer, how to view the credit reports (via a link in my email) and when is the deadline. I also make it clear that once a bid is accepted, the buyer may see the collateral materials. And lastly, I make it clear that the Purchase Sale Agreement should be signed and funded within a week’s time.

I get it that some buyers like to run title reports once their bid has been accepted, but it shouldn’t take longer than a week to get this information.

Not ten minutes after I sent out my emails did I start receiving emails asking me if there were any credit reports available.

When the offers did come in, they came in various methods. Some came in a column where the buyer put in their offer price next to the loan. Some came in an email with the name of the loan and the bid offer. Others came with just the name of the city and an offer – Now I have to find out which loan they’re referring to. Some buyers just gave me a lump offer for all the loans even though I explained in the email blast that I needed individual loan offers.

I had one buyer call me literally one year after they purchased their loan and complained that the loan went into foreclosure and they wanted their money back. Which brings me to Reps and Warrants.

It’s pretty customary that every PSA has a section for Reps and Warrants, which details what recourse the buyer has should the loan they purchase be in foreclosure (usually within 30-45 days after purchasing the loan) or if for some reason the buyer can’t file an Assignment of Mortgage or the collateral materials are incomplete.

It’s extremely important that the buyer contact the seller as soon as possible should they run into trouble with their newly purchased loan.

Another problem I sometimes run into is after the buyer has signed the PSA, they then inform me that they won’t be able to fund the deal for another week or two. To me, this is unacceptable in that it’s bad business and why didn’t you make arrangements with the seller to let them know prior to signing the PSA?

The point of this article wasn’t for you to listen to me bitch and moan about how hard it is to broker loans, but more about what a seller’s expectations are when selling loans.


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