Whenever I speak to an investor for the first time, I am always asked two key questions. First, am I direct to the seller and second, do I compile? The answer to the first question is yes but the answer to second question is no. There are many reasons why but the most important one is that unless you have a billion dollars, are an ex-banker with an extensive relationship to banks over a 20 year period, none of the banks or sellers will compile for you. This, of course, is a bit of an exaggeration but highlights the challenges of compiling.
Every investor is seeking a great deal but for many, they look to specific geographical areas. Some are state specific while others are region specific. What is so appealing about these areas and why are they buying there?
A reseller’s goal is to obtain access to a package through a direct relationship with a seller for the purpose of buying it at one price and then reselling it to an exit buyer for a higher price. Their profit is the spread, the difference between the two prices. Some resellers are worth their weight in gold while others are not. How do separate the good from the bad and how do you read between the lines so you are not lead down a path of frustration and disappointment?
Many buyers assume that they more they spend on acquisition of a bulk REO package, the better the discount they will receive. Truthfully, this ain’t Wal-Mart. Banks are notoriously firm when it comes to their discounts. You take it or leave it. This may come as a shock but you have zero leverage with the banks and you are in no position to negotiate better discounts. Why you ask? One reason; blame our government for giving the banks billions.
That’s billion with a B. Yes, there are billion dollar deals available to billion dollar buyers every week… and I am the tooth fairy. Every so often I receive a call from a rep that has access to the FDIC and billions of dollars in REO’s and Notes. All that is required is executing their NCND and providing a proof of funds (POF). The rep will then put my buyer in direct contact with the attorneys representing the FDIC. Perfect!! Well, not so fast.
Unless you have a billion dollars, a twenty year relationship with the bank and a plan to rule the world , banks don’t want to talk to you. Seriously, why would a bank want to trade with a buyer they know nothing about and have absolutely no banking relationship with? Why does everyone think buying bulk directly from the bank is the answer? If you are successful enough to be able to trade with the bank, then you have gone where most buyers never will. There is an alternative – buying on the secondary market from private sellers. Here are the pros and cons of both.
