June 14, 2023 • 29 mins
Are you navigating the tricky world of real estate investing? Join Justin and Richard as they dive into post-closing processes and share their experiences with successful investments that seemed like failures at first glance.
Resources and links discussed:
- Videocast on our YouTube Channel
- ANB Funds Website - https://anbfunds.com
About the Host:
Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!
Connect with the Host:
Facebook - bethebank
Twitter - bethebank1
Instagram - bethebankpodcast
American Note Buyers - https://anbfunds.com/
Monthly Broadcast - https://youtube.com/playlist?list=PLzc944w1xydt5aLDrrEPHJhdJeDkBjjD4
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Narrator (00:03):
Interested in real estate.
How about wealth?
Well, they go hand in hand, andhere you'll learn all about it.
Welcome to Be The Bank, apodcast where we discuss and
debate the topics centeredaround real estate investing.
Your host, justin Bogart,shares insights into investing
in real estate to create realwealth and passive income for
(00:23):
you and your family.
He'll share stories of realestate investments done right,
walk you through the process ofowning a real estate note and,
most importantly, educate you soyou can Be The Bank.
This is Be The Bank brought toyou by American Notebuyers.
Now here's your host, justinBogart.
Justin Bogard (00:46):
Hey, it is episode number 12 of Season 5 on
the Be The Bank podcast.
I'm Justin Bogart.
Today, Richard and I are goingto be talking about just some
post-closing processes to beaware of and maybe some
timelines that you areunfamiliar with or maybe kind of
set your expectations on whatshould be.
We got some fun little sellerfinance stories on some
(01:07):
successes when they look likethey could be failures.
So stay tuned, Hey, Thornton.
How's it going?
dude?
Richard Thornton (01:24):
Mr Justin, pretty well today, thank you.
It's nice and warm outside andsummer is upon us.
Justin Bogard (01:30):
Yeah, It's been very dry here in Indiana.
It's been so dry I don't thinkwe've had rain for, I want to
say, like three weeks.
And so now there's some airquality issues going on.
There's construction for a lotof commercial stuff that's being
built around where I live here,So the ground is very dry.
(01:51):
So now when the big equipmentis rolling through they're just
kicking up dust everywhere andjust kind of blowing all around.
So, like you know, cars are alldirty and like the air has all
got a lot of dust and pollenthat's kicked up but it's not
able to settle without anyhumidity.
So we got a little bit ofstruggling going on here.
Richard Thornton (02:08):
So it's really dry, so you haven't put on any
moisturizer.
Justin Bogard (02:11):
Yeah, exactly Yeah, i don't know when it's
going to rain.
Richard Thornton (02:13):
I looked at the forecast for a couple of
days I noticed those crowfeedsare starting to come in around
your eyes.
Justin Bogard (02:18):
Yeah, that's why I got the brightness dirt up so
much on the camera So you can'tsee it.
Richard Thornton (02:22):
You can't see my real Yeah, Yeah.
That's why we do this right?
Justin Bogard (02:26):
Yeah, for those of you that want to check us out
on YouTube, just go to ourYouTube channel at American Note
Buyers.
You can see the live stream,not the live stream, the
recording of this podcast aswell.
This is episode number 12brought to you by American Note
Buyers.
So, besides the weather, isthere anything exciting going on
out there in good old Petaluma,california?
Richard Thornton (02:46):
Well, you know , what's interesting is the
local real estate market justcontinues to confound me out
here, because you look at thestats and they say, oh, things
are, San Francisco Bay Area isdown by 12% and blah, blah, blah
.
Well, we're in the North Bay,Okay.
So we're still fairly close toSan Francisco and we're on the
(03:07):
older side of town.
So a lot of the houses arebuilt in the I don't know lots
in the 20s.
It has slowed down a bit, butwe're still getting houses that
are going at $200,000 and$300,000 over asking here.
I mean, it's just amazing to methat you think that the market
(03:32):
would be falling out of thebottom for a lot of these houses
, but we're still getting in alot of instances and I'm not
saying last month, I'm sayinglast week over asking $200,000
and $300,000 over asking prices.
Justin Bogard (03:48):
That's incredible .
Richard Thornton (03:49):
It's crazy.
Justin Bogard (03:50):
Yeah, i haven't been paying attention this past
week on our market here so Idon't have any updates for you
there, but I guess I amsurprised to hear that.
I'm surprised that so it'shappening.
I think you mentioned a stat tome not too long ago.
I want to say it was today,when we talked today, that you
said 40% of the Bay Area isvacant with commercial right,
(04:12):
yeah, downtown San Francisco.
Richard Thornton (04:14):
Yeah, it's got the highest vacancy in the
country.
San Francisco.
The city is cruising for abruising because of the ripple
effect.
It's not just the commercialbusinesses or building owners
themselves.
It's the hotels that don't havethe people to stay in them.
(04:35):
It's the sandwich shop on thecorner, it's the shoemaker, it's
the guy who repairs your shoes,who people aren't taking their
shoes anymore because they'renot down there.
They're getting the guy who'sat home to do it.
The rollout of that's going tobe interesting.
We're just on the very cusp ofthat, i think.
Justin Bogard (04:59):
A little funny side note there.
You said cruising for abruising.
It made me laugh in psych.
That's what my mom would say tome when she was mad at me, but
she wasn't always serious.
She goes Justin, you'recruising for a bruising.
I'm just kidding.
Richard Thornton (05:18):
Most of my parents are from the Midwest.
Of course you're in the Midwestnow.
I've had a lot of people lookat me and go are you from the
Midwest?
I go no, i'm a Californian.
I've got Geeta, my other half,constantly kissing me because
something will happen.
I want to go with Jeepers.
(05:38):
She says Jeepers is that thestrongest word you've got is
Jeepers?
I'm not used to say that allthe time It sounds like that's
from Idremo Genie, Yeah orsomething like that.
You just go okay.
Justin Bogard (05:51):
That's funny.
You never lived in the Midwest,correct?
Richard Thornton (05:57):
No.
Justin Bogard (06:01):
I guess if I had known that you were from
California, i wouldn't peg youfrom being in California.
Richard Thornton (06:05):
Yeah.
Justin Bogard (06:06):
Not that being California has its own moniker
to it, but never know.
Richard Thornton (06:12):
Tell us about The hidden things that are going
on in the back rooms of loanand note buying these days that
you're finding.
Justin Bogard (06:24):
So what I find interesting is that there are
people in the note industry thatteach about investing in loans
and maybe some processes andkind of how it works, and it
doesn't seem to pan out exactlyhow reality is meaning.
Not saying this in a bad way,but what is taught in the
classroom sometimes really isn'treality.
(06:46):
And so you have a situationwhere you might not surprise
General in any subject matter,right.
Richard Thornton (06:55):
It's not just real.
Justin Bogard (06:57):
So when you get into the application of the
environment and you buy a noteand I'm not talking about, you
know, documentation as far asrecording stuff, because we've
talked about that before I'mtalking about actually that
transfer of service from who iscollecting the payment to the
new person that's collecting thepayment.
It doesn't have to be theactual note owner, it can be the
(07:19):
third party servicer.
So, like we service all of ourloans through a third party
servicer, richard and I do notcollect on any of the payments
personally or professionally.
We always use a servicer.
So sometimes we buy or investin notes that are serviced by
the individual, that is, thebank, and we call that owner
(07:42):
finance, paper seller, finance,mom and pop paper.
So that paper is fun to buybecause obviously we get a
pretty good discount on thattype of paper.
But also we do have to makesure that it's set up correctly.
So when we get this paper andwe go to the transfer of service
process, i have to preparethese.
Certain letters at thegovernment or the federal
(08:03):
agencies say that we got to sendthis stuff out, meaning you got
to let the borrower know thatthe notes been sold.
Duh, right, it's pretty obvious.
And then you also got to letthem know where the heck do you
send the payment now.
And so they have what's calleda TILA T-I-L-A form that goes
out to Truth and Lending Act andjust says hey, your note has
been sold to XYZ company, soexpect something from them.
(08:26):
Oh, and also they get a secondletter that comes in the mail
that says it's a good we call ita good buy letter.
It's basically an RESPA letterthat stands for I can't remember
the exact name of it, butbasically it's saying hey, i was
collecting on your note and nowthis company is going to
collect your note And here's thedate that they're going to
(08:47):
start collecting on your note on.
So if you need to make apayment and you have to do it
before this transfer date, justmake it to me.
And so if you're going to besurprised if it's on this date,
then you start using thiscompany And then the new company
that's collecting the paymentis going to send out their
welcome package, which includesyou know, hi, i'm this servicer,
i represent this.
You know the person that ownsyour paper Well, so that
(09:10):
information needs to be sent out.
So oftentimes that process cantake a little bit of time.
So, for example, we just boughta package of five loans for our
company And when I bought thoseloans I bought them from
somebody that was using not aloan servicing company but more
of an escrow type of company.
(09:30):
So it's almost like a glorifiedbookkeeping thing to where they
can collect the payments andthey know how to collect
payments and they do a good jobof it, but they're not
technically a licensed, fullylicensed servicer, so they don't
aren't required to send, likeyou know, the teleforms, the
goodbye letters and that sort ofthing.
So then the responsibilityfalls back on me or you know the
(09:52):
person that sold us the paper.
But since we're theprofessional in the business,
right, we obviously know what todo.
It's quicker for us to do it,so we just provide that as part
of the closing and it's kind ofpackaged into the closing cost,
if you will, of what the expenseis to do that.
But you have to get it right.
So the new servicing companywill want things done a certain
way And then you have to makesure that you adhere to that.
(10:14):
So this one of the servicesthat we use is really good, but
they're also very picky, i guess, or I guess they're really
strict on following thesecertain guidelines And if you
don't have XYZ ABC MNLOP donebefore the transfer date, then
(10:35):
you know they're not going toapprove of the transfer letter
that you sent to the borrower.
So you kind of have to gothrough these hoops and it's
like it's pushing and pullingand tugging in And with the
previous owner, the previousowner's escrow company, the new
servicer, and then you know, getthese pieces together.
So it can be very timeconsuming, especially when
(10:57):
you're doing five at a time, ifyou can imagine, to make sure
like everybody's got their ducksin a row.
On top of that wrinkle Richard,this certain escrow company that
was collecting the payments forthese five loans that we bought
.
They have an exclusive right tocollect the payment from the
borrower.
So in order to break thatexclusivity with the borrower,
(11:19):
the borrower has to sign andnotarize a special document that
says I want to release theservicing of this note from you
to X1, the new servicer.
So there was another layer thatI had to go through and make
sure that all those borrowersgot into, let's say, a title
company or someplace close towhere they could execute that
(11:40):
document.
So that actually took three orfour weeks to get all that stuff
lined up and all theinformation the new servicer
needed, and so the transferservice actually took, i want to
say, closer to 50 to 60 days,as opposed to typically we would
get this done in like three orfour weeks.
It's for the transfer service.
So those are the things thatkind of can delay things.
(12:03):
You also have to keep in mindthere's payments that are
probably coming in and out ofthis process, meaning I got five
loans.
They're going to be making apayment at some point.
Where are they making thepayment to?
and then, wherever they madethat payment to, if it wasn't
with my new servicer, well, igot to go find it and collect it
or at least tell somebody like,hey, just forward the payment
to me.
So right there you can see.
(12:25):
There's five loans with fivedifferent issues and
characteristics about it thatyou have to monitor.
So that window of time fromwhen you buy the loan to the
next 60 days is really importantthat you stay on top of your
game.
Now I haven't even mentionedgoing over insurance, but that
process as well.
We have to update all theinsurance policies that we are
the new mortgage holder.
Richard Thornton (12:47):
So a small example of that would be and
this goes into the if you're notreally careful, it falls
through the cracks category.
Oh, yeah.
That's a technical term, ofcourse.
So I bought a note recentlythat was serviced by XYZ
servicer.
They wanted the tax bills sentto them so that they could
(13:14):
escrow for the property taxesWhen it was transferred over to
the new servicer.
They did not want the taxdocumentation sent to them, they
wanted sent directly to theborrower and then they would go
(13:35):
to the county directly to findout what the tax bills were.
And what happened in thatprocess was that somehow
somebody said all right, sincewe're doing it that way, that
means that we, the new servicer,are not going to collect, are
not being requested to collecttaxes and or escrow for taxes
(13:57):
and insurance.
And when I finally realizedthis, because tax bills were
coming due, i now have to pay$175 fee to get the new servicer
that I would not have to havebeen paid earlier to start
collecting taxes and insuranceLittle things like that.
Justin Bogard (14:19):
Yeah, there's always these situations that we
find out that kind of annoy youthat there's not a blanket
policy across all servicers.
You really have to understandwhat's going on and kind of dive
deep into it.
So I wouldn't have known aboutthese borrowers having to sign a
release form to release themfrom an escrow company having
(14:40):
the sole right to collect fromthem, and unless you either read
the entire agreement, theservicing agreement that that
person had, or they just hold uptheir hand and say, hey, look,
you know you don't have theright to collect the payments
until they release the servicing.
So you would have to get anaccount with us in order, you
know, to start receiving thepayments from the borrower.
(15:01):
So it's just.
It's just good to understand,especially when you're dealing
with owner finance and sellerfinance paper, if it's not being
serviced by a licensedprofessional loan servicer, you
may have to go through someextra hoops and wrinkles to in
order to get this thing to beserviced with a licensed
servicing company.
Most people are buying loanswhere the loan is already
serviced professionally, and sothat's not an issue.
(15:22):
They just do all the talkingback and forth and it's easy and
you, as the new note owner,don't have to worry about it.
But when you buy the mom andpop paper, it's just another
wrinkle, which is why you knowwe have to buy it a bigger
discount because we knowJustin's going to spend a lot
more time trying to figure allthis stuff out and getting it
boarded with a new service.
But once it's boarded, hey, youknow it said, forget it.
These performing loans, youknow, do great, but it's that.
(15:46):
That interim process, richard,those 60 days, it's really
important to document whatyou're doing, have a good
checklist, making sure you'repushing and pulling, because
this stuff, as you know, richard, can drag on for three, four,
five, six months sometimes,because you just forget us now.
Richard Thornton (16:01):
You're much better at keeping track of that
stuff than I am.
I keep ticklers and whatnot onit, but it just drives me nuts.
I have to go back.
Like you say, when it drives.
When it goes on for three orfour months, i have to go back.
I have to look at my notes.
I have to see what the issuewas, because you don't have just
one of these.
(16:21):
You've got five of them up inthe air all at the same time.
Justin Bogard (16:25):
Yeah.
So this business can be reallyactive really quickly in
performing loans.
When you're buying in bulk likethat, if you're just buying one
or at a time, it's usually notas much work to do If you're
buying a non performer.
Obviously you better be payingattention to what's going on,
because you can lose out on yourROI pretty quickly and things
can go on for eight, 10 monthsAnd you not realize.
(16:48):
I could have solved that sixmonths ago, you know.
So that's the reason why we payattention and we have a good
process and a clean process, sothat we nothing Falls through
the clack crack easily.
I'll say not everything wecatch, but it's definitely.
We have a good safety net.
Richard Thornton (17:06):
Yeah, and I mean an example that I gave with
collection of taxes.
The borrower came back and saidlook, i thought you guys were.
We're doing all that.
So since you weren't, you, pamand I'm going Wait a minute.
Justin Bogard (17:20):
Yeah, look one.
Guys, when you're the no owner,you got to take the horse by
the reins and you got to justcommand the ship.
You got to know exactly what aparty a is doing and party B is
doing and either be themiddleman or to say, look, the
receivables are this, yourdeliverables are that, make it
happen, and then check up all itand follow up to make sure it's
being done at the at thetimeline that you get done by.
Richard Thornton (17:44):
Right, that's the advantage of investing.
Investing in Selenica fund?
Yeah, because all that's takencare of for you.
Justin Bogard (17:48):
It's all done for you.
It's the white glove treatment,as our friend drew would say
done for you done for you.
I've got some other Interestingstories that I wanted to share,
if that's okay sure so We buyloans that have problems with
them on purpose, because we knowwe can get a good discount for
(18:11):
them And we also know that We'vebeen through enough to where we
can work our way out of themand we feel pretty confident.
Mm-hmm, we had bought Severalloans like this.
Some of them are performing Butthey have problems with it, and
some of them are not performingand they got problems with it.
A Couple of the ones that arenot performing that we've bought
.
We've had really good successwith them And it's because of
(18:35):
the story.
That's the underlying story toit.
Narrator (18:38):
Mm-hmm.
Justin Bogard (18:39):
And so we look at the traditional ways to do due
diligence on a note and we seethings and we go, okay, we can
assess the value of it and wethink it's this but hey, that's
great.
But let's look at the otheremotional factors here.
Let's look at What thecommunication has been like with
the borrower.
What is the borrower side ofthe story?
What is the lender side of thestory and how?
(19:01):
How can we see this goingfurther?
and what do we see is thepropensity for them to start
repaying again or them to payoff the loan.
Richard Thornton (19:09):
Give us an example.
Justin Bogard (19:10):
So Richard and I we've mentioned this before in
the broadcast We've had a lenderand borrower who actually
relatives to each other, close,close relatives to each other
and They basically had like afalling out.
So over the course of manyyears they've kind of had this
let's just call it this disliketowards each other.
But one of them was a lenderand one of them was the borrower
(19:31):
.
So obviously the the lender istrying to get payment from the
borrower and the borrower sayingI just don't want to give you a
payment Because I don't likeyou.
So that's the truth of thematter.
The lender is, you know,hard-pressed not to go through a
foreclosure action because it'stheir relative and, quite
frankly, they just see it asthis doom and gloom type of
process and they just don't wantto deal with that and have all
the family drama.
(19:51):
So they kind of let things go.
We kind of jump into thepicture and we're like, hey,
we'll buy this note.
And we dig into the story andwe're like, wait a minute, this
person has been paying, wait aminute, they're this far behind
this and that.
So I go and interview theborrower and say, hey, look,
we're thinking that we're in theprocess of buying this debt
that you owe to your familymember XYZ person.
(20:12):
We're just letting you know andwe wanted to confirm with you,
like, this is what they'retelling us the balance owed is,
and all that stuff.
And I said, oh, that soundsright.
But no, i think I've made theseXYZ payments.
And we would say, hey, great,just show us you made those
payments and then when we buythis debt, that's gonna be your
new balance.
That's great for you.
(20:32):
You know, we'll take care of it.
Okay, that's awesome.
Don't hear from them.
Don't hear from them.
Don't hear from them.
Finally, hear from them.
I don't, i don't have anyreceipts of that stuff.
Mr Mrs Barber, you understandthat we can't just go up your
word.
We have to have hard evidence.
Do you have a check stub?
Do you have something in yourbank that shows a draft?
(20:53):
No, i don't have a checkingaccount.
Okay, i don't know any otherway that we can prove this.
She's like yeah, i don't knoweither.
Okay, well, unfortunately, youknow, when we take over this
debt, it's gonna be this.
Do you accept that?
Yeah, i guess I have to,because I have no way to prove
it.
Okay, great, we're on the samepage.
Sign something Awesome.
So we buy the debt, we get itboarded with our servicer, we
(21:16):
start communicating to them andthey are more than willing to do
a modification with us.
So we go through and we say,hey look, you know you owe this
much money, you have this muchin interest or rearage, you have
this much in your late charges,you are behind in your taxes,
you don't have insurance on theproperty or your lapse on
insurance.
(21:36):
Like, how are we gonna fix allthis stuff?
And so we come up with asolution.
They ended up being a landlordto this property and they were
actually renting it out.
So we said how much rent areyou getting from this thing?
Blah, blah, blah.
Seven, eight hundred dollars,whatever.
Okay, so if we garnish, notgarnish, if we assume that when
the renter makes the payment andyou take that entire payment
(21:57):
and you put it towards this loan, this is what's gonna happen.
Within a year of doing that,you're gonna basically wipe out
all this back arrears that youowe and then you'll start having
your normal payment of I don'tknow what is, richard, like $400
or something Mm-hmm, and thenyou'll have free cash flow and
you'll be all caught up.
Does that sound good to you?
Oh, yeah, that'd be great.
Yeah, because I love theproperty, i like the tenant
(22:18):
there, i want to make money onit.
Sure, no problem.
Boom.
Year later, things are goinggreat, the borrower is paying my
clockwork, they're making allthe payments they were supposed
to, everybody's happy, and thenwe make a really great return
because of our extra layer ofdue diligence that we found out
about the story of what wasgoing on.
Richard Thornton (22:38):
So the real story was going on.
It was two siblings and theygot into a squabble.
One had made a loan to the nextand when they got into the
squabble, one said, okay, screwyou, I'm not gonna make my
payments anymore.
And then it went downhill fromthere, right.
Justin Bogard (22:59):
Yeah.
So the person's more thanwilling to make the payments.
They have the money to make thepayments, they just didn't want
to make the payments to thatperson.
Right, new person steps in andthen boom, there you have it.
Things change, right,everything changes.
The emotion changes Everything.
Richard Thornton (23:15):
So we should create a whole new category of
loan and call them spite notes.
Justin Bogard (23:20):
There you go.
I like that.
Richard Thornton (23:22):
They're not being paid out of spite.
Justin Bogard (23:25):
Around the same time we bought a little loan.
That was a very similarsituation, where there was a
condo and the person we weren'tsure if they lived there or not,
but they hadn't been makingpayments and they'd been going
dark on this person for a while.
This lender was fed up with itand they just they said they
didn't want to deal with itanymore.
They don't know what's going on.
Can you buy it?
(23:46):
Blah, blah, blah.
So we look at it, we bought it.
We didn't have any idea of whatthe person was doing.
As soon as we bought it.
We bought it with our servicer,we sent out information and the
red flag came up and I said,hey, wait a minute.
You know I don't know what'sgoing on, but I had been in jail
for so many months Let's justsay eight to ten months.
(24:07):
Okay, well, that makes sense.
You know they've been in jail.
They probably can't communicatewith anybody, so and I said
Yeah why was he in jail?
We don't know.
So.
So we communicated with themand said Hey look, do you want
to sign a modification so youcan get caught up?
Yeah, same thing.
I got money.
I want to put more paymentsdown towards this mortgage.
(24:28):
I actually want to pay it offquicker.
So what do I need to do?
So we laid out the back taxes,the insurance stuff, the
interest or re-reads account,said Here you go, here's
everything that's owed on it,here's your payment.
You know, start spreading thisout over a couple months.
And boom, we don't have to gothrough foreclosure.
On you.
Sure enough, the guy, withinthree months of us taking this
over and having it boarded,started making these large
(24:50):
payments to get everything paidoff.
And they're 100% caught up andpaying that clockwork.
Now on, boom, once again wemake a great purchase because we
just, you know, look at theunderlying situation.
We saw that there was anopportunity just to start
foreclosure to see if we can getthe person to respond to us.
Sure enough, they did.
We found out the story and thenthey have it.
Richard Thornton (25:11):
So we didn't really in that case.
We didn't really know if hewould make the payments or not,
but it was a win-win for useither way, right.
Justin Bogard (25:18):
Yeah, it was a win-win.
We saw an opportunity and Isaid, hey look, you know, we
don't know, we don't really knowthe borrower story because we
couldn't reach out to them likewe did in the other scenario.
We could reach out to theborrower and find the story,
This one.
We said, yeah look, if we getthis property back, it seems to
have great value, It seems to bein great condition.
You know, it doesn't appearthat anybody lives there.
Turns out somebody was livingthere, It's just they just
(25:39):
didn't have a.
You know, it was hard todetermine if they actually lived
there.
Let me step back a little bit,because this was a condo in a
condo building, so they can onlythe photographer can only take
a picture of, like kind of thefront window, if you will, and
it was an upstairs condo.
So they couldn't really tellwhat from their point of view.
Like, well, you know, it lookslike somebody's living there or
(26:00):
it looks like someone's notliving there.
I think they told us someone isnot living there.
Richard Thornton (26:04):
Right.
So for us, if we had toforeclose and I should say I
don't think I know we may notknow exactly what the fellow was
in jail for, but I don't thinkit was like Arm Robbery or
anything.
It wasn't really.
Justin Bogard (26:17):
No, no, I don't think it was anything.
Richard Thornton (26:19):
Yeah, some domestic issue or something like
that.
But so the analysis for us wasthat if he starts to pay, we've
bought.
this is such a deep discountthat where it's a home run And
if we have to foreclose and sellit, it's a home run.
Justin Bogard (26:39):
Yeah, right, we were very well protected because
of the motivation of theprevious lender.
Right, they had had it.
We were the right spot, theright time And we said, yeah,
we'll buy it.
It was a very low value note Iwant to say.
We paid under 20,000 for it Andmaybe it had $40,000, $50,000
in debt owed on it, still addingup all the arrearages and
(27:01):
everything.
So we, you know, after payingthat money, we obviously had to
put money back into it, but thenwe were reimbursed pretty
quickly for what the borrowerneeded to pay us back for.
So it's around to be very nice.
So we took a gamble on it andeducated guests and said, hey
look, this looks like a goodopportunity.
Like you said to Richard,either way, if he starts paying,
hey great, it doesn't startpaying, we can foreclose quickly
.
because we think it's vacant,hey great, you know we're able
(27:22):
to move on this action prettyquickly.
Richard Thornton (27:24):
So the key on both of those is to ask the
right questions and try and getinto the covers and really find
out what's going on right.
Justin Bogard (27:31):
Yeah, Sometimes the previous lenders on the
seller finance paper that we goafter.
they don't tell the truth allthe time.
Richard Thornton (27:38):
And we find.
Justin Bogard (27:39):
Yeah, we definitely find out during the
pay history what the truth is,because when they have to put
you know pen to paper, so tospeak, and they have to prove to
us like Hey, here's the checks,here's the bank accounts,
here's the receipts of thesepayments Because we ask these
questions like you have to provethe payment, otherwise the
payment didn't happen.
Richard Thornton (27:56):
Right.
So one thing we're doing,though, i think, is I'm going to
say we're taking advantage butI don't really mean that in a
negative factor way is thatwe're taking advantage of the
fact that a lot of these lendersare not sophisticated and
they're just tired of dealingwith this, whatever the
situation is whether it's thesister, it's the, you know, it's
(28:17):
the guy that was my best friendthat I made a loan to, and now
the relationship is sourced, sohe's not paying me And he's
jerking me around, or whateverit is, and we're able to step in
as a more professional group,and a lot of times the borrower
will pay attention to us morethan they would that other
(28:38):
begrudged party.
Justin Bogard (28:40):
So both of those lenders and those two scenarios
that I talked about, those twoactual real applications that we
did, they both said you'renever going to get the borrower
to pay you, right?
They both said that Right, andI knew at that point when they
said that, that we had a goodopportunity to figure out
something.
Richard Thornton (28:58):
Right, right The fun stories.
Justin Bogard (29:00):
Yeah, we got plenty more of them, but that is
about all the time we got fortoday.
This is episode number 12 onthe Be The Bank podcast brought
to you by American Note Buyers.
We got Justin Bogart andRichard Thornton on the call
today And, for all of you outthere, don't forget to check out
our YouTube channel, americanNote Buyers on YouTube, and you
can see the video stream of thispodcast as well and all the
(29:25):
ones before.
Sounds good Talk to you later.
Well then, see you all later.
Bye.
Narrator (29:34):
Thanks for listening to Be The Bank.
We hope you learned somethingfrom today's show.
If you enjoyed this episode,please rate and review us.
Plus, check out our channel onYouTube and follow us on
Facebook and Twitter at Be TheBank, and on Instagram at Be The
Bank podcast.
Be The Bank is sponsored byAmerican Note Buyers.
Thanks again for listening.
Interested in real estate.
How about wealth?
Well, they go hand in hand, andhere you'll learn all about it.
Welcome to Be The Bank, apodcast where we discuss and
debate the topics centeredaround real estate investing.
Your host, justin Bogart,shares insights into investing
in real estate to create realwealth and passive income for
(00:23):
you and your family.
He'll share stories of realestate investments done right,
walk you through the process ofowning a real estate note and,
most importantly, educate you soyou can Be The Bank.
This is Be The Bank brought toyou by American Notebuyers.
Now here's your host, justinBogart.
Justin Bogard (00:46):
Hey, it is episode number 12 of Season 5 on
the Be The Bank podcast.
I'm Justin Bogart.
Today, Richard and I are goingto be talking about just some
post-closing processes to beaware of and maybe some
timelines that you areunfamiliar with or maybe kind of
set your expectations on whatshould be.
We got some fun little sellerfinance stories on some
(01:07):
successes when they look likethey could be failures.
So stay tuned, Hey, Thornton.
How's it going?
dude?
Richard Thornton (01:24):
Mr Justin, pretty well today, thank you.
It's nice and warm outside andsummer is upon us.
Justin Bogard (01:30):
Yeah, It's been very dry here in Indiana.
It's been so dry I don't thinkwe've had rain for, I want to
say, like three weeks.
And so now there's some airquality issues going on.
There's construction for a lotof commercial stuff that's being
built around where I live here,So the ground is very dry.
(01:51):
So now when the big equipmentis rolling through they're just
kicking up dust everywhere andjust kind of blowing all around.
So, like you know, cars are alldirty and like the air has all
got a lot of dust and pollenthat's kicked up but it's not
able to settle without anyhumidity.
So we got a little bit ofstruggling going on here.
Richard Thornton (02:08):
So it's really dry, so you haven't put on any
moisturizer.
Justin Bogard (02:11):
Yeah, exactly Yeah, i don't know when it's
going to rain.
Richard Thornton (02:13):
I looked at the forecast for a couple of
days I noticed those crowfeedsare starting to come in around
your eyes.
Justin Bogard (02:18):
Yeah, that's why I got the brightness dirt up so
much on the camera So you can'tsee it.
Richard Thornton (02:22):
You can't see my real Yeah, Yeah.
That's why we do this right?
Justin Bogard (02:26):
Yeah, for those of you that want to check us out
on YouTube, just go to ourYouTube channel at American Note
Buyers.
You can see the live stream,not the live stream, the
recording of this podcast aswell.
This is episode number 12brought to you by American Note
Buyers.
So, besides the weather, isthere anything exciting going on
out there in good old Petaluma,california?
Richard Thornton (02:46):
Well, you know , what's interesting is the
local real estate market justcontinues to confound me out
here, because you look at thestats and they say, oh, things
are, San Francisco Bay Area isdown by 12% and blah, blah, blah
.
Well, we're in the North Bay,Okay.
So we're still fairly close toSan Francisco and we're on the
(03:07):
older side of town.
So a lot of the houses arebuilt in the I don't know lots
in the 20s.
It has slowed down a bit, butwe're still getting houses that
are going at $200,000 and$300,000 over asking here.
I mean, it's just amazing to methat you think that the market
(03:32):
would be falling out of thebottom for a lot of these houses
, but we're still getting in alot of instances and I'm not
saying last month, I'm sayinglast week over asking $200,000
and $300,000 over asking prices.
Justin Bogard (03:48):
That's incredible .
Richard Thornton (03:49):
It's crazy.
Justin Bogard (03:50):
Yeah, i haven't been paying attention this past
week on our market here so Idon't have any updates for you
there, but I guess I amsurprised to hear that.
I'm surprised that so it'shappening.
I think you mentioned a stat tome not too long ago.
I want to say it was today,when we talked today, that you
said 40% of the Bay Area isvacant with commercial right,
(04:12):
yeah, downtown San Francisco.
Richard Thornton (04:14):
Yeah, it's got the highest vacancy in the
country.
San Francisco.
The city is cruising for abruising because of the ripple
effect.
It's not just the commercialbusinesses or building owners
themselves.
It's the hotels that don't havethe people to stay in them.
(04:35):
It's the sandwich shop on thecorner, it's the shoemaker, it's
the guy who repairs your shoes,who people aren't taking their
shoes anymore because they'renot down there.
They're getting the guy who'sat home to do it.
The rollout of that's going tobe interesting.
We're just on the very cusp ofthat, i think.
Justin Bogard (04:59):
A little funny side note there.
You said cruising for abruising.
It made me laugh in psych.
That's what my mom would say tome when she was mad at me, but
she wasn't always serious.
She goes Justin, you'recruising for a bruising.
I'm just kidding.
Richard Thornton (05:18):
Most of my parents are from the Midwest.
Of course you're in the Midwestnow.
I've had a lot of people lookat me and go are you from the
Midwest?
I go no, i'm a Californian.
I've got Geeta, my other half,constantly kissing me because
something will happen.
I want to go with Jeepers.
(05:38):
She says Jeepers is that thestrongest word you've got is
Jeepers?
I'm not used to say that allthe time It sounds like that's
from Idremo Genie, Yeah orsomething like that.
You just go okay.
Justin Bogard (05:51):
That's funny.
You never lived in the Midwest,correct?
Richard Thornton (05:57):
No.
Justin Bogard (06:01):
I guess if I had known that you were from
California, i wouldn't peg youfrom being in California.
Richard Thornton (06:05):
Yeah.
Justin Bogard (06:06):
Not that being California has its own moniker
to it, but never know.
Richard Thornton (06:12):
Tell us about The hidden things that are going
on in the back rooms of loanand note buying these days that
you're finding.
Justin Bogard (06:24):
So what I find interesting is that there are
people in the note industry thatteach about investing in loans
and maybe some processes andkind of how it works, and it
doesn't seem to pan out exactlyhow reality is meaning.
Not saying this in a bad way,but what is taught in the
classroom sometimes really isn'treality.
(06:46):
And so you have a situationwhere you might not surprise
General in any subject matter,right.
Richard Thornton (06:55):
It's not just real.
Justin Bogard (06:57):
So when you get into the application of the
environment and you buy a noteand I'm not talking about, you
know, documentation as far asrecording stuff, because we've
talked about that before I'mtalking about actually that
transfer of service from who iscollecting the payment to the
new person that's collecting thepayment.
It doesn't have to be theactual note owner, it can be the
(07:19):
third party servicer.
So, like we service all of ourloans through a third party
servicer, richard and I do notcollect on any of the payments
personally or professionally.
We always use a servicer.
So sometimes we buy or investin notes that are serviced by
the individual, that is, thebank, and we call that owner
(07:42):
finance, paper seller, finance,mom and pop paper.
So that paper is fun to buybecause obviously we get a
pretty good discount on thattype of paper.
But also we do have to makesure that it's set up correctly.
So when we get this paper andwe go to the transfer of service
process, i have to preparethese.
Certain letters at thegovernment or the federal
(08:03):
agencies say that we got to sendthis stuff out, meaning you got
to let the borrower know thatthe notes been sold.
Duh, right, it's pretty obvious.
And then you also got to letthem know where the heck do you
send the payment now.
And so they have what's calleda TILA T-I-L-A form that goes
out to Truth and Lending Act andjust says hey, your note has
been sold to XYZ company, soexpect something from them.
(08:26):
Oh, and also they get a secondletter that comes in the mail
that says it's a good we call ita good buy letter.
It's basically an RESPA letterthat stands for I can't remember
the exact name of it, butbasically it's saying hey, i was
collecting on your note and nowthis company is going to
collect your note And here's thedate that they're going to
(08:47):
start collecting on your note on.
So if you need to make apayment and you have to do it
before this transfer date, justmake it to me.
And so if you're going to besurprised if it's on this date,
then you start using thiscompany And then the new company
that's collecting the paymentis going to send out their
welcome package, which includesyou know, hi, i'm this servicer,
i represent this.
You know the person that ownsyour paper Well, so that
(09:10):
information needs to be sent out.
So oftentimes that process cantake a little bit of time.
So, for example, we just boughta package of five loans for our
company And when I bought thoseloans I bought them from
somebody that was using not aloan servicing company but more
of an escrow type of company.
(09:30):
So it's almost like a glorifiedbookkeeping thing to where they
can collect the payments andthey know how to collect
payments and they do a good jobof it, but they're not
technically a licensed, fullylicensed servicer, so they don't
aren't required to send, likeyou know, the teleforms, the
goodbye letters and that sort ofthing.
So then the responsibilityfalls back on me or you know the
(09:52):
person that sold us the paper.
But since we're theprofessional in the business,
right, we obviously know what todo.
It's quicker for us to do it,so we just provide that as part
of the closing and it's kind ofpackaged into the closing cost,
if you will, of what the expenseis to do that.
But you have to get it right.
So the new servicing companywill want things done a certain
way And then you have to makesure that you adhere to that.
(10:14):
So this one of the servicesthat we use is really good, but
they're also very picky, i guess, or I guess they're really
strict on following thesecertain guidelines And if you
don't have XYZ ABC MNLOP donebefore the transfer date, then
(10:35):
you know they're not going toapprove of the transfer letter
that you sent to the borrower.
So you kind of have to gothrough these hoops and it's
like it's pushing and pullingand tugging in And with the
previous owner, the previousowner's escrow company, the new
servicer, and then you know, getthese pieces together.
So it can be very timeconsuming, especially when
(10:57):
you're doing five at a time, ifyou can imagine, to make sure
like everybody's got their ducksin a row.
On top of that wrinkle Richard,this certain escrow company that
was collecting the payments forthese five loans that we bought
.
They have an exclusive right tocollect the payment from the
borrower.
So in order to break thatexclusivity with the borrower,
(11:19):
the borrower has to sign andnotarize a special document that
says I want to release theservicing of this note from you
to X1, the new servicer.
So there was another layer thatI had to go through and make
sure that all those borrowersgot into, let's say, a title
company or someplace close towhere they could execute that
(11:40):
document.
So that actually took three orfour weeks to get all that stuff
lined up and all theinformation the new servicer
needed, and so the transferservice actually took, i want to
say, closer to 50 to 60 days,as opposed to typically we would
get this done in like three orfour weeks.
It's for the transfer service.
So those are the things thatkind of can delay things.
(12:03):
You also have to keep in mindthere's payments that are
probably coming in and out ofthis process, meaning I got five
loans.
They're going to be making apayment at some point.
Where are they making thepayment to?
and then, wherever they madethat payment to, if it wasn't
with my new servicer, well, igot to go find it and collect it
or at least tell somebody like,hey, just forward the payment
to me.
So right there you can see.
(12:25):
There's five loans with fivedifferent issues and
characteristics about it thatyou have to monitor.
So that window of time fromwhen you buy the loan to the
next 60 days is really importantthat you stay on top of your
game.
Now I haven't even mentionedgoing over insurance, but that
process as well.
We have to update all theinsurance policies that we are
the new mortgage holder.
Richard Thornton (12:47):
So a small example of that would be and
this goes into the if you're notreally careful, it falls
through the cracks category.
Oh, yeah.
That's a technical term, ofcourse.
So I bought a note recentlythat was serviced by XYZ
servicer.
They wanted the tax bills sentto them so that they could
(13:14):
escrow for the property taxesWhen it was transferred over to
the new servicer.
They did not want the taxdocumentation sent to them, they
wanted sent directly to theborrower and then they would go
(13:35):
to the county directly to findout what the tax bills were.
And what happened in thatprocess was that somehow
somebody said all right, sincewe're doing it that way, that
means that we, the new servicer,are not going to collect, are
not being requested to collecttaxes and or escrow for taxes
(13:57):
and insurance.
And when I finally realizedthis, because tax bills were
coming due, i now have to pay$175 fee to get the new servicer
that I would not have to havebeen paid earlier to start
collecting taxes and insuranceLittle things like that.
Justin Bogard (14:19):
Yeah, there's always these situations that we
find out that kind of annoy youthat there's not a blanket
policy across all servicers.
You really have to understandwhat's going on and kind of dive
deep into it.
So I wouldn't have known aboutthese borrowers having to sign a
release form to release themfrom an escrow company having
(14:40):
the sole right to collect fromthem, and unless you either read
the entire agreement, theservicing agreement that that
person had, or they just hold uptheir hand and say, hey, look,
you know you don't have theright to collect the payments
until they release the servicing.
So you would have to get anaccount with us in order, you
know, to start receiving thepayments from the borrower.
(15:01):
So it's just.
It's just good to understand,especially when you're dealing
with owner finance and sellerfinance paper, if it's not being
serviced by a licensedprofessional loan servicer, you
may have to go through someextra hoops and wrinkles to in
order to get this thing to beserviced with a licensed
servicing company.
Most people are buying loanswhere the loan is already
serviced professionally, and sothat's not an issue.
(15:22):
They just do all the talkingback and forth and it's easy and
you, as the new note owner,don't have to worry about it.
But when you buy the mom andpop paper, it's just another
wrinkle, which is why you knowwe have to buy it a bigger
discount because we knowJustin's going to spend a lot
more time trying to figure allthis stuff out and getting it
boarded with a new service.
But once it's boarded, hey, youknow it said, forget it.
These performing loans, youknow, do great, but it's that.
(15:46):
That interim process, richard,those 60 days, it's really
important to document whatyou're doing, have a good
checklist, making sure you'repushing and pulling, because
this stuff, as you know, richard, can drag on for three, four,
five, six months sometimes,because you just forget us now.
Richard Thornton (16:01):
You're much better at keeping track of that
stuff than I am.
I keep ticklers and whatnot onit, but it just drives me nuts.
I have to go back.
Like you say, when it drives.
When it goes on for three orfour months, i have to go back.
I have to look at my notes.
I have to see what the issuewas, because you don't have just
one of these.
(16:21):
You've got five of them up inthe air all at the same time.
Justin Bogard (16:25):
Yeah.
So this business can be reallyactive really quickly in
performing loans.
When you're buying in bulk likethat, if you're just buying one
or at a time, it's usually notas much work to do If you're
buying a non performer.
Obviously you better be payingattention to what's going on,
because you can lose out on yourROI pretty quickly and things
can go on for eight, 10 monthsAnd you not realize.
(16:48):
I could have solved that sixmonths ago, you know.
So that's the reason why we payattention and we have a good
process and a clean process, sothat we nothing Falls through
the clack crack easily.
I'll say not everything wecatch, but it's definitely.
We have a good safety net.
Richard Thornton (17:06):
Yeah, and I mean an example that I gave with
collection of taxes.
The borrower came back and saidlook, i thought you guys were.
We're doing all that.
So since you weren't, you, pamand I'm going Wait a minute.
Justin Bogard (17:20):
Yeah, look one.
Guys, when you're the no owner,you got to take the horse by
the reins and you got to justcommand the ship.
You got to know exactly what aparty a is doing and party B is
doing and either be themiddleman or to say, look, the
receivables are this, yourdeliverables are that, make it
happen, and then check up all itand follow up to make sure it's
being done at the at thetimeline that you get done by.
Richard Thornton (17:44):
Right, that's the advantage of investing.
Investing in Selenica fund?
Yeah, because all that's takencare of for you.
Justin Bogard (17:48):
It's all done for you.
It's the white glove treatment,as our friend drew would say
done for you done for you.
I've got some other Interestingstories that I wanted to share,
if that's okay sure so We buyloans that have problems with
them on purpose, because we knowwe can get a good discount for
(18:11):
them And we also know that We'vebeen through enough to where we
can work our way out of themand we feel pretty confident.
Mm-hmm, we had bought Severalloans like this.
Some of them are performing Butthey have problems with it, and
some of them are not performingand they got problems with it.
A Couple of the ones that arenot performing that we've bought
.
We've had really good successwith them And it's because of
(18:35):
the story.
That's the underlying story toit.
Narrator (18:38):
Mm-hmm.
Justin Bogard (18:39):
And so we look at the traditional ways to do due
diligence on a note and we seethings and we go, okay, we can
assess the value of it and wethink it's this but hey, that's
great.
But let's look at the otheremotional factors here.
Let's look at What thecommunication has been like with
the borrower.
What is the borrower side ofthe story?
What is the lender side of thestory and how?
(19:01):
How can we see this goingfurther?
and what do we see is thepropensity for them to start
repaying again or them to payoff the loan.
Richard Thornton (19:09):
Give us an example.
Justin Bogard (19:10):
So Richard and I we've mentioned this before in
the broadcast We've had a lenderand borrower who actually
relatives to each other, close,close relatives to each other
and They basically had like afalling out.
So over the course of manyyears they've kind of had this
let's just call it this disliketowards each other.
But one of them was a lenderand one of them was the borrower
(19:31):
.
So obviously the the lender istrying to get payment from the
borrower and the borrower sayingI just don't want to give you a
payment Because I don't likeyou.
So that's the truth of thematter.
The lender is, you know,hard-pressed not to go through a
foreclosure action because it'stheir relative and, quite
frankly, they just see it asthis doom and gloom type of
process and they just don't wantto deal with that and have all
the family drama.
(19:51):
So they kind of let things go.
We kind of jump into thepicture and we're like, hey,
we'll buy this note.
And we dig into the story andwe're like, wait a minute, this
person has been paying, wait aminute, they're this far behind
this and that.
So I go and interview theborrower and say, hey, look,
we're thinking that we're in theprocess of buying this debt
that you owe to your familymember XYZ person.
(20:12):
We're just letting you know andwe wanted to confirm with you,
like, this is what they'retelling us the balance owed is,
and all that stuff.
And I said, oh, that soundsright.
But no, i think I've made theseXYZ payments.
And we would say, hey, great,just show us you made those
payments and then when we buythis debt, that's gonna be your
new balance.
That's great for you.
(20:32):
You know, we'll take care of it.
Okay, that's awesome.
Don't hear from them.
Don't hear from them.
Don't hear from them.
Finally, hear from them.
I don't, i don't have anyreceipts of that stuff.
Mr Mrs Barber, you understandthat we can't just go up your
word.
We have to have hard evidence.
Do you have a check stub?
Do you have something in yourbank that shows a draft?
(20:53):
No, i don't have a checkingaccount.
Okay, i don't know any otherway that we can prove this.
She's like yeah, i don't knoweither.
Okay, well, unfortunately, youknow, when we take over this
debt, it's gonna be this.
Do you accept that?
Yeah, i guess I have to,because I have no way to prove
it.
Okay, great, we're on the samepage.
Sign something Awesome.
So we buy the debt, we get itboarded with our servicer, we
(21:16):
start communicating to them andthey are more than willing to do
a modification with us.
So we go through and we say,hey look, you know you owe this
much money, you have this muchin interest or rearage, you have
this much in your late charges,you are behind in your taxes,
you don't have insurance on theproperty or your lapse on
insurance.
(21:36):
Like, how are we gonna fix allthis stuff?
And so we come up with asolution.
They ended up being a landlordto this property and they were
actually renting it out.
So we said how much rent areyou getting from this thing?
Blah, blah, blah.
Seven, eight hundred dollars,whatever.
Okay, so if we garnish, notgarnish, if we assume that when
the renter makes the payment andyou take that entire payment
(21:57):
and you put it towards this loan, this is what's gonna happen.
Within a year of doing that,you're gonna basically wipe out
all this back arrears that youowe and then you'll start having
your normal payment of I don'tknow what is, richard, like $400
or something Mm-hmm, and thenyou'll have free cash flow and
you'll be all caught up.
Does that sound good to you?
Oh, yeah, that'd be great.
Yeah, because I love theproperty, i like the tenant
(22:18):
there, i want to make money onit.
Sure, no problem.
Boom.
Year later, things are goinggreat, the borrower is paying my
clockwork, they're making allthe payments they were supposed
to, everybody's happy, and thenwe make a really great return
because of our extra layer ofdue diligence that we found out
about the story of what wasgoing on.
Richard Thornton (22:38):
So the real story was going on.
It was two siblings and theygot into a squabble.
One had made a loan to the nextand when they got into the
squabble, one said, okay, screwyou, I'm not gonna make my
payments anymore.
And then it went downhill fromthere, right.
Justin Bogard (22:59):
Yeah.
So the person's more thanwilling to make the payments.
They have the money to make thepayments, they just didn't want
to make the payments to thatperson.
Right, new person steps in andthen boom, there you have it.
Things change, right,everything changes.
The emotion changes Everything.
Richard Thornton (23:15):
So we should create a whole new category of
loan and call them spite notes.
Justin Bogard (23:20):
There you go.
I like that.
Richard Thornton (23:22):
They're not being paid out of spite.
Justin Bogard (23:25):
Around the same time we bought a little loan.
That was a very similarsituation, where there was a
condo and the person we weren'tsure if they lived there or not,
but they hadn't been makingpayments and they'd been going
dark on this person for a while.
This lender was fed up with itand they just they said they
didn't want to deal with itanymore.
They don't know what's going on.
Can you buy it?
(23:46):
Blah, blah, blah.
So we look at it, we bought it.
We didn't have any idea of whatthe person was doing.
As soon as we bought it.
We bought it with our servicer,we sent out information and the
red flag came up and I said,hey, wait a minute.
You know I don't know what'sgoing on, but I had been in jail
for so many months Let's justsay eight to ten months.
(24:07):
Okay, well, that makes sense.
You know they've been in jail.
They probably can't communicatewith anybody, so and I said
Yeah why was he in jail?
We don't know.
So.
So we communicated with themand said Hey look, do you want
to sign a modification so youcan get caught up?
Yeah, same thing.
I got money.
I want to put more paymentsdown towards this mortgage.
(24:28):
I actually want to pay it offquicker.
So what do I need to do?
So we laid out the back taxes,the insurance stuff, the
interest or re-reads account,said Here you go, here's
everything that's owed on it,here's your payment.
You know, start spreading thisout over a couple months.
And boom, we don't have to gothrough foreclosure.
On you.
Sure enough, the guy, withinthree months of us taking this
over and having it boarded,started making these large
(24:50):
payments to get everything paidoff.
And they're 100% caught up andpaying that clockwork.
Now on, boom, once again wemake a great purchase because we
just, you know, look at theunderlying situation.
We saw that there was anopportunity just to start
foreclosure to see if we can getthe person to respond to us.
Sure enough, they did.
We found out the story and thenthey have it.
Richard Thornton (25:11):
So we didn't really in that case.
We didn't really know if hewould make the payments or not,
but it was a win-win for useither way, right.
Justin Bogard (25:18):
Yeah, it was a win-win.
We saw an opportunity and Isaid, hey look, you know, we
don't know, we don't really knowthe borrower story because we
couldn't reach out to them likewe did in the other scenario.
We could reach out to theborrower and find the story,
This one.
We said, yeah look, if we getthis property back, it seems to
have great value, It seems to bein great condition.
You know, it doesn't appearthat anybody lives there.
Turns out somebody was livingthere, It's just they just
(25:39):
didn't have a.
You know, it was hard todetermine if they actually lived
there.
Let me step back a little bit,because this was a condo in a
condo building, so they can onlythe photographer can only take
a picture of, like kind of thefront window, if you will, and
it was an upstairs condo.
So they couldn't really tellwhat from their point of view.
Like, well, you know, it lookslike somebody's living there or
(26:00):
it looks like someone's notliving there.
I think they told us someone isnot living there.
Richard Thornton (26:04):
Right.
So for us, if we had toforeclose and I should say I
don't think I know we may notknow exactly what the fellow was
in jail for, but I don't thinkit was like Arm Robbery or
anything.
It wasn't really.
Justin Bogard (26:17):
No, no, I don't think it was anything.
Richard Thornton (26:19):
Yeah, some domestic issue or something like
that.
But so the analysis for us wasthat if he starts to pay, we've
bought.
this is such a deep discountthat where it's a home run And
if we have to foreclose and sellit, it's a home run.
Justin Bogard (26:39):
Yeah, right, we were very well protected because
of the motivation of theprevious lender.
Right, they had had it.
We were the right spot, theright time And we said, yeah,
we'll buy it.
It was a very low value note Iwant to say.
We paid under 20,000 for it Andmaybe it had $40,000, $50,000
in debt owed on it, still addingup all the arrearages and
(27:01):
everything.
So we, you know, after payingthat money, we obviously had to
put money back into it, but thenwe were reimbursed pretty
quickly for what the borrowerneeded to pay us back for.
So it's around to be very nice.
So we took a gamble on it andeducated guests and said, hey
look, this looks like a goodopportunity.
Like you said to Richard,either way, if he starts paying,
hey great, it doesn't startpaying, we can foreclose quickly
.
because we think it's vacant,hey great, you know we're able
(27:22):
to move on this action prettyquickly.
Richard Thornton (27:24):
So the key on both of those is to ask the
right questions and try and getinto the covers and really find
out what's going on right.
Justin Bogard (27:31):
Yeah, Sometimes the previous lenders on the
seller finance paper that we goafter.
they don't tell the truth allthe time.
Richard Thornton (27:38):
And we find.
Justin Bogard (27:39):
Yeah, we definitely find out during the
pay history what the truth is,because when they have to put
you know pen to paper, so tospeak, and they have to prove to
us like Hey, here's the checks,here's the bank accounts,
here's the receipts of thesepayments Because we ask these
questions like you have to provethe payment, otherwise the
payment didn't happen.
Richard Thornton (27:56):
Right.
So one thing we're doing,though, i think, is I'm going to
say we're taking advantage butI don't really mean that in a
negative factor way is thatwe're taking advantage of the
fact that a lot of these lendersare not sophisticated and
they're just tired of dealingwith this, whatever the
situation is whether it's thesister, it's the, you know, it's
(28:17):
the guy that was my best friendthat I made a loan to, and now
the relationship is sourced, sohe's not paying me And he's
jerking me around, or whateverit is, and we're able to step in
as a more professional group,and a lot of times the borrower
will pay attention to us morethan they would that other
(28:38):
begrudged party.
Justin Bogard (28:40):
So both of those lenders and those two scenarios
that I talked about, those twoactual real applications that we
did, they both said you'renever going to get the borrower
to pay you, right?
They both said that Right, andI knew at that point when they
said that, that we had a goodopportunity to figure out
something.
Richard Thornton (28:58):
Right, right The fun stories.
Justin Bogard (29:00):
Yeah, we got plenty more of them, but that is
about all the time we got fortoday.
This is episode number 12 onthe Be The Bank podcast brought
to you by American Note Buyers.
We got Justin Bogart andRichard Thornton on the call
today And, for all of you outthere, don't forget to check out
our YouTube channel, americanNote Buyers on YouTube, and you
can see the video stream of thispodcast as well and all the
(29:25):
ones before.
Sounds good Talk to you later.
Well then, see you all later.
Bye.
Narrator (29:34):
Thanks for listening to Be The Bank.
We hope you learned somethingfrom today's show.
If you enjoyed this episode,please rate and review us.
Plus, check out our channel onYouTube and follow us on
Facebook and Twitter at Be TheBank, and on Instagram at Be The
Bank podcast.
Be The Bank is sponsored byAmerican Note Buyers.
Thanks again for listening.
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