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Private Mortgage Broker Reality

Written by Jeffrey R. Armstrong – President/Owner of Armstrong Capital

Your favorite Master Note Buyer – Straightforward, Honest, Fair…

September 11th, 2001 is a day that will never be forgotten. Our great country has been put to the test. We are all saddened and outraged by the attack on America, and extend our deepest sympathies and prayers to all of the people affected. We must come together and support one another as the events of this tragic day continue to unfold. Keep the victims and families in your hearts, for their sacrifice must never be forgotten. The events of that tragic day seemed to be almost surreal and yet is was more real than we could have ever imagined.

With the events that have happened recently in this industry, especially on the private mortgage side, how realistic is it that a note broker can be successful? I was informed that in the Rucker Howell interview he stated that brokers couldn’t survive in the private mortgage industry as it is and may need to look at getting into the origination business. It is the opinion of this Master Broker that a note broker in the private mortgage industry can survive and be successful but they will have to change the way they do business.

As many of you know, I have been a note broker for almost 11 years now and I can honestly tell you that I am still surviving. One of the main reasons I believe that I will survive in the future and continue to be successful is that I have always run my business with the highest ethical and moral standards. The tag line for my business Armstrong Capital is “Straightforward, Honest, Fair…The Way It Should Be”. I have always believed that if I am straightforward and honest with the note sellers and give them a fair price I will eventually get the deal. I do not get every deal, far from it, but I do think that my way of dealing with people has given me an edge over other note brokers in the industry.

As a note broker you must always be truthful with both the note sellers and the funding sources. You should never give the note seller a higher price for a note just to get the deal while you know full well that you will never give the seller that price at the end of the transaction. There are brokers out there that have done the following: they give an unrealistically high price to get a deal, drag it out for six to eight weeks and then at the last possible minute, when the seller is ready to sign, they lower the price dramatically for some reason and the seller, who is just tired of waiting to close, just signs it out of frustration and walks away angry with less money than they thought they were going to get. I am willing to bet that some sellers are too smart for this and do not sign at the closing but just walk away. What happens to these sellers now is that since they have been screwed by one broker they then lump all note brokers into the unethical, lying, cheating, stealing and thieving category and can never trust another note broker. Thus, the industry will get a bad name and then the regulators will start looking at our industry and start laying out more guidelines, rules and licensing requirements. That is not the way to run a note business. You will not last or be successful if that is the way you get your business.

Additionally, a note broker should not always try to get as much as possible from every transaction. On a simple SFH note under $50,000 I am happy to make $1,000 after expenses. There are many times where a seller will tell me exactly what they need and I calculate that I would make a large commission if I just gave them what they wanted. I have been known many times to surprise the sellers at the end of a transaction when they receive their closing documents with a higher purchase price than originally quoted. You would not believe the response I get when they find out that I am giving them more money than previously stated it is a wonderful moment. I know that this has led to many referrals and more deals from past note sellers for my business.

Business has slowed down for me this year; there is no doubt about that. Mainly because of the Associates being shut down. The Associates got a lot of business from me because they were paying good prices for not so good notes. Most of the time what made the notes not so good was the poor credit of the buyers. Now the remaining funding sources that are using their own funds either will not purchase these not so good types of notes or will pay a price that will still make it profitable for them if the note goes into default (usually much lower than the Associates used to pay for the same types of notes). We as brokers need to understand that the funding sources are in business to make a profit, not to pay broker fees and commissions, and not to buy as many notes as they can every month. I think that you will find many of the remaining funding sources are now beginning to have this frame of mind. There are many funding sources that still love to work with brokers and will go out of their way to get a transaction to close as long as it is profitable for them to do so.

When I started in this industry the only “field” in the industry at the time was the private mortgage side of the business. Now, although 90% of my business is still seller financed real estate notes, I always have an ear open for other opportunities. I have done several transactions in the last year or so with business notes, structured settlements, and even one on a cellular tower lease! A note broker must be able to recognize other profitable opportunities that will come across their desk in the course of doing business.

The reality is that being a note broker is a business. It is not a get rich quick scheme or a way to make a quick buck when you need it. Like any other business it has its hills and valleys. If you want to get something out of it you have to put something into it. Like any other business you are going to have to put in, at a minimum, money and time until you find what works best for you. And from time to time you will have to tweak (change) your business to keep it running profitably.

If today’s note broker wants to survive and be successful I think that they should be “Straightforward, Honest, Fair…The Way It Should Be”.

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