When someone is selling a note directly they are just a note seller. When someone is brokering a note, they don’t typically own the note, they are coordinating the sale of the note between a seller and buyer. Add into the mix, a broker who is brokering notes from another broker who is brokering from another seller unknown to him or her. What? Say that five times fast!
When there are that many people involved in a transaction, the broker is commonly called a “joker broker”. It’s sort of like when wholesalers try to wholesale a property that they don’t own or have a contract on, but they are trying to manage a sale as if they do. They call that a “daisy chain”; like the joker broker, the chain of ownership is unclear.
I learned a lesson when I attempted to broker a note. Brokering notes is another way many start out in the note space to build up capital. I let a buyer know up front that I was able to broker notes that I had access to, and we agreed upon a fee. Often, if you have access to inventory from different sellers or other brokers, some buyers don’t mind getting a note through a broker if their required yield on the note is met.
This note that I was brokering came with trade desk fees, my agreed upon broker fee, a wire transfer fee and the buyer still would have been able to realize his desired yield. I put together the purchase agreement and sent it off for review to my buyer. The deal fell through. The deal could not be entered into because I could not put the actual sellers name on the purchase agreement! Oh no! Was I a joker broker? No.
I later found out that there is something called an “arbitrage” or a double closing, which should have been done in this instance. I took a lump on that one. Lesson learned. I now only broker notes from private sellers or sellers that I know directly. I would hate to be on anyone’s “joker broker” list. The note community is small one and people seem quick to blackball you.
As I prepare to move into the New Year, I take with me the experiences, knowledge, tools and connections made in 2019. I wish you all and your families a happy, healthy and prosperous 2020!
©Awanna Renovation & Holdings, LLC (Dec 2019-5), zee@awannarandh.com/www.awannarandh.com