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Hello To All:
I think I can speak for alot of people when I say that this industry needs to change and it needs to change now. I am talking about commercial properties, Bulk REO's, Bulk Assets, etc.
This business has too many individuals running around trying to do deals where they don't even know what they have. They don't have a clue what they are doing but they expect to get a deal done.
This business, especially in the area of Bulk REO's and Bulk Assets has way too many people running around doing so much of the wrong and none of the right. Individuals who try to tell veterans in this business, one's who have closed hundreds if not thousands of deals, how the business operates and how deals are transacted, yet have no real clue and all the information they are getting are from individuals who are just as clueless as they are and more.
These are the very same people who at 9 am are on a phone call telling veterans that the seller is this bank, that the bank has this protocol and that protocol, that the bank wants to see a POF that needs to be send to the Intermediary first and on and on and on.
At 0915, the veteran is on the phone with the bank, discussing the deal and what he/she was told and by 0920, both are laughing histerically at the so called intermediary.
You have guys and gals posting things that say they have a funding program, that the terms are this and that, yet cannot explain to you anything. They talk about all this money they have access to, yet they are not even affiliated with the capital source.
Let me tell you one really bad thing and this is food for thought. It pertains to Bulk REO's and NPN's. I will use a sample deal to illustrate my point. Keep in mind this is just a example and is not a real deal as far as I know.
You see a posting that says: I am direct to the bank. $300,000,000.00 NPN package for sale. No cherry picking, multi family, office, self storage, several tier-1 cities. Need to see LOI, POF to get the tape.
That looks concise, could be a real deal, you think. Lets pick this apart and see why it may be real but the person who posted it is grasping for strws if they expect to even have access to this deal.
First, when someone says they are direct to the bank, consider them to be three or more from the actual bank. Unless they are a asset manager, them being direct to the bank is not realistic and if they were a asset manager, they wouldn't be advertising deals on sites like this one, because they have the contacts already in place where all they have to do is pick up the phone,make a call or two and they can actually move product.
Who posts these deals then? Joker Brokers and Intermediaries who actually think they are somebody important. Which at the end of the day, the only two people in a deal who are important are the buyer and seller, that's it.
Several Tier-1 Cities. Ask them if they can define for you the term Tier-1 City. Most people have heard the term but can't explain what it means. It means major cities with a certain population base. Some will throw out the term MSA, yet can't tell you what that means either.
Need to see LOI, POF to get the tape. You see that phrase everywhere. Lets see, what type of LOI do they need to see? OMG James, you mean there is more than one type of LOI? well yes there actually is. There is a Letter of Intent and a Letter of Interest. Same Acronym, two different types.
If the poster was to say to you Letter of Intent to purchase, you need to seriously say the following: "Are you just dumb by yourself or are you part of Dumb and Dumber"? because anyone who expects you to sign a Letter of Intent for a deal you have not seen yet, have not done a due diligence on, have not been provided a due diligence package for, then you cannot sign a document like that and if you do, then you are just not thinking like a business person.
I leave the best part for last here. The POF. This means that the seller is expecting you to furnish a proof of funds letter or statement for $300,000,000.00 or whatever the purchase price actually is. The $300,000,000.00 I just mentioned is for our example deal. This Proof of funds must be able to be verified and must come from a bank or financial institution.
Now let me show you how to determine in less than five minutes if the person you are dealing with is real or not.
1. This person had to more than likely provide a POF to the person they got the deal from, now does this person strike you as someone who could in the case of our example deal, provide a POF for $300,000,000.00?
The only three people in existence who would not have to provide a POF for a Bulk REO or Bulk Asset deal is a Asset Manager contracted by the bank/seller to liquidate on their behalf, A Banks In house Asset Manager or the Banks Attorney, who sometimes helps liquidate for the bank.
Anyone else would have to produce a POF for a very large amount of money. A Hedge fund is one of the only exempted entities from having to provide a POF, because banks realize Hedge Funds have the amount of funds to buy, if they choose to.
Now I am going to end this discussion by answering the million dollar question. Ok then, why do these intermediaries want to see a POF from you and have it in hand? because they could never bring to the table what is required to get the tape in order to originate a deal. If they have a POF from a strong buyer source, they can at that point make contact with the seller or the sellers agent, announce that they have a partner they are working with who has provided the POF and they can get the tape or the asset(s) and go about trying to make a deal, and in doing so, they have provided to the bank, a verifiable Proof of funds. If a POF in the millions or hundreds of millions of dollars is presented, the bank or the seller actually believes they are dealing with a mover and shaker.
Most banks don't really care about anything other than can a deal get done and will the money be there to close. That is it. However from a ego standpoint, to have a major bank or seller of bulk assets consider a Intermediary to be worthy of doing a deal, it is a huge thing.
This whole business needs to change if it is to survive. I am not lobbying for me to be that person, but if we all try to make some changes in how we do deals, this will go along way to making changes happen that are positive.
I started out on wall Street, right out of college and was on a deal team at JP Morgan. I was a investment banker and the team I was on, raised capital for real estate developers on a international level, as well as corporate america and their real estate needs. I think I may have insulted a few IM's, leaving them with the impression I don't value IM's. It is quite the opposite actually.
I cannot help it if I am direct and to my point and I apologize to no one for it. Allow me to clarify a few things here. I never once said that Intermediaries do not bring value to the deal. Let's be real honest right now and state for the record that there are really very few true intermediaries on this site. You know it and I know it.
Ask many of the people here who call themselves Intermediaries, what exactly is a intermediary and they would not be able to tell you. If you asked them to describe the job duties/functions of a Intermediary, again, many wouldn't be able to say anything more than find deals for investors.
Anyone who does that is nothing more than a bird dog and deserves a referral fee and certainly not points in a deal. Let me pose this question to those here. If you were a investor or a banker and someone sent you a deal with nothing more than contact information, a few general docs and a general overview of a deal, are you going to really pay that person points? what value did they bring to the deal.
Let me say this as well. What most IM's fail to realize is that any investor who actually is a player in the business, can find the same deals most IM's bring forth.
If a IM does more than become a referral agent and actually works the deal, then I have no problem paying them well. You have to set boundaries and stick with it. I have a issue with IM's sitting in the middle waiting for a check, when they did not do their job to earn it.
Most IM's certainly beat the bushes looking for deals, the problem is they beat the bushes that are part of the landscaping at the offices of Loop Net.
If you want to talk further, email me your contact information at email@example.com and my VP will setup a call with you and I. I would be interested in hearing more about what you have to say about this issue.
First off let me state that the industry doesn't need to change, people do...
Second I didn't start out on Wall St. just good ole Main St...( surprise, surprise)...it was good enough for my grandpa and it's good enough for me...
Third I'm shocked, you didn't even mention the crap-slingers out there charging 10k and up in due diligence fees just to look at a deal...
Never mind the fact that never in a million years will they ever fund it...
Maybe I should change my business model after these posers...
After I take a sucker oops, I mean borrowers money up front... before I've even seen an operating statement or a rent roll, asked about sources and uses etc. why should should I even lift a finger to provide any service or value whatsoever...
Hey like my new suit?...how bout my new car?... after all you bought it for me...and I didn't have to do anything except show up to earn it...well maybe forward an email or two...
I could just call it a day and go the beach...easy money...oh yeah...how many of these do I need to do every month to make my nut...?
It's the American way...a hand fulla gimme and a mouth fulla much obliged...
But hey, what do I know about baseball or finance, providing value, service or results in advance?
Crap-slingers beware...I've got you in my sights an unlike a chimpanzee I have ( opposable? ) thumbs and know how to aim and fire...
OK I'm done now you can all go back to your double latte super mocha's...I've gotta save something for the next time...
somebody gimme cheeseburger...
As always, I enjoy your being candid. When i titled this thread, I did so because you and I both know that is a business of relationships and people make or break that.
Your right, the industry doesn't need to change, people do. I now consider myself part of Mains Street as I left Wall Street behind years ago.
I agree with you, especially with the issue you bought to light about those people who charge 10% upfront to look at a deal. I guess when your making 10% of $10,000,000.00 for example, you don't really have to fund anything. I always have said to those folks, "Nice Work if You Can get It".
Today, I am just a business man, working hard to make money. I try to just do what others are not doing. I am not really one who likes to compete. Just give me the five data points and let me go to work. Let me do my thing, leave me alone about how many points a IM can squeeze from a deal and let me set up a deal. No deal=No Payday.
Anyway, I really enjoyed reading everyone's comments.