NIME 42 | Seller Financing

 

Seller financing brings numerous benefits to sellers especially when they want to get huge returns on investment for their property. Bob Repass from Colonial Funding Group shares his history in the real estate business including how he got into the notes space and seller financing industry. Bob is a twenty-year veteran and expert in the seller finance mortgage and distressed asset industry. As Bob dives into the topic of seller financing, specifically outside low fare market value properties, he also teaches us how to find a seller-financed transaction. He also touches on the Seller Finance Coalition, its advocacies for the community, and how it works.

Listen to the podcast here:

Bob Repass on Seller Financing And The Seller Finance Coalition

I’d like to introduce a very special guest, Bob Repass from Colonial Funding Group. Bob, welcome to the program. 

How is it going, Martin?  

I’m good. It’s great to have you on. I know last time we had you on to discuss primarily the NoteExpoWe’re going to get into the weeds a little bit more with what you have going on with the Seller Finance Coalition, Colonial Funding Group and talk about Bob, the man who’s been involved in tens of thousands of note transactions. It’s great having you on here.  

I appreciate it. It was good seeing you in person in NoteExpo. I’m glad to be on your show here. 

Like many people, when I first came into the note space, it was Joe Varnadore seeing him at the local REIA doing his dance. From there, I did the satellite one day and then I did the three days with NoteSchool. It was a very life-changing point in my life as I went on to start note investing. I’m sure a lot of people hold that level of gratitude for helping them get into the note space. I appreciate that. 

I’m glad you brought that part up so that everybody knows that Colonial Funding Group and NoteSchool are affiliated with each other to some degree. Colonial Funding Group is a separate entity, more of a trading company. We also have a capital fund, Colonial Capital Management where we have about $18 million in assets under management. It all started with NoteSchool and your story is pretty similar to a lot of people we run into. We visit REIA clubs and tee up the idea of note investing. People get that itch and dig a little deeper. The group you have on Facebook offers a lot of good tips and educational opportunities. I appreciate what you do for the industry. 

About once a week, I get an email from someone and they say, “Should I take NoteSchool’s three-day workshop or should I take your workshop?” Pretty much I always say, “You should take both. If you’re making a serious run in this industry, you should look at different perspectives and different philosophies, business models. That way you can custom mold what works best for you. Tell us about the Seller Finance Coalition. 

The Seller Finance Coalition, I was one of the co-founders back in 2014. When we found out that through the Dodd-Frank Act, there were some regulations that were affecting folks that historically have created seller finance originations. In other words, prior to Dodd-Frank, if I own 100 houses, I could sell 100 houses as long as I can find 100 buyers. Dodd-Frank limited that and said that you can only do three in a twelve-month period. If you were going to do more than three, then you would have to get a license, follow the guidelines and RMLO. What we’ve been trying to do is have an exemption to that number of three so that it would cover most of the small note investors across the country. 

We’ve got legislation in place that would increase that from to 24 in a twelve-month period with the idea that if you do more than 24, then you should be regulated to a degree of having a license or using an RMLO. It’s taken quite a journey to get here. As I’m sure everybody knows, all you’ve got to do is turn on the TV or pop up the internet and you can see all kinds of gridlock going on. We’ve had meetings with the mortgage bankers association, the community bankers, the realtors, to get them to agree on language in our bill they could live with. Initially, it was like, “If we’re regulated, you should be regulated.” We’ve worked through that and got everybody to a degree on this number of 24. 

NIME 42 | Seller Financing

Seller Financing: What prompted the creation of the Seller Finance Coalition were some regulations that were affecting folks through the Dodd-Frank Act.

 

Our bill was in the Financial Services Committee last session and it did not get voted on in time before the election. We’re re-introducing it now in the new session as well as introducing a companion bill in the Senate. We’re excited that this is happening now and that leads us into the annual Fly-In that we have in Washington DC. I want to tag team on that I saw on your Facebook posts that you are having a class in DC. That prompted me when I first reached out to you and said, “That dovetails right into our Fly-In. I appreciate you saying, “Let’s get together and talk about that and tell people more about it.” It’s crazy how sometimes these coincidences happen and everything gets together here. 

What about that wacky concept of more cohesion in the note space? Imagine if that ever happened.  

For some of the old-timers that may be on here, I can tell youI started in the business in 1990. When I started, I was in the institutional investor side. My history goes way back to I worked at Metropolitan Mortgage, then I worked at the Associates and then I worked at Bayview Financial. For many years, I was always on the institutional investor side. I was the guy with the checkbook that everybody always wanted to buy notes. Back then, everybody had their own secret sauce and nobody wanted to share a whole lot with each other. You talk about cohesiveness, it was every man for himself. There were islands of information all over the place. 

In one regard, knowing that we’ve come a long way as an industry, but there are still some obvious people that would rather do their own thing and not getting involved. In this time, we’re all involved because it may not affect you now, but something would come down the road in the next few months and all of a sudden some issue will affect you. That was the impetus that started the Seller Finance Coalition. Back when Dodd-Frank was being rolled out back in 2008, 2009, 2010, all that negotiation, the coalition didn’t exist. We didn’t have a seat at the table. The saying in DC is, “If you’re not at the table, you’re on the table.” We were on the table and we got caught up in the umbrella of over-regulation and not knowing that it affected our industry. I spent the last few years telling our stories. A lot of times people are like, “We didn’t even know you were going to be under this.” It was blankets thrown on top of it. We were caught up in that net.  

How can attending the Fly-In help? What would that person be expecting if they attend the Fly-In?  

Let me lay out what happens up in the Fly-In. It’s a day and a half. It starts on Tuesday right after lunch. That afternoon, we hear from some of the sponsors of our bill. They may come and give us an update on what’s going on as far as the Financial Services Committee. They tee-up the action. They tell everybody what’s going on. We’ll have Congressman Roger Williams from Texas, Congressman Tom Emmer from Minnesota, Congressman Andy Barr from Kentucky and Congressman Vicente Gonzalez from Texas who are all sponsors of our bill. They’ll all come in there and tell you what’s going on. They’re all part of the Financial Services Committee.  

Wednesday is an exciting date. That’s the grassroots efforts’ day. That is when we have all the attendees and we schedule back-to-back meetings across Capitol Hill with congressmen and senators to tell our seller finance and the note industry story. First off, when you sign up to come, we’ll find out who your particular representative is and we’ll make sure you have a meeting with them or their staff. We’ll also meet with various members of the financial services or the banking committee on the Senate side. 

There are a lot of cheaper properties being sold across this country that banks just don't make loans based on the Dodd-Frank regulations. Click To Tweet

You go in groups of four or five. It’s not like if you’ve never done it before, we’re not going to send you out on your own and you freak out talking to congressmen. We tell the story of how seller financing provides homeownership opportunities to those that otherwise wouldn’t have. Whether the banks are not lending in their particular area, maybe the loans are too small for them. There are a lot of $60,000 to $80,000 properties being sold across this country that banks and community banks don’t make loans based on the Dodd-Frank regulations. They can’t make enough money doing it. Anybody can go to the Seller Finance Coalition Facebook page and you could see various articles that have been posted on there about the opportunities for homeownership that are missing in certain areas. When we meet with people, we tell them that there’s no capital in their districts back home, the light bulb goes off and they realize that it’s affecting your constituents. All of a sudden, they’re realizing that maybe this wasn’t the consequence we wanted when we set this regulation. 

It’s very interesting in that respect is that you have a property and it’s $70,000 fair market value. You’re going to have trouble getting a first. God forbid, you want to try to even get a second on that property. You create that nation of renters and all these other outcomes come about. The idea of making it more feasible for lenders to give loans to low fair market value properties, we understand that in the industry. From what you’re saying, that’s an educational step you need to take with all the politicians and the people that the coalition is trying to reach. 

I’ll tell you one of the interesting things that I learned when I first started going to Capitol Hill and even on the state level here when I go to Austin. A lot of times, your initial meeting is not with the representative themselves. You’re meeting with one of their staffers. These staffers are Millennials. 95% of them have never even owned a home. They go straight out of college. They all live forward to an apartment to try to afford a place in DC and they go to work every day. They don’t have any real-life experience. The first thing you do when you sit down with the Seller Finance Coalition that wants to tell your story, “Are you familiar with what seller financing is?” They’re like, “Not really, why don’t you explain it to me?”  

A lot of the initial meetings were like, “It’s a private transaction between two individuals. I own a house. I want to sell it to you. You’re not going into the bank and you’re going to pay me back out in terms.” They get it and I’ve met with some of them multiple times and they can repeat it back to me. The first time, you get that deer in the headlight look and they’re not getting it. I’m like, “How can I explain this so they can relay it?” Because they take notes and they’re going to go tell, and everybody calls a congressman or senator, the boss.” “Let me get it to the boss. We’ve got to tell the boss. I’ll meet with the boss.” Usually, it will take a couple of meetings and we will sit down with the representative themselves and tell the story, but they get a good framework out of it. It is eye-opening on the people that work on Capitol Hill and how young they are and how powerful. It’s almost scary to some degree. 

A lot of those staffers understand about $3,000 rent payments within Washington DC, but they don’t get seller financing on low fair market value properties. 

There are people that we talked to, they can’t believe you could buy a house for $70,000. We’ve met with Congress-people from New York and California and they’re like, “There are houses for $50,000? Can you buy a parking space in New York for $50,000?” You hit it on the head. It is an educational process. We have to educate people about what seller financing is, what note investing is and how it fits into the everyday life of people in their communities. 

Tell us about seller financing outside of low fair market value properties. For example, half of the commercial properties I bought whereby the seller took back seller financing with me. It encompasses much more than buying low fair market value properties. 

To be clear, as far as the regulations limiting the number of transactions, that is for residential properties. If it’s commercial property, you can do however many. They figured out you’re a big boy if you’re going to go buy a commercial property. There are state regulations originating in any mortgage. A lot of times there are several reasons on seller financing, it could be the uniqueness of a property. There’s a lot of seller financing on raw land, improve land, commercial properties. We talked about $70,000 houses that the banks don’t like to lend on. They do not want to lend on $150,000 commercial property. They want those million-dollar projects and so forth. You might have a nice ten-unit apartment building or you may have a little office building or a strip center and you’re right, the seller will take back owner financing on that. That provides you with the freedom to negotiate the terms on that. That’s the good part when you’re not dealing with the bank. You went to a bank and they’re going to say, “It’s ten years and the rate is this prime plus whatever.” If you’re dealing with the seller, you can get them to take 0% or you can give or take 6% or whatever cashflow works based on that commercial property. It makes the deal much easier to get done. 

NIME 42 | Seller Financing

Seller Financing: People need to be educated about seller financing, note investing, and how it fits into everyday life in varied communities.

 

Is your focus primarily on seller finance notes on primary residences? 

As far as Colonial Funding Group, the answer would be yes. That’s because, in our capital fund, we focus on performing and reperforming loan, but you’re always going to have the nonperforming, you’re going to have some that go through the foreclosure process and end up in REO. One of our exit strategies for the REO properties is through seller financing. If we get a property back from an NPL to an REO, we want to get that loan performing again. We will owner finance it for a new borrower. You’ve got to get the property cleaned up and back into a condition where the new buyer can get in there. It’s much better than just cash selling your REO, take in loss and movdown. We try to fix it up and put a homeowner in there. You’re originating a $50,000 to $60,000 house for a new borrower. You’re getting a down payment and they’re paying us back over time. 

For me, I’ve created some seller finance notes when I’ve got the property back and sold the property with seller financing and things like that. I’ve never gone out and bought a CFD or I’ve never looked for that type of opportunity. I assume with what the coalition does that benefits directly those individuals that look for the CFDs out in the marketplace. 

It’s an educational thing because the only news you hear about CFD is the bad news. To be totally transparent with everybody, a lot of times you have to overcome it, “That’s a contract for deed, I heard all about that in New York Times,” or whatever. You know how it is Martin, they lump a lot of things together. They’ll call it seller financing in the headline and you read the article and it’s lease to own, which has nothing to do with owner financing. All of a sudden, you get lumped into that umbrella again. You have to go through that process. A typical seller finance transaction years ago, all the way back to my days at Metropolitan, it was typically a note mortgage or note deed of trust. 

There are a handful of states like Michigan where it was very common to do a land contract. That was the common way of doing a home sale. When the crisis came in ‘07, ‘08, a lot of people bought REO properties and created these contract for deeds through seller financing. That’s what exploded from a CFD perspective. Our coalition on that angle was from the educational point where everybody knows that contracts for deeds are not all bad. It does protect homeowners. It does help the municipalities that are sitting there with properties that taxes aren’t being paid, the trashes aren’t being picked up, the water is getting cut off. As you mentioned about the neighborhoods, they’re not a bunch of tenants and renters. Now we have some neighborhood stabilization because we have homeowners in there that are taking care of the properties and it helps the whole community as well. 

You’ve seen a few downturns. You were with Associates and I assume that there was a hit in 2000, 2001, that time frame. 

Anybody who’s in the note business, whether you’ve been in a long time or you just got in, it’s going to change. There are going to be ups and downs. That’s one reason why we get a lot of people like, “I’m going to buy performing loans. I don’t need to take any educational course. I don’t need to listen and go to a conference. I’m set. I’m doing performing loans.” I hate to tell you, but some of those performing loans go bad and even nonperforming loans, you don’t know what to do. 

I’ve seen people throw up their hands and say, “I’m going to sell it. Take a loss and move on.” That’s ridiculous. There’s no reason to do that. There are all kinds of exit strategies that you talk about on your Facebook page, other guests you have on. They’re outstanding at doing things like that. Now we all share that information. There are ways and there are vendors. There are people you can connect with that can help you integrate businesses. I have seen ups and downs. I have people ask me all the time, “Is it better if the interest rates are higher? Is it better if the interest rates are lower? What happens?” Seller financing started back heavily in the early 1980s. That’s when interest rates were like 20%. 

I had seller finance because nobody could afford a 20% mortgage. All of a sudden, seller finance started doing it at 10%. That was extremely high. I can’t even imagine now getting that high anymore. People get to 5% and 6% and started freaking out. Now it’s been 4% or 5% and there is still plenty of seller finance stuff out there because it’s either unbankable property or unbankable borrower or it’s a hassle factor. I bet when you bought some of your commercial properties, you could have gone to a bank. It was like, “Why go through all those financial statements, tax returns, all that stuff when all I have to do is cut a deal with Bob to buy his building?” It’s true all across the seller finance, whatever property types you’re talking about. 

There are tons of people that are creating an annuity play for themselves. They’re older in years and they want to retire. This is another retirement check for them. That’s who I’ve bought a lot of the properties from. With regards to the note play, it’s interesting when you talk about 15%, 20%. As I understood it in the 1990s, if you had credit cards at 25% and you had a lot of those credit cards, you do a debt consolidation at 18.99%. It could look pretty good for someone. 

Times have changed, that’s for sure. In the late ‘90s and early 2000s, when I left Associates in 2001 and started the Bayview Seller Finance division, we were buying at $10 million, $12 million a month. We were buying hundreds of millions of dollars each year with seller finance. Not all of it was professionally made like somebody rehabbed the house and created their own mortgage. There are a lot of mom and pop transactions out there. We did buy a lot of different things. We bought single-family residences, owner-occupied rentals, apartment buildings, all kinds of stuff. The only thing that we didn’t buy was gas stations and churches. I saw on your Facebook page, somebody asked about a church not too long ago. I always say you don’t want to foreclose on God so we don’t buy churches.  

A lot of initial meetings are basically private transactions between two individuals. Click To Tweet

I have two tenants that are churches in my buildings and they’re the best. You want to talk about a tenant that only occupies a property four hours out of the week. There’s no wear and tear. What would you say to that individual and myself included who says, “How can you buy a seller finance note from someone? Let’s say they’ve originated the seller finance note. They did due diligence on a napkin with the intention of selling it off after six months of seasoning. What would you say to that type of person that may be leery of buying such a note? 

First of all, I had about tens of thousands of those over the years. It does happen. For the most part, when something like that happens, the seller who originated is typically what we refer to as a mom and pop. They’re not that sophisticated. They may know one or two properties and they want to get a retirement check going or whatever so they sell the house. Maybe they had to move or whatever. They’re not what we refer to as professional sellers. Somebody does it all the time and knows how to follow RMLO rules and may even be an RMLO. If you’re dealing with true traditional seller finance originated loans, honestly the real thing that’s missing from a regular package is probably a pay history. That’s because a lot of mom and pops are not thirdparty service. 

They’ll have a note and deed of trust and you can see that it’s recorded and that they’re in first lien position. You can get a BPO on the property and you can feel good about the value. They probably didn’t get a loan application. You’d be surprised, they should have the Social Security number because they’re supposed to report the interest that they received from them. They don’t and it’s hard to obtain credit reports. It’s getting comfortable with the pay history. We do things like getting estoppel signed by the borrower and the seller saying that they made the payment for the unpaid balance.  

I had somebody send me a payment history and they sent me pages and copies of $20. That’s how the person had made their payments. It’s like 50 pages and each page had six $20 on it. They were telling me that’s their pay history. It’s crazy. Some have little receipt books. Some have their schedule checked off. They paid on the first of every month, never the second, always the first. I’d be like, “Come on.” You have to get comfortable with the pay history. That’s the main thing. You could do all your other due diligence to make sure the collateral is where it needs to be and that the property is worth it. It’s insured, the taxes are paid, it has a clear title, that kind of stuff. I think doing the estoppel and getting an affidavit signed is the way to go.  

That’s brilliant because you’ve never seen a seller pay his own payments. Make the borrower do the monthly payments. 

I won’t say I’d never seen that. It’s not as prevalent as you would think, but there’s always risk involved. How do you find a seller finance transaction? A lot of people ask that. You do direct mail campaigns. There’s courthouse research that people have done that they sell. It gives you lists of people that took back seller financing. There are all kinds of things out there of people that are drumming up ways. Back in the day, we would put little ads in the little community newspaper, “We’ll pay cash for your note,” and all different ways to do it. It’s a little more sophisticated now with online research and ways to do that. 

Have you read Bill Bartmann’s book Bailout Riches!? 

I have not. 

Bill Bartmann is a billionaire. He has started a collection agency, but he stumbled upon meeting a banker. The banker sold him a storage locker full of seller finance paper and other credit card debt and everything else for pennies. That’s how he started his career. 

I’m sure he saw all kinds of things in that storage locker. 

He passed away a few years ago unfortunately. He’s one of the few people that is a billionaire two times over. He’s a billionaire who lost it all and then became a billionaire again. It’s a good read for sure. How long has Colonial Funding been open for business?  

Colonial Funding Group started back in the 1980s. Eddie Speed and his wife, Martha, started the company. He likes to say he’s been in the business for almost 40 years. I think he started with Martha’s dad when he was twenty years old. We are talking about the ‘90s. It goes back and talks about the RTC days and that was the first crisis where there were a lot of nonperforming loans sold for pennies on the dollar. You could get those loans from RTC and get them back paying and reperforming and make out pretty good on that. We’ve been around doing that initially. That’s how I met Eddie in 1990. He was selling loans to me at Metropolitan, then Associates and then at Bayview. I came over here and joined him in 2013 and we started our capital fund. 

NIME 42 | Seller Financing

Seller Financing: Anybody who’s in the new business or has been on it for a long time must know that it’s going to change and there are ups and downs.

 

Initially, we were buying nonperforming and performing. We were about 50/50. Based on the structure of our fund and the market conditions, we decided we’d focus more on performing and reperforming loans. Now, our percentage is two-thirds performing and a third nonperforming. That gives us the cashflow. People ask me, “Should I buy performing or nonperforming? What sort of fund? I want to do JV thing.” I’m a big guy on diversity. You’ve got to have that cashflow coming in from your performing loans to cover the advances in fees. You’re paying on the nonperforming in order to work out a resolution. It’s a balancing act for sure, but it’s an exciting business. We sell one-off loans out of our capital fund. We buy one-off loans. If anybody out there has seller finance for loans they want to sell, they can email us at Pricing@ColonialFundingGroup.com. That’s our group email there for pricing. We also have TradeDesk@ColonialFundingGroup.com and we can talk about selling loans, buying loans and so forth. 

It’s interesting you brought up something that’s prevalent in the industry and that is if you don’t have a business model that has cashflow as the heavy component of it. I see a lot of people cannibalizing themselves. In other words, you have $100,000 in the bank and you go out and start buying some nonperforming notes. You pay legal and you get them performing and then you need money. You start selling those off as reperformers and you’re cannibalizing yourself as you’re trying to grow. You’re going up and down and it’s not very balanced over the course of time. 

You’re going around in circles. You’re working on fee income and you’re not trying to build wealth when you’re doing something like that. You keep turning it like you finally get a result, you had a performing loan and all of a sudden, you’re out of capital. What do you do? You look to sell that loan. There are ways and I’m sure when you went to our three-day class and we’d get into how to sell a partial on that loan and recapitalize, but keep some wealth down the road on the back end. There are ways to do that. That’s why I’m a proponent of if you’re going to buy six loans, split them up. Don’t buy six nonperformers, and this is Bob’s opinion, especially if you’re using your self-directed IRA. If you have NPLs in your self-directed IRA, any fees and advances, anything you’re going to do on that property has to come out of your IRA money. If you run out of that, what are you going to do? It makes it tough along there. I’m a big fan of mailbox money, buy loans and check every month and go from there. If you want to buy a nonperformer, you work it out. You had that cashflow on other loans to help you cover the advances. 

My strategy is I buy performers, reperformers out of my IRA and I buy nonperformers out of my LLC. I have a self-directed for myself and one for my wife. The challenge becomes buying notes that are going to perform well in my wife’s IRA and where my IRA is not outperforming hers because then I started hearing about that. One thing that I heard that was very interesting in what you said is 75% of your fund is with performing notes. When I hear that, I immediately think, “You have built quite a network for yourself.” That’s a testament to what you’ve built, your brand and everything else. 

Honestly, I bought loans when I was at Metropolitan and Associates. I buy loans from people who we used to work together. They are in one company, I’m at another company now. It’s that network that you build over the years. That’s why I’ve seen people come and go in this business. There is no get rich quick thing. There is, “I’m going to hit a home run on this broker deal and take advantage of somebody,” because that’s one deal. You’re not going to be in business for very long if you have that. Sometimes a lot of singles are a lot better than trying to hit that home run all the time. 

Tell me about what you hope to accomplish with the Seller Finance Coalition. Do you think you’re close to having something substantial be done in Congress?  

We’ve pushed the last two sessions. Just so everybody understands, a Congress session is two years. Even though the presidential election is every four years and senators have six-year terms, they have the sessions of Congress every two years. This session started as we kicked off back in January with the new set of congressmen that came into office. We made a lot of progress in the last session to where our bill was in the Financial Services Committee ready for markup. 

Picking up from that moment forward should be relatively easy. There has been a change in the leadership in the house side. Chairwoman Maxine Waters of the committee is different than when we had Chairman Hensarling who was a Republican. However, it’s a bipartisan bill. We have co-sponsors that are Democrats. It’s not Republican. When you sit down and talk to them and you tell them how their back home is being affected, they realize that they need private capital in their district or else their constituents are not going to be homeowners. You’re never going to get 100% to agree with you, but we have enough people that get it.  

We’re not asking for the moon. We’re not asking for the repeal of Dodd-Frank or whatever. All we’re asking for is an exemption and the increase in the number of transactions that can be done. We have a seat at the table. If another proposed regulation comes down the pipe, we’re going to know about it. What I’m excited about being here talking about it is I know you have people from all over the country on your Facebook group. I want to tell you it’s not a Texas issue, it’s not a DC issue, it’s across the country. When we started out in 2014, there were about six guys and then we were able to get the National Association of Real Estate Investors as members. We have 40,000 members of theirs that are also part of the Seller Finance Coalition that do business in 46 states I believe. We always have somebody that can tell the story to their representative and that’s what resonates. You’d be surprised, you get five or six letters or emails to an office, it doesn’t take thousands. It gets their attention pretty quick. 

We have a question, “Could anybody get involved with Seller Finance Coalition? Are there any set requirements for involvement in it?” 

No, as long as you’re in the seller finance or note business. We even have people that are real estate investors. They may do a wrap mortgage or they may do something that falls in line with seller financing. They’re part of our organization as well. You can go to SellerFinanceCoalition.org. There’s a page there to join. You can join anywhere from a $100 grassroots member all the way up to a huge sponsor. It’s the same thing with the Fly-In. You don’t have to be a super high-dollar sponsor to attend. We want real people doing real business to go tell their story on Capitol Hill. We’re not bringing in higher guns that do tens of thousands of deals. We want people that are back home doing five, six, seven transactions telling their story. We have some cool testimonials from homeowners. They’re like, “I’m a single mom. I would not be able to be a homeowner without seller financing. I grew up in an apartment building and had been playing on asphalt. Now I have a yard where my kids can play because of seller financing.” You show one or two of those to Congressperson, they get it all of a sudden. 

It’s something else for a lot of people that their parents probably were lifelong renters. They were looking to be lifelong renters and then you give them an opportunity, you give them a chance. You’re going to do it where your underwriting processes are reasonable and rational. It’s not taking them through a bank where they’re scrutinizing them or making them feel bad about working at Walmart and buying a $50,000 house. They are people like anyone else. It’s wonderful that you’ve set all this up in place. 

I want to invite everybody to join us in DC. It’s an exciting day. The only thing I would tell you is you’re going to do a lot of walking. Be prepared for that because the way those buildings in DC are connected to go from one office to another, you’ve got to pedal fast. You’ll do a lot of walking. We’ll probably set you over six or eight meetings and you go in there with your group, tell our story, leave the little flyer behind about our bill and ask them to be a sponsor and support us. It’s a fun experience. If you’ve never been to DC, I highly encourage you to do it and be a part of it. You’ll truly learn what goes on and what keeps things from happening sometimes. 

What do you think is the major resistance or fear with the politicians not taking advantage of what you’re presenting or not acting on it? 

Overall, a lot of it is they don’t want to give the other side of victory, which is why I think our bill resonates because they can go back home. It’s all about what they do for the people that send them in office. As much as we like to think that they’re doing something to help the community, they’re running for reelection over and over while they’re in there. They can go back to their district and say, “I made these changes and now I have better neighborhood stabilization or whatever.” That’s a victory for them. The real opposition that we’ve ever come was somebody who’s hardcore like, “Everybody should be regulated,” and they still want to hear it. It’s just, “No.” There are some concerns for consumer protections. To be clear, our bill has no relief from any consumer protection. You still have to follow all the guidelines and the ability to repay. All we’re asking for is an increase in the number of transactions you can do in a twelve-month period, just as some small real estate investor. Most people can get by with 24 in a year. That should handle about anybody and that’s why we worked out that number. We feel at least 80% of our members across the country will benefit from having it increased to that. 

NIME 42 | Seller Financing

Seller Financing: There is no thing such as a “get rich quick” solution.

 

It doesn’t touch on any Fair Debt Collection Act or any third-party debt collections activity. This is to help open up for small mom and pop lenders to go and provide housing for people. That’s wonderful. They can go and sign up on that website. I think it’s a worthwhile cause. I’ve been buying institutional originated papers from day one. That’s what I’ve done. I’ve been fearful or I’ve had some hesitancy on buying land contracts or contract for deeds. This is great for people like myself that are learning. We need to expand our horizon if we’re going to be long-term investors. 

Seller finance can be known to mortgages or contract for deeds. There are different underwriting risks for each one. A contract for deed, you’re the owner of that property until the contract pays off. Tax notices are coming to you as well, so you’ve got to make sure your borrower pays us. Whereas typical mom and pop note and deed of trust, it’s like what originated by a bank other than the fact that you’ve got to be comfortable with the pay history. 

Is there anything else that you’d like to touch on that you think is important for the group to know? 

We’ve covered a wide range of topics here. I do think education is important. I think the community is important. That’s why I’m a big fan of your Facebook group. I see the interaction. I see some ask question and the responses are flying out there with people’s opinions. The cohesiveness that you spoke about is very important, but you can’t live in a hole. You have to be out and you have to know what’s going on. That’s part of the Seller Finance Coalition. If you’re like, “I don’t do any seller financeI only do one. It doesn’t bother me.” That’s now, next year we may do something else. It could be a bill that says we’re going to do away with seller financing. We have to have a seat at the table and it takes people from all over the country. I’m passionate about it. That’s why I keep saying that. 

Even if that’s not your passion, seller finance loans, and your coalition can provide someone education in that arena. If nothing else, let’s say being a part of it, they can get exposed to that side of the industry. Bob, I have to ask you because I always ask my guests, what are some of the daily rituals that you have in your life that have helped lead you to sustain success? 

My faith and family always come first. From a daily ritual perspective, I’m always home for dinner, especially when my kids were younger. We’d always do dinner as a family. Now, my wife and I are doing that. Staying on top of what’s going on in the industry is important. I do a lot of reading. I stay on top of news coming on potential things or anything in the housing or the economy. I’m trying to have some time outside of work. I know they were entrepreneurs and everybody is super excited, but I’ve seen a lot of entrepreneurs have a work-life balance that wasn’t very healthy for them. I’ve always strived to have that whether I was working at an institution or as an entrepreneur out here at Colonial. That’s it. Try to keep the right priorities. I have a saying, “It will work out. It always does.” 

My wife always tells me because I’m always in hunger mode and I’m always wanting to hit it so hard like my next meal depends on it. She always tells me it’s going to be better than okay. That’s her thing like she knows okay is not going to work. It’s going to be better than okay. Let’s touch NoteExpo. Are we doing it again in November, is that the thing?  

As usual, it’s the first weekend in November. It’s going to be November 1st and 2nd. It will be in Dallas. It’s in the same Renaissance Hotel. We’ll start promoting that pretty good. We’ll start announcing some of the speakers. We’re going to put together some different speakers. It won’t be the same guys all the time. We’ll have some good panels. You can go to NoteExpo.com. I hope to see you. If I don’t see you, Martin, before that hopefully, I’ll see you in DC at the Fly-In and I’ll hopefully see some of the other guys on the group page here. I expect to see you and their New Jersey issues. I’m certain we can cover in DC. If not, I’ll see you at NoteExpo for sure. 

I was there in 2018. That was my first year and I thought it was a very classy and well-put-together show. It’s top-notch from the location to all the food, all the vendors that were attending, all the content with the presenters. My hats off to you on what you have put together with that. I appreciate you on, Bob. Seller Finance Coalition, Colonial Funding Group, NoteExpo, we talked about NoteSchool and all the above. Thank you for joining us.  

I appreciate it. Hopefully, I’ll get back on here a few months down the road and give you an update after the Fly-In and keep everybody in the loop.  

I appreciate that. Take care and God bless. 

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About Bob Repass

NIME 42 | Seller FinancingBob Repass is a 28-year veteran and expert in the seller finance discounted mortgage and distressed asset industry. Over the course of his career, he has purchased over 40,000 performing and non-performing mortgage loans totaling over $2.5 billion dollars in volume, giving him an unparalleled track record in the industry. During his career in the seller-financed note industry he was a Senior Executive at the largest institutional investors; Metropolitan Mortgage & Securities, Associates Financial Services and Bayview Financial.

Mr. Repass currently serves as Managing Director of Colonial Funding Group and NoteSchool, where he has overall responsibility for the management of the firm. In addition, Bob is a Managing Partner for Colonial Capital Management, where he is the Chief Investment Officer of CCM’s Colonial Impact Fund II. Co-Founded the Seller Finance Coalition in 2014 to ensure the seller financing industry would have a seat at the table going forward to protect our industry from over-regulation.