Getting the collateral checked on a prospective note

12 Replies

Hi everyone, I'm looking for who to call about checking on the collateral for a note I'm looking to purchase.  I can't recall what those guys are even called...the type of company, what to google, etc.  I'm looking for someone in San Antonio.  Thanks for any help!

@Franklin F.

Hi Franklin! 

I think  that could be recorded with the county recorder's office.

Usually seller has to sign off on these I think as they are supposed to provide all documentation about it accordingly, but at least start here with the recorder's office. 

A title search would also seem to give you more details as it relates to encumbered assets and the specifics as it relates to this property prior to purchase- having said that maybe I totally misunderstood your question and am not clear on what you mean, but I hope this helps! 

@Franklin F.

I typically have an attorney review the collateral only after you have ordered a title report

You will want to send the attorney a copy of the title report along with a copy of the note, the allonges and don’t forget to tell the attorney who it is you are buying the note from

There are also collateral review companies like KC Wilson, Orion, Richmond Monroe who also do this.

My preference is an attorney in that state so if you ever have to go the legal route they are familiar with the file

@Chris Seveney Pardon me for being a bit green... when you say you need to order a title report do you just call a local title company in the town the asset is located and give them the address?  Also are there companies that strictly do BPO's?  I'm in the process right now that this is also my next step.  I'd like to verify some of this stuff before I pull the trigger and put an offer in.

I also thought maybe I had heard somewhere that you should get the note under contract or agree with the seller on a price then go and do the BPO and title report.  What is the proper order of this in your opinion?

You are always a great help in this form!



@Franklin F.

I do not spend money until it is under agreement (sidenote I also do not sign loan sale agreement until all my due diligence is done)

Yes, accurate group is a company that does title and BPO. you can call local title company or a national company. you can also get a local realtor to drive by, take some photos and provide some comps as well. I would take the BPO with grain of salt and make sure to check your own comps etc.

I wait until after I have an agreed upon offer.  Then I do title.  I also talk to realtors local to the area and have them go out and take a look and give their insight.  Then, if anything comes up, I counter the original offer with reasons.

There's several options for title and BPOs.  I use ProTitle.  AccurateGroup can do both title and BPO.  Relationships with title companies can also get you title reports.  But you'll hear a lot that BPOs aren't worth the paper they're printed on.  That's why I go the realtor route.

Another company that provides DD reports is Phoenix Collateral Advisors. They will also order O&E reports and incorporate the results into their reports.

As far as the normal sequence of events for those that want to know:

1. Agree on price

2. Get your digital copies of all note related documents

3. Order DD, O&E, and BPOs

4. Handle any discrepancies that your DD uncovers: Re-price, accept price as is, or kick the loan

5. Once everything has been cleared, both parties sign loan purchase agreement.

6. Wire purchase money to seller within 24-48 hrs of signing loan purchase agreement. (Don't mess this up!)

7. Seller ships physical collateral files with 1-3 weeks  

@TJ Addison There is an art to bidding and what behavior is acceptable. In general, we'll assume that what the seller has on his tape is the truth. If we prove otherwise then there's a reason to have a conversation about pricing.

For example, if the tape says the property is worth $100k and your BPO comes back at $80k you have reason to ask for a price reduction. (Make sure you verify that your BPO is more accurate than your seller's and be prepared to send it over.) The seller may accept his value over yours in which case you either accept his value or drop the loan from the trade.