Be The Bank S4 Ep12 - Bad Connection
On episode 12 of season 4, Justin Bogard interviews Richard Thornton.
Key Takeaways:
Resources and links discussed
About the Host
Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!
Connect with the Host:
Be The Bank S4 Ep12 - Bad Connection
On episode 12 of season 4, Justin Bogard interviews Richard Thornton.
Key Takeaways:
Resources and links discussed
About the Host
Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!
Connect with the Host:
Interested in real estate. How about wealth? Well, they go hand in hand and here you'll learn all about it, about it. Welcome to be the bank, a podcast where we discuss and debate the topics centered around real estate. Investing your host, Justin Bogard shares insights into investing in real estate to create real wealth and passive income for you and your family. He'll share stories of real estate investments done, right? Walk you through the process of owning a real estate note. And most importantly, educate you so you can be the bank, the bank. This is be the bank brought to you by bright path notes. Now here's your host, Justin Bogard Here. We are episode number 12. I'm gonna have my friend again, Mr. Richard Thornton on today. And well, if might find this hard to believe, but there's actually quite a bit of work that you wanna check up on. You wanna cross your T's and dot your eyes as it comes to the post-closing process, as I call it where you buy a loan and then you start collecting on the payment and there's a lot of things you gotta do. And, uh, we're gonna discuss on why you need to do things and why, how quickly you need to do them. So stay tuned. This episode is brought to you by bright path notes. Hey Richard, how are you today, man?
Richard Thornton:Pretty good. Justin, how about you?
Justin Bogard:I'm doing good. It's the afternoon. It's a little bit warmer today. Hmm. And um, yeah, man, can can plan. I get to talk to you and talk about notes.
Richard Thornton:That's fantastic in California here. It's uh, 90 plus degrees. And for that it's pretty warm in Northern California.
Justin Bogard:All right. You're gonna go do some surfing later.
Richard Thornton:Yeah, yeah, yeah. Right.
Justin Bogard:Richard, your, your connection was breaking up quite a bit there, but I think I heard your comment to say, yeah, right. I'm not gonna be surfing. So yeah, I didn't think so. It's too dangerous. I, I won't lie to do it cuz I won't give you time off work.
Richard Thornton:Okay.
Justin Bogard:<laugh> for injuries, Richard. Um, when I buy a loan and I get that loan, I feel like I've done a lot of work with the due diligence. I've, you know, I've, I've gotten this deal at the price that I want. And then after I collect, after I, I purchase it, um, I'm starting to get fed some documentation. I'm starting to get fed some information that I need to verify to make sure I got everything in my collateral file. I'm uh, I'm, I'm going through the process of, uh, you know, recording, um, all the typical things you do. You're, you're, you're boarding it with a servicer. And so what I find interesting is that a lot of note professionals, um, either are very quick about this stuff or they just kind of go at their own pace with it. Um, the note business in general seems to be kind of island time, if you will, it's kind of at your own pace and things. Don't move very quickly sometimes as if you want them to. And I'm on the opposite mindset. I like, I wanna get this thing, you know, boarded as quick as I can, I wanna get things recorded and stuff. And, and so, um, talk, talk to me for a minute. What are some of the experiences you've had if you haven't been, um, is the correct word expeditious about getting these things done
Richard Thornton:Well, um, yeah.
Justin Bogard:On island time with your, with your post closing.
Richard Thornton:Yeah. Yeah. If I'm, if I'm on island time, um, the, the biggest problem is, is that things get forgotten.
Justin Bogard:Yes.
Richard Thornton:Yes. So, uh, gee, did you file this? Did you file that, um, it's a real job keeping track of what you have or have not done. And, um, as you know, we, we both use podium, uh, to help us do that. But even with that, you have to set up a lot of, a lot of tasks, uh, a lot of reminders, um, because if you don't, if you forget to record, um, a given document, um, you can end up, uh, between a rock and a hard place in terms of, of, uh, uh, what happens down the line. You get sued, you don't get sued. Um, as you know, I've got a deal going right now where a land contract by a previous owner did not get recorded, Uhhuh<affirmative>. And, um, one of my, uh, even though I have sold the note, the bar was trying to refinance right now and cannot do it, cuz it can't get clear title. And so it's a mess. Um, it's, it's a mess.
Justin Bogard:Yeah. So your Rey to that is you're probably gonna have to record the assign. I'm sorry, the delay contract then any, all the assignments that came with it. So the chain follows in proper order.
Richard Thornton:Yes. I'm gonna have to go back and do that now, but, but I'm also gonna have to pay a lawyer to help me do that. Yeah. Uh, where, if I had just done it before, it would've cost me$50 or whatever with a county to, to go ahead and have it done. Yeah. Um, there's a lot of, uh, as you know, a lot of our documents need to be notarized. Yeah. And so how do you get the borrowers to do that? I mean, it's like anything else you have to keep people's attention focused on it. Yeah. To get it done immediately because if you don't, it's probably not gonna get done.
Justin Bogard:Yeah. When I first bought my first few loans, I didn't realize the importance of being very detailed and accurate with trying to set up a process after you buy it, to make sure cuz quite honestly, Richard, I just wanna sit it and forget it. I want to get everything done with it and just start making money. And that's where I want to be. And, and oftentimes I would just not realize I need to do something. Um, one of my biggest issues is insurance. So when I'm a loan, obviously you need to have insurance on. If the borrower doesn't have insurance on it, then you need to put a force place policy on it. And that's something that we need to advance where the borrower pays us back. And so I haven't been doing a good job when I first got in this business of making sure that endorsement clause or that mortgage E clause, whatever the insurance company calls it is updated with my, um, lender's vesting information, the proper information. So that way, if something happens God forbid, if something happens, you know, a fire or whatever, it's the total loss in the house, at least I'm getting paid. The mortgage is getting paid off and I don't have to worry about it. But if that insurance policy isn't updated, um, you know, you could be Sol, uh, luckily we we've had, I mean, unlikely for the bar where their house burnt down, but luckily we were on the policy the correct way. And so we were able to get paid off in the situation. But if I wouldn't stayed on top of it, that that could have been, that money could have been out somewhere. I could have not seen it for 6, 7, 8 months a year, just fighting it, trying to get it back. So
Richard Thornton:Right. And so you, you, you, um, brought up a very good, uh, point there, which is the insurance, but also you mentioned forced place insurance. Um, tell everybody what that is because that's not a term that a lot of people are familiar with,
Justin Bogard:Right? It's just a, it's a policy. So if you have, if you own a home and if you decide you're, you're not gonna redo re repay your homeowner's insurance policy, it's gonna go lapse, it's gonna expire. And that lender should get notification immediately to say, Hey, this insurance policy is expired and there's not one there. Then there's a trigger that, you know, someone, either the mortgage company or the servicing company is gonna go out and get a forced place policy, which is a lenders based policy, uh, more expensive just to put liability coverage on that house. So that in the event of a catastrophic event, the lender is protected with an insurance policy to get the, the, uh, unpaid balance paid off.
Richard Thornton:And so you are, you are forcing it to be on the property, correct?
Justin Bogard:Yeah. So it's just a homeowner's insurance policy, but it's lender based and it's on, it's typically just liability only casualty. Um, so that way you're covering just the unpaid balance part, not really to rebuild the house, not really to, to, to prevent any lawsuits or anything.
Richard Thornton:And who pays that.
Justin Bogard:So I think I heard what you said, your, your connection's bad. So basically we have a couple options here. We have, the servicing company can provide that for you. And they could have triggers internally that do that. Or the servicing company may have that be a responsibility on the lender to go out and find that vendor and, and, and put that policy back on the home and then give them the declaration page so that they can put it in their file. So they know that, okay, this is, this thing's covered, right.
Richard Thornton:Who pays for that policy?
Justin Bogard:The lender's gonna pay for it, and they're gonna advanced advance the money. So we can't really say the lender pays for it. Ultimately the borrower owes it, uh, they they're to pay it, but the lender may have to advance. They call it a corporate advance on that policy.
Richard Thornton:Okay. And how much is that policy for?
Justin Bogard:It depends. How much is the loan balance? What's the property worth? I mean, there's a lot of variables there that you can't answer and the insurance companies will give you that information. So it could be a couple hundred bucks for the year. It could be a couple thousand dollars for the year.
Richard Thornton:It really, no, no, no. I mean, I'm sorry. How much is the, are you covering the house or are you covering the mortgage? Which, which value are you covering
Justin Bogard:The mortgage?
Richard Thornton:The mortgage. Right. Okay. All right. Yeah. I just wanted to clarify that for the audience so that they, uh, so that they understood.
Justin Bogard:Right. So that kind of dovetails me into servicers. Um, right. It's really important that you understand, you know, Richard, the characteristics of that servicer, what they do and what they don't do, cuz each servicer's a little bit different and you kind of have to adjust and adapt to that environment. So I've, I've learned that, um, I deal with two servicers mainly right now and they, they're kind of, I wouldn't say they're polar opposite, but they're, they're opposites in a lot of things. Some they're a little looser in some things they're a little tighter in some things, and you just gotta understand who's who, what vendors in front of you and how you can give them the information they need and then how you need to go about furthering, um, doing an audit on your loan as well. So Richard, I'm gonna go through a couple of loans every month just to make sure things are done. Like I have, I have an assistant now. So I give them the task of like, okay, you need to make sure this insurance policy is always in file. If you can't find it, you know, you need to find it or figure out if the seller had it, you know, we're going through to making sure things are recorded, you know? So that, there's a checklist of things that I have to do, because if I don't, like you mentioned, um, with your land contract, that's something that maybe now that you've experienced it, you're looking forward on each loan that you go through now saying, okay, if this land contact is recorded, okay, now I can, I'm gonna stop. I'm gonna say, am I gonna record it? And then step two, am I gonna not record it? Or am I gonna convert this to like a note and mortgage or note de of trust? So that way you can alleviate the headaches you're gonna have right now dealing with the attorney and getting things recorded.
Richard Thornton:Right? So, um, by and large, are you finding that your services are notifying you if, uh, the borrower was late,
Justin Bogard:I'm not getting a good signal from you, Richard. I think what you're said, let me repeat this. Um, is that, am I getting notification from my servicer? If they, the payments to the insurance company are being paid mm-hmm<affirmative> okay. So yes and no. Um, I believe the policy for the two main servicers that I'm using is to notify me, but I'm not really getting notifications. So it's more of a, you know, I wanna make sure it's all set up well and good. Luckily the insurance policy, it expires once a year. So once you have the policy, you know, you can kind of go and, um, call the insurance agency and be like, Hey, has this been paid if it's really close to the due date or, Hey, do you typically get this payment on the due date? Or, you know, sometimes they have tracking companies that can track the insurance due dates and stuff to see if they are being paid. And if not, there's a trigger that just automatically just goes ahead and gets one real quick and then you have to, uh, make that payment for it. But then the borrower gets it put on their, on their trust ledger, if you will. And then they are required to pay it back, whether it's in small increments of money or whether it's all at once.
Richard Thornton:So what I'm hearing you say is that, um,<affirmative>, um, notes are not totally set it and forget it that there's a lot of ongoing, uh, follow up that you have to make sure, um, happens to protect your own interest.
Justin Bogard:I think when you buy a loan, you have to do quite a bit of research and work. I say quite a bit loosely, you know, you're doing some work and after you buy, it is even more important to make sure that every, all the I are dotted and the Ts are crossed. And then after you get past that first 60 days, let's say, then it's usually just a checkup on it. It's maybe an audit every quarter or once a year or twice a year that you're just going, okay, have the, are the taxes really being paid? And is the insurance policy really up to date and being paid? And is this, you know, obviously I'm checking the payment history to make sure that things are being paid and nothing's going further than I want it to on some of these loans. So the answer is, yeah, it's not truly set it and forget it, uh, when you're the full accountability owner of this note, but it starts getting easier after a while.
Richard Thornton:Okay. All right. So what are the other things that you in, in particular, uh, what are some of the biggest things that have gone wrong in your portfolio on an ongoing basis with loans, not default or anything like that? Yeah, I mean, day to day
Justin Bogard:It's, um, what I see is sometimes payments will get missed. Sometimes bankruptcies will happen. Like some, the two servicers I work with, they, they kind of are on their own and they, and they let things go down the path. They need to go down with some light instruction for me up front and they get me involved when it, when it there's a stop as a decision that needs to happen, that they shouldn't be making. But for the most part, I kind of have to look into my portfolio to see like, okay, if is there a, a missing payment going on, what what's going on, let me look at the servicing notes to see what the communication going on. And I'll have to find out, maybe there's a bankruptcy going on. Maybe there's a, there's a death to one of the borrowers. Um, you know, there's, there's lots of situations that life happens, right? Lots of situations that happen to where, you know, things are not moving at the pace that I want them to because of something holding up. Now, they usually get caught back up, you know, at some point they're in the, in the near future, but there's usually a stop gate there. So I've seen just, um, loans that we have right now, either it's a bankruptcy thing going on, or it's a loan payoff situation. Or, um, I have gotten notices in the mail recently, which is why I brought up the insurance thing about the insurance, uh, is being canceled because if the servicing company isn't us growing that insurance and taxes, then the responsibility is to the borrower to get that paid. So sometimes if they're a day or two late, the policy holder of the insurance cup, the insurance carrier is gonna send me a letter in the mail that says, Hey, this policy has been canceled. We're just letting you know. And the next day I'll get another letter that says, okay, this policy is, is in effect now. And it's all good. So<laugh>
Richard Thornton:Gotcha.
Justin Bogard:Yeah. Yeah. So I, luckily haven't had any big catastrophes because I didn't do, uh, the proper things in the post-closing world, but I have caught myself a year or two later where I forgot to do a step. I forgot to look for this collateral. I forgot to record a document. So, because I did that a couple of times, I really made sure that I knew as soon as I bought it a loan, I'm making sure X, Y, and Z are done. And you brought up a gate break point earlier about having podium and tasks and reminders, because we have a whole list of reminders that says, you know, after we get this loan boarded, you know, we need to make sure that we have a follow up to be like, okay, are we receiving that payment, whatever, you know, two weeks out. And then we have another follow up four weeks later that says, did this actually get recorded? If not, okay. Now we push on getting recorded because if, if the borrowers nowadays are finding more opportunities to sell their house and refinance, so you need to make sure that you are on county records shown as the true lie holder as of today, so that, you know, the proper, the, the title company's going to the proper, uh, folks to get the payoff and stuff. So it's, it's really important that you get these things done in a, in a timely manner. Now that other vendors that we use to rely on to record our documents and to store our documents and servicers to click from the borrowers and insurance companies and stuff like we had to rely on them. So obviously there's, there's a slow down, perhaps from that mm-hmm,<affirmative> all in all, you know, you, you, if you yourself have one to three loans, it's, it's very easy to manage by yourself. If you get more than three loans, you need to get some help or you need to have a good system in place to help you remember, okay, this is where we're at with this one. This is where we're at with that one. Cuz if you don't, you know, with Richard, with you and I, we probably have a couple hundred loans between us and things can get lost pretty quickly.
Richard Thornton:Yeah. Uh, I, as I'm sitting here listening to you say this, I'm thinking I've gotta, uh, get a better follow up system for my notes because I, I don't have one that's completely adequate. And that's a problem with a small shop. Yeah. Any small shop. I mean, how do you originate deals, find financing and then keep all of this, uh, back off of stuff going at once.
Justin Bogard:Yeah. It's, it's a business, right, Richard, right. You discover it starts to become a business. Now you have to dedicate, um, a certain employee or a certain contractor to do some of that work for you, which is why you and I use vendors, right. That to help us with things, then we, they have accountability and then they, they manage that task of it. So there's those become expenses that you have to also understand. We're gonna get derailed a little bit here, Richard. We're when we buy a note, we wanna take into consideration all the cost involved with purchasing that note. And then after you purchase it, how to get it, to set it and forget it mode. Right? And so if you understand some of those costs lightly in your head, you can, you can take your approach when you buy these loans and you can take that into consideration. So now Richard and I look at a loan and be like, yep, we're gonna board it with this servicer, cuz it fits what they do. It's this type of loan. We know what that servicer fee is. So we're gonna deduct that from the, uh, the PNI, uh, the, the principal and income monthly price. So then when we run our calculations, we know, okay, now we wanna be at about this return. So we need to make sure that we're buying at this price. Oh, wait, let's knock off a few hundred bucks because we know we're gonna spend some money with due diligence. So that then our, our net net is gonna be exactly what we want. And so our gross price is gonna be, you know, lower, but we know our net price when we actually fund it and put all the costs into place. That's where we wanted to be, to begin with. And so we're right there in the, uh, in the black, as they say for accounting,
Richard Thornton:Mm-hmm<affirmative>,
Justin Bogard:Mm-hmm<affirmative> and new note investors don't take that into consideration because quite honestly, they don't run in, they haven't ran into this business for very long.
Richard Thornton:No. And I find, I mean, I, I know your clientele is slightly different than mine. You sell more whole notes to people, um, people who are actually getting experience in it and are willing to take care of those items themselves. A lot more of my clients are, are totally passive. They're buying partials and things like that. And even if they're buying whole notes, they don't really, they totally want set it and forget it. So I find that I'm ending up doing some of that myself, just to keep up the client relationship. Uh, that's a big difference in the two practices. So you want to, if you're starting your own practice, you want to think about that and what difference that's gonna make to your practice in other, where do you, where do you want to go? Do you, do you wanna sell to more people who are actually getting in the business and taking care of those things or have more passive investors,
Justin Bogard:Right? Yes. Yeah. Kind of have to make the decision. Um, I mentioned to you earlier about, uh, insurance policy where, you know, we're fortunate enough to have a process to where we put ourselves on the policy and made sure everything was there. Bar war's house burnt down. Then we were able to get paid off, uh, pretty quickly. Um, so have you had a situation to where taxes were a problem and that you were unaware that the taxes were not being paid?
Richard Thornton:Um, yes, I've had that, but, but, um, more often when I've had, especially due to the pandemic is, um, a lot of people, uh, borrowers, uh, kept their mortgage payments current, but let their taxes slide mm-hmm<affirmative> because they knew the county wouldn't come, come after them. Um, and then even more so, uh, they've let their sewer and water payments slide, and I've got one house in particular, that's got almost$7,000 worth of, uh, back payments on their sewer that they haven't made for actually pre pandemic about three years now. And I'm having to work that out with a borrower. And the problem with that is, is that the sewer bill, uh, doesn't show up on, on your, any due diligence, if you just happen to, um, ask your title company to run that, um, and try and get that information. When you buy the note, then great. You might snag it if it's a problem at that time. But if it happens while you own the note, it's a sleeper, you have no idea that it's going on.
Justin Bogard:Yeah. That's a good point. Cuz sometimes you'll see it in the county information with the delinquent taxes. You'll see an item there for, you know, I forget what they call it. They have a code for it, but it's like city, city utilities or something. And it could be like you said, sewer water could be gas, you know, depending on how small a town is, if they pile it onto one, but you're right. It doesn't really show up, um, that stuff. So you have to, when you do it, non-performing loan, obviously we're checking all that stuff. Cause we're expecting that to be there with that performing loan that someone's paying their mortgage. You have a great point, but what if they aren't paying their taxes? What if they aren't paying the insurance? Like their mortgage payment history could look fantastic. But what about the other stuff? It may not look so good. So you're right. You have to get to kind of check on that. So those are both things
Richard Thornton:That, and that depends on your servicer. As you know, one of the services we use will advance those out of their own account and then charge you interest accordingly. Um, another servicer that we use, uh, will not, um, uh, make any advancements on the taxes at all. So they'll turn around and, and call me and say, look, you've gotta pay these taxes and we'll try and collect them later on, which can be pretty painful in a lot of instances. Yeah.
Justin Bogard:Yeah. But that's part of the business, right?
Richard Thornton:That's part of the business,
Justin Bogard:Wait, we're not, we're dealing with higher yielding, um, assets loans, and we're not dealing with, you know, half million dollar mortgages in places where interest rates, you know, are two, three, 4% and people pay on ACH payment, you know, like clockwork for years. I mean, obviously if you want a perfect note, you're gonna get, you know, a very low return, but you're gonna have extremely low risk. You know, if you're looking for a little bit more return, there's gonna be a little bit more risk and a little more accountability for you to follow up and check on these things. So,
Richard Thornton:Right. So to go back to the sewer bills, just for a second, the way I found out about that one is that I did, uh, for actually another reason run the title on the property. And it turns out that the county, um, had put a lien against the property for the sewer bill and all of a sudden this new lien popped up. And so I had to investigate it and take care of it.
Justin Bogard:Yeah. So do you run a title search after so long on a loan, on a performing loan?
Richard Thornton:Um, I typically do about six months out, something like that. And it's fairly, uh, a after, um, all the recordation is supposed to be done and things like that because as you well know, the county doesn't necessarily take, uh, uh, all of that into account. Plus what you and I have both found is that in some instances, the assessor's office is not talking to maybe the township, maybe the county, assessor's not talking to the township. And so you're getting different reporting from different places about different amounts and uh, so that all needs to be straightened out.
Justin Bogard:Right. So there, wow, there's, there's a lot there going on. Right. It seems, it seems daunting, but again, if you have a follow up system, if you have, it makes it just a whole lot easier. So even if you're buying a lot of loans at a time, like we are, sometimes we're buying, you know, a couple, sometimes we're buying, you know, 8, 10, 12 loans at a time. You just gotta have a way to track that stuff and understand, you know, what you're doing. Most of my loans that I buy, I try to make sure that they're escrow for taxes and insurance. Exactly. Not all the time they are, but it, it is nice to have the borrower kind of take that responsibility and deal with that when they're not, you just gotta have somebody follow up with it. So for I'm lucky I have an assistant and that's one of their tasks is just to make sure like, okay, it's time for this to become due next month. Let's see if it's been paid yet or let's see, you know, what, what the hold up is. Um, if taxes go delinquent, it's not a big deal. Yes. You're gonna pay a fee, a penalty, but the penalty is, it's not like they're severely steep by any means. They're just, you know, you're just paying a little bit more than what you should be.
Richard Thornton:Right. So, um, on that note, um, and collecting taxes and insurance, are you, um, keeping the land contracts you have or are you converting them to, uh, deeds and mortgages?
Justin Bogard:That's a great question. So eventually I would like to convert all of them to note and mortgage or note need of trust, but right now, if they're not a problem, they're not at the forefront of my mind for me to change them. But when the opportunity presents itself, I do take that and start converting them. The process, there is some money involved. Let's just be clear about that. Sometimes you can get the borrower to pay for it, some of it. And sometimes you can't, um, for the simplicity of just having the note and mortgage it's, it's much better than a land contract mm-hmm<affirmative>, but yeah, that, that's kind of where, where we're at.
Richard Thornton:Okay. So you're splitting that cost with the, with the borrow. Cause I can see a lot of borrowers would push back and say, no, I don't wanna do that.
Justin Bogard:If I can. I kind of position it as, Hey look, you know, do you wanna be on the deed? Great. You know, I, I can, I can do that for you. I can help you cleaning this up, but I need some help here. I need you to pay for, uh, the, the title insurance or the, you know, I don't ask them to pay for all of it, cuz it could be a few thousand bucks depending on what state you're in. Right. Um, but I do ask them to bring something to it. So if they can bring four or 500, depending on if it's a really low valued loan, like a$30,000 note, I wouldn't expect them to have a bunch of money to pay for it. But if they got three or$400, I mean that's, that's great. And that it could be a thousand dollars cost and that only costs me 600 bucks to convert it. And I'm willing to do that and invest in that, knowing that I could have a note and mortgage and, and make things a little bit cleaner, a little bit nicer.
Richard Thornton:Right, right. What's the what, what other, what's the other biggest item, if you can think of one, uh, and there may not be just one specific one on an ongoing basis that you need to take care of that you find out. Um, you know, it's, it's a, it's a after purchase, uh, item that is consistently a problem.
Justin Bogard:It's one of the things that haunts me every time I buy a loan and that's the interim payments. Hmm. So the intern payments, obviously Richard are like when we buy a loan and before our, our servicer can service that loan there isn't, there is a time period of black hole right. Of where that borrower is supposed to be making a payment. Well, they ain't making it to you. They're gonna be making it to the previous servicer until that transfer date. Right. That transfer date could be pushed out a couple months. It could be pushed out a few weeks. It all depends on your servicer and their workflow and what they have in front of them. But you have to be mindful of like how many times did they make a payment? We gotta talk to the old servicer and you gotta find that out. Then you gotta get the payment from them. So there is, there is money that I have left on the table for over a year because I didn't follow through in that intern payment be like, I missed$600. I mean, how did I do that? Well, because I didn't, I didn't understand that it's not the old servicer and the old, old seller's responsibility really to track that and push it to me, especially if they're a big operation. Right. But it's, it's my responsibility to go after and get it. Now they're required to give it to me, but they don't maliciously try to not give it to me. It's just that if they deal with thousands of loans, it's just not, it's not, they're not gonna catch it. Right. I'm gonna catch it because I don't have thousands of loans. You know, we've got hundreds of loans, so right. It's much different for us. It's easier for us to manage that. So that's, that's one of my biggest pet peeves for myself is like, you know, besides the insurance and everything else is that intern payment. I need that collection as soon as possible.
Richard Thornton:Right. And to your point, um, about, uh, your audits, um, I've found, uh, in several instances that notices such as sewer bills and things like that were being sent to past servicers. Yep. And the servicers would get it and just go, oh, okay. We're no longer servicing that loan Bing in the trash can, well, Hey it, Hey, you you're you're, you know, you just notice, you didn't know what was going on. So all the more reason for you to have an audit on things like that.
Justin Bogard:Yeah. That's, that's a good point. So I'll just make a little sidebar real quick on that, on that comment you made the counties don't necessarily update all their databases quickly, even if there's a transfer of ownership with the deed. Um, that's one thing I noticed is that people that I buy land contracts from even a, a year or two later, sometimes the county doesn't update that information. So sometimes it's a phone call that you have to make and be like, Hey, look, I bought this loan. Here's my Elange and my assignment and the transfer deed, like please put my address on there and send it to me. So I'll have my assistant go through and look up that stuff and make those phone calls. But again, it's, it's, you're not expecting that to happen. It's unfortunately, when it happens is when you update it. So even we have holes in our process a little bit, but you know, those are just the, the stragglers or the standard deviations that we don't, we don't really worry about too much, but yeah, that's something that you have to check on as well. So this goes quite a bit of things to follow up on,
Richard Thornton:Especially if you have land, contract is not all in contract are recorded,
Justin Bogard:Correct. Yeah. And even if they are recorded, it's still, you need to follow up and make sure the county, cuz some counties are larger than others and some counties are extremely behind on technology and it's is it's interesting. Um, when you have to go through the county is which county you're dealing with,
Richard Thornton:Right? Uh, yeah, to that point. Um, I bought a note last year that I was just amazed, um, in Ohio and in this county, uh, you have to, uh, paper file for and record. It has to be hand walked in. So, uh, there's no way you can do any sort of, um, electronic recording. So they have this whole system of, of uh, recorders, people who are local and you send your documents to them and they charge you a hundred bucks or whatever. And they, I mean, for the most part, it's a lot of Housewives and they, they will take it over and they'll actually put it in the bin, uh, at the desk, the counter and get it stamped and return that back back to you. Um, and then they largely have a paper system beyond that. And it just astounds me that there's counties that are still doing it that way. But
Justin Bogard:Yeah, that's an 80 year old system. That's still affects David that county.
Richard Thornton:Yeah. Yeah.
Justin Bogard:That's
Richard Thornton:Funny. So all the more reason to have to follow up on this stuff.
Justin Bogard:Right, right on Richard, that, that was some good conversation there about the post-closing stuff. Um, this episode number 12 was brought to you by B path note, stay tuned. We're gonna have a little bit of fun after this. All right, Richard, thanks for, uh, being on our podcast again for episode number 12. That's great. And uh, appreciate that. Appreciate the conversation, um, that we have about this. And actually in talking about the post-closing stuff, it brought up a lot of things that I realized I need to check up on in a couple of loans that you and I have bought lately. So<laugh>
Richard Thornton:Right.
Justin Bogard:A good conversation to have today.
Richard Thornton:Yeah. I think actually I'm gonna ask you, uh, for the contact for your VA and start getting her to go through him or her to go through my cuz if they know the process, uh, why not just hire them, do it to me too. Why, uh, why create a whole new wheel with somebody else?
Justin Bogard:So, um, I wanna talk about, because you brought that up and you, you did that so eloquently, you didn't know that you were teeing me up for this.
Richard Thornton:That's called a good segue.
Justin Bogard:It's called lo it up and knocking outta the park.<laugh> good segue. Right? So it's not how you do it. It's who does it for you? And I think running this business a note business, at some point, if you want to make this, um, scalable, you kind of have to figure that out. And so, um, Richard, I've been working really hard to try to find people to do certain tasks that I need to have done. Let's just call'em back office administrative or operational type of tasks, um, to where now I've kind of grown into a team that does certain things for the business. So, uh, what is, what is the first thing that you decided to kind of push off to the side, to have somebody else kind of own that responsibility and do what's what's the first one that you had done?
Richard Thornton:Uh, the first thing I had, uh, done was post-closing okay. So, you know, uh, in, in the realtors world, they would call that a transaction coordinator and somebody who just collects all those documents, gets all that stuff done for me. So once I've done the deal, I can sort of forget that it, that that needs to be done and across all those Ts and dot all those. I, um, I've got a group that I send all my recording documents to some recorders will do that for some, sorry. Some servicers will do that for you, but personally, I don't know how you feel about this. Personally. I have come to, unfortunately, not trust those servicers because it's a, they may not charge you for it. They may just do it as a courtesy, but it's a second, if not third tier item that they get done. And as you said earlier, it may not get done for six or eight months.
Justin Bogard:Yeah. And it's not their core competency. Right. It's not really what they're designed to do. Yes. They can do it. Yes. They know how to do it, but if it's not in their wheelhouse, what's the point in have them do that. So my question to you is why did you choose post-closing as your first starting point of moving that operation off of your desk and your responsibility?
Richard Thornton:It was the, it was the, uh, biggest item of pain earliest<laugh>. So, uh, before you and I started working together, um, I was trying to close, uh, three, if not four, uh, notes a month. And what you quite quickly realized is you, you can get through one month and get the follow up done, you get into month two, and you get so bogged down, even with a good list on the backside that, um, it becomes very, very difficult. Um, and I had one small portfolio of about six loans that I bought from a seller. And it was interesting, uh, because he was an experienced investor. And I have to say that he was so incompetent and his self-directed IRA company was so incompetent, um, that it took me probably four months to get all the documentation done for just those five loans.
Justin Bogard:Wow.
Richard Thornton:Yeah. It was just, you know, if I didn't have gray hair before, I certainly had it, had it afterwards and you can't the, the time that you have to spend that is just too expensive.
Justin Bogard:Yeah. Right. Cuz you can't do anything else, but fix, fix those and, and put those in the right order and, and get things moving to where you don't have to worry about anymore. So
Richard Thornton:Yeah. And, and I have to say too, that that level of detail at that point is not my core competency. That's one of the reasons that you and I mix such a good team is that you are much more detail oriented on the back end and much better at doing that than I am. I'm the first person to admit that.
Justin Bogard:Great.
Richard Thornton:<laugh>
Justin Bogard:Yeah. It's it's recorded and it's on camera. We got it.
Richard Thornton:That's right. You got it. You got it. You're very good at that. And I appreciate it.
Justin Bogard:Thank you very much. I appreciate that. And I appreciate you, uh, Richard, thanks for sharing a little bit about that. That was our little, little sidebar, a little fun today. Just to kinda get a peek into what it's like to run a note business. And uh, I'm Justin Bogar with bright path notes. This episode, number 12. Thanks again, Mr. Richard Thornton and Richard. I'm sure we'll probably see you in an episode or two in the future.
Richard Thornton:I hope so.
Justin Bogard:All right, my friend, I will talk to you later and, and hear you guys. We'll see you on episode number 13.
Richard Thornton:Alrighty.
Justin Bogard:Thanks for listening to be the bank. We hope you learn something from today's show. If you enjoyed this episode, please rate and review us. Plus check out our bright path notes channel on YouTube and follow us on Facebook and Twitter at be the bank and on Instagram at be the bank podcast. Be the bank is sponsored by bright path notes. Thanks again for listening.