For trust deed investors
by Brad Evans, ©2006
To better develop harmony in our investor/broker relationship,the following is a draft of what you can expect from Brad Evans Real Estate Loans as your broker and what will be required of you as a BEREL trust deed investor. I want to do whatever I can to improve our services for you. I want to clarify what our free service consists of and what you can expect from us as well as what you may expect from your Trust Deed investments. I have included an explanation of what our service offers you as an investor. Keep in mind that I am open to and interested in your reaction, suggestions, and input.
Please initial items #3, 6, 9, 13, 15, and 16, and then sign the back page, make yourself a copy and return original to me.
1) Please call about placing only those funds you actually have available (in your possession) to invest so that I can put your name in line on the "FUNDS AVAILABLE BOARD". Sometimes when you call I may even be able work out a commitment with you right then. Committing to a loan when you're "going to" have funds or "expect to" have funds sometime in the near future can create major problems if you can't perform on your commitment. When you make a verbal commitment please plan to stick by it. Lenders making loan commitments that they later cannot keep for whatever reason can be very costly and frustrating. I need to be able to depend on your commitment. If subsequently a loan you have committed to seems to be taking too long to close escrow (over two weeks) call me again and I can sometimes start your interest clock early or even shift you to another spot if necessary.
2) Please avoid all contact with borrowers. On numerous occasions borrowers have become a nuisance to a lender who disclosed their home phone numbers or street addresses. (One borrower decided to tear down the house he was supposed to remodel and later said the lender told him to. Another borrower misunderstood an investor to say he didn't have to make his payments for awhile!) I strongly suggest you obtain a P.O. Box. Without a P.O. Box you've automatically put us, as well as the title company, in the position of having only your street address to give out to borrowers. Set good ground rules by immediately referring ANY borrower telephone calls and requests promptly and directly to our office the very first time they call to best avoid letting yourself in for potential nuisance and aggravation!
3) Noteworld.com keeps us updated automatically about late monthly payments and they will send a standard late notice. If subsequently 2 payments both become past due (the moment any borrower becomes a total of two months and 11 days behind) we will send a "Notice of Intent to File Foreclosure ". Please only check in with us on borrowers who are 2 months behind where both payments are late. Please don't call us about outstanding late charges owed you, we can no longer enforce collection of late charges legally. Instead, please keep track of any late charges owed you and add them to your demand total at the time of payoff.
4) With respect to borrowers who do fall behind on monthly payments please agree that as a Brad Evans investor you will cooperate with our standard practice of filing a Foreclosure notice of default only after they have fallen a full 2 (two) months behind, including the grace period. Not sooner and not later PLEASE! Trying to take delicate foreclosure matters into your own hands or filing a foreclosure early or filing on borrowers unnecessarily cannot be allowed. An improperly executed foreclosure can present more problems for you than it could be worth! Let us handle it.
5) Please refer any borrowers who contact you "directly" to please call me directly about whatever they need. As your Broker I am always prepared to handle most everything for you the right way and at no cost to you whatsoever, so why would you want to take a big chance with your investment just to save a bargain hunting borrower a few of your bucks? Don't ever attempt to extend, re-write or modify a Brad Evans Real Estate loan yourself. Doing this not only voids the Brad Evans Loan Promise but is dangerous and worse yet, any illegal extension benefits a borrower did convince you to accept could later result in finding yourself guilty of usury (and without properly updated title coverage, the recording of proper modification agreements and documents, and subsequent new lien protection, and all for nothing except saving the borrower some fees). If you attempt to alter, modify, or extend a note and Deed of Trust yourself, not only is there NOTHING IN IT FOR YOU, but you also will be without:
a.) records checked for new tax liens, new mechanics liens, or any other new liens.
b.) the proper modification agreement and other documents recorded.
c.) A.L.T.A. title insurance protection updated properly.
d.) fire insurance extended properly.
e.) legal ability to collect extension or assumption fees or interest increases.
f.) the Brad Evans Promise.
g.) any of our other free services.
Our methods have already proven themselves on 1,300 loans for two hundred investors for over two decades. Let us handle it for you the right way and at no charge. As a Broker, I am exempt from usury laws, you are not! I can offer you higher yields and better title coverage than you can obtain legally for yourself. Plus free loan servicing !!
6) CAUTION!! LACK OF FIRE INSURANCE COVERAGE POSES THE SINGLE GREATEST THREAT TO YOUR TRUST DEED INVESTMENT. Always notify us immediately if you receive a fire insurance policy cancellation notice, renewal notice, or expiration notice. I will put pressure on the borrower and threaten foreclosure if necessary. If he does not pay the premium, it is still ALWAYS your responsibility to follow up, even to the point of buying a lenders policy for yourself prior to the previous policy's cancellation. You'll have the legal right to file a notice of default if you have to, to get reimbursed. I have seen two homes with our loans on them burn to the ground and both times investors were covered in full with no problem because of this very important practice. (On fractionalized notes, the investor holding the largest portion of the note would be required to advance the premium amount necessary to cover any unpaid fire coverage and would be reimbursed later.)
7) Expect a 30 day delay of your monthly payments. That is a part of the trade-off for the privilege of earning high interest. If you can't accept this delay caused by loan servicing, you can choose to service your own loans. Also, at the time of payoff, if you have still been unable to collect an old late charge or check charge, etc., it can always be added by you to your final demand for payoff along with any other outstanding fees.
8) I truly enjoy sharing Trust Deed investing with those investors who are pleasant and cheerful to work with. Disgruntled, rude, impatient or demanding investors should try to remember that you and I are both on the same ball team. You absolutely would not believe how rude some investors have been over relatively nothing in the course of enjoying this FREE service! I find myself giving a little more priority to cheerful, polite, professional and respectful people that I enjoy working with.
9) I can't guarantee your investment against all problems, delays, occasional snags and borrowers who pay late. The Commissioner of Corporations requires that I advise you consider not putting any more than approximately 10% of your total Trust Deed investment portfolio into any one single Trust Deed investment. National statistics show that approximately 1 or 2 in every 50 to 100 borrowers will file a bankruptcy which can result in as much as a six to twelve month interruption in monthly payments to you on that loan before the court forces them to pay in full plus all interest fees etc. however If you are depending on Trust Deeds for regular monthly income, I recommend diversifying into as many smaller pieces or fractionalized loans as you can. Dividing the amount you have into ten pieces might be a good rule of thumb. If a borrower does file bankruptcy, your interest clock will still continue to click and there should ultimately still be no costs to you.
10) Be realistic. If a borrower had flawless credit and a million dollars in the bank, he probably wouldn't agree to pay you such high interest. In exchange for earning high interest we've agreed to hang our hat or look to secure our investments primarily on nearly "two to one" in real estate equity. The reasoning behind this practice of equity' lending is although you may encounter some headaches, delays and some minor problems, you'll always have nearly 2 to 1 in ample security based on the real estate equity. Trust deed investing is a very slow moving thing! Expect snags, expect delays and expect late payments from time to time. It's no secret that Trust Deeds are simply just not for everyone. You and I usually pay our bills on time, while some borrowers may choose not to. That alone doesn't make that particular investment a bad risk as long as you have ample security in real estate equity as collateral backing you up. (Late charges collected can actually raise your yield considerably). Some headache is the price you must accept in exchange for earning high interest. One investor (depending on his interest for his monthly income) pays himself with his own funds on the first of each month and later subsequently replaces the funds when the borrowers payments arrive.
11) Please let us know if you plan to be out of town for more than 3-4 business days. Not being able to reach you can create a serious problem, kill a deal or even cause a lawsuit. Lenders can be sued for not providing a payoff demand within 20-25 business days of a request for payoff. Imagine if a borrower's new loan commitment expires & rates go up because you were unavailble. Imagine what even a 1/2% interest rate increase could add up to on a 30 yr. loan. You could be liable for this if you were unavaiable for those 25 days.
12) Email. If you don't already have it you may want to consider getting it now. Time is money and if someone can't reach you or communicate with you, you are probably going to be the one who will be missing out. I feel that email and an answering machine should be a prerequisite for all Trust Deed investors. Other helpful tools for those who expect to do a higher volume of investing might be a fax machine. Email is available to anyone who has a home computer now. When I am offering new loans to investors I always do this via email. I used to be able to communicate with investors when I had 20 of them on my list. Now with 300 investors and having brokered 1,300 loans I just dont have the time it requires to play phone tag with investors who want to communicate with me. Did you know that you can reach me 24/7 via email ?
13) IT IS a good idea to always send a 90 day notice of balloon to every borrower by certificate of mailing only, NOT certified, NOT return receipt requested. I put the instructions on the bottom of the 90 day notice form and offer free copies for your use upon request. Section 2924i of the California civil code requires that you send this notice to borrowers on all owner occupied loans and I require that you send this notice on all loans. It is a good idea and a good habit to develop as an investor. I can email you the document. If you can't or dont want to ..not to worry as we send them on all loans and so does loan servicing. We just feel "too many notices to borrower can never hurt".
14) Trust deed investing is a very slow moving thing! Don't take matters into your own hands or become emotional over investments; life is much too short. Exercise a little patience. If you have any problems whatsoever call or email me and we'll be happy to handle them for you. We are here for you and someone is usually always available 9:00 to 5:00 Monday through Friday (except maybe Dec. 23rd to Jan. 2nd; and 2 weeks during the summer each year). For the quickest reply send email.
15) At the time of payoff it is your responsibility to accurately fill out and promptly return the demand for payoff (reconveyance). Boots here is available to help you with this if you need help. Keep track of where you sent your original documents to be paid off so that later if a different sale or new loan payoff occurs, you'll know where you sent those original documents. Sometimes a sale refinance or payoff doesn't go through and later you will need to get your original note and Trust Deed back; you may find it hard to remember exactly where you sent your original documents. NEVER ACCEPT A PAYOFF CHECK FROM ANYBODY PERSONALLY. ALWAYS REQUIRE A BONA FIDE ESCROW OR TITLE COMPANY ESCROW BE OPENED. NEVER RECONVEY ALL OR ANY PART OF YOUR INTEREST IN ANY TRUST DEED WITHOUT A BONA FIDE ESCROW UNLESS YOU WAIT UNTIL AFTER THE PAYOFF CHECK HAS CLEARED. Why? Because a payoff in the form of a personal check accepted by you directly from a borrower could bounce after you've allowed the reconveyance to record! It's your right to require a bona fide escrow be opened with a reputable title company to handle all payoffs and reconveyance.
16) On construction loans please promptly forward to my office any "California Preliminary 20 Day Notices" you may receive. (This notice, also known as a "pre lien" notice,) is not notice that a lien is or has been filed, it is sent to notify us of credit extended by material men or subcontractors. It is required by law in order for the creditor to protect and maintain his right to file a lien against the property (behind your loan) in the event a bill is not paid. Quite often an investor confuses this notice for an actual lien or something bad, it is not. We make every effort to verify payment of each one of the pre liens received whenever a borrower asks for his next draw. There is no cause for alarm when you are properly insured against the threat of mechanic's liens. The A.L.T.A. title coverage provided on every Trust Deed investment, insures your loan's position against the threat of any mechanic's lien getting ahead of your loan. We need the pre lien notices so we know who to call to find out who has or has not been paid!
17) I am happy to meet with you in person at any time. However, there are many of you and only one of me, so please, by appointment only! We have had pushy investors show up unannounced at our door as we were seating guests for dinner.
18) Please consult your accountant or tax preparer and always keep track of and properly declare all income, interest and late charges received by you. You can bet the borrower will be showing them as a deduction on his tax return. Loan points and late charges are also taxable income, just like interest, according to one IRS employee... .
19) Please agree to follow the 37 tips that together, myself and other investors have developed to protect you. The information is really not complicated. Myself or my representative will aways view the property you plan to lend against, for example. I also perform all final inspections myself personally. You can also request a copy of the 37 TRUST DEED INVESTING TIPS by mail.
You can expect the following services from me:20) I will always be willing to arrange the re-sale or liquidation of a note brokered by me at any time and charge you nothing for my services. The title company will have some title and escrow charges. (This policy may not apply to loans written for longer than three years or loans in breach or default). All loans with loan terms in excess of three years may be difficult or expensive to liquidate. I would probably not recommend the funding of loans for periods much longer than 3 years. This free service is intended for an investor suffering an unexpected personal challenge and does not include portfolio optomization or liquidation.
21) There are risks that exist for Trust Deed investors that even my 37 point safety checklist cannot eliminate. A borrower being drafted by the military, earthquakes, sinkhole and other freak acts of God are risks that will always be there regardless of what any person or any piece of paper says. I have been a broker for over thirty years and although I have never had a private investor lose his investment and hope that I never will, all forms of investing carries some risk. I have brokered approx.. 1300+ trust deed loans to date earning 200+ investors an average yield of in excess of 10% over more than 2 decades and have had a 99.5% track record with only about 5 or 6 of those notes resulting in problems.
22) I will be happy to assist you in the handling of any problems that may arise, no matter how small. Filling out demands, fire insurance expiration or cancellation notices, filing the notice of default, etc. Call us and let us help you. Please avoid calling unnecessarily however. One nice elderly gentleman insisted on calling me twice a week whether he needed to or not. Multiply that times a hundred borrowers and investors. Correspondence via Email is greatly appreciated by me.
23) I will properly handle all loan extensions, modifications, additional advances, etc., for you at no cost. When I handle these for you, you will receive, at no cost to you, all of the following:
a) the records checked for new tax liens, mechanics liens, or any other types of liens.
b) the proper modification documents recorded.
c) New updated A.L.T.A. title insurance dated down properly.
d) fire insurance coverage extended properly.
e) you'll receive extension (assumption) loan fees and/or other considerations
f) free loan servicing
g) the Brad Evans Promise.
h) all of our other many services.
Our methods have already proven themselves. Let our proven methods work for you.
24) On all construction loans, prior to the release of any draw, we will always call and verify that all building inspections were really passed by the county, check for new potential mechanics liens, verify that all payments to you are current, inspect the work performed and snap a picture. We also measure the improvements to confirm proper square footage, obtain a copy of the signed off permit card and check for unpaid bills as a standard part of our service to you. I will gladly send you copies of any draw release upon request.
25) We agree to keep you informed of any draw deviations on all construction loans and obtain your approval in advance on any draw deviations that are in excess of $5,000. Before releasing any draws we will always:
- Check the loan servicing late list from notemanager.com
- Check to see if bills are paid
- Check with the county to verify work completed & permit card signed off
- Inspect, measure and photograph the property
- Require borrower to pay anything delinquent
- Obtain your signature if there is ever a draw deviation over $5,000.00
- Check for liens, and stop notices.
26) When you call with funds in hand to invest, I promise to try to get your investment capital into a Trust Deed and working for you in as short a time as possible. Our rates are in no way connected to the prime lending rate, we are instead tied primarily to supply and demand, and sometimes the supply of investors does temporarily exceed the demand for money by borrowers. Trust Deed Investing may require patience at times.
Due to the higher cost of doing business we will be charging borrowers up to 2% of the interest paid by borrowers for all that we do and the balance of the interest yielded will go to you the investor. Funds are doled out as work progresses under the terms of our comprehensive loan draw agreement used successfully now on 1,300 construction loans for over 25 years.
27) Free loan servicing. We agree to set up, maintain and pay all costs for loan servicing on your Trust Deed investments. Earning high interest on smaller amounts is now available at no cost to you through our fractionalization program, whereby you may fund smaller portions of loans by going together with other parties. We have covered all the possible conflicts for you including the right to file a notice of default if your partners signature was unavailable for any reason.
28) We will continue to make every effort to customize and improve our service to suit your particular needs. Please give us your feedback. We accept the fact that changes and minor adjustments will always have to be made.
THE BRAD EVANS PROMISE
The California Department of Real Estate will not allow brokers to offer investors a foreclosure buy-back guarantee. However, I personally stand behind all work I perform on every Trust Deed investment brokered by me unless altered, modified, extended or changed by someone other than myself. Trust Deed investing does carry certain risks. No Broker can possibly guarantee your Trust Deed investments against recession, depression, earthquake, war, flood, natural disasters, and other acts of God, and items not covered by title or fire insurance. In other words, I will continue to stand behind every aspect of MY work the best I can.
I promise that I will work diligently to assist in the process of re-selling any property that any private lender of mine may ever have to take back in an occasional foreclosure (unless of course you wish to keep the property) until that property is sold; to work diligently in an effort to net the lender the return of all principle, interest, late fees, monthly payments, and any other costs and foreclosure fees, etc., that the lender has invested. You will be required to sign a document entitled "Appointment of Agent" allowing me the power to liquidate the property for you. In the event of a borrower filing bankruptcy, I agree to coordinate all legal services that may become necessary in connection with obtaining a bankruptcy "motion for relief of bankruptcy stay" removal.
This "BRAD EVANS PROMISE" will also apply to all loans that I have extended, re-written, or modified. This page does not apply to loans altered, modified, extended, or re-written in any way by private investors or properties sold by investors on their own or anyone else. (In California I am exempt from usury laws and you are not). Time is of the essence in a default situation and notice of default will be filed only when (two) payments are both late and before a third payment becomes late. This promise shall also become null and void if the fire insurance policy covering the subject property is ever allowed to lapse for any reason.
Looking forward to a long a prosperous relationship!
C. Brad Evans
Calif. Dept. of Real Estate, R.E. Broker Lic. #00426805 (DRE PH: 916-227-0864)
NMLS id #233582 & 303135
BRAD EVANS REAL ESTATE LOANS
P.O. Box 163, Cedar Ridge, California 95924
PLEASE SIGN THIS PAGE AND RETURN IT TO ME. KEEP THE REST OF "PROTOCOL 4 " TO REFER TO.
I have read, understand and agree to abide by PROTOCOL 4
Copyright 2006 Brad Evans
I have also initialed and paid particular attention to six of the items, #3, 6, 9, 13, 15, and 16, and I feel that this is an arrangement I am willing to abide by and at the same time I realize that Brad Evans and I both reserve the right to cancel this arrangement at any time.
Other points of interest:
- Stocks Vs. Trust Deeds
- Roll that IRA
- 37 Tips For Trust Deed Investing
- High Yields
- 90 Day Notice (Form)
- Actual Trust Deed Investments (Lender Flier Examples)
- What The Heck Is Subordination?
BRAD EVANS REAL ESTATE LOANS
P.O. Box 163, Cedar Ridge, California 95924
tele: (530) 272-5916
up to the top