Every once in a while, a seller will say to me,"Why are you asking me all these questions?"

My answer usually is something like "Because I want to know as much about your note as you do."

The world of seller carryback is the Wild, Wild West. Parties agree to all kinds of things. The new laws will change that to some degree, but the basic reality remains - notebuyers really don't know what they are buying until AFTER they have the note.

Just take a look at how a bank examines a potential borrower( today - not pre bubble days) and the property he wants to buy. The bank will meet face to face with the borrower. They will ask for tax returns and pay stubs. They will expect stable employment, check references, demand a certain credit history. The downpayment requirement may be based on all the prior data gathered.

The bank will order an appraisal on the property, and base their lending decision on the results of that appraisal.

Bottom line - the bank wants to know EVERYTHING they can about the borrower and the property he wants to buy BEFORE they lend their money.

Contrast this due diligence with buying a note. We don't meet with the borrower. We don't ask for tax returns. We don't talk to his employer. We do run credit and we do get a payment history. That's about it.

We don't order a full appraisal on the property. We request a drive by BPO, get neighborhood comparables, do online research, and try to get the best feel for the current value of the property. We review all the documents, order a Title update.

Buying a seller carryback note is fraught with risk. That's why a note is never purchased at full price of its current balance. It must be discounted to account for the inherent risk. Our due diligence is the best it can be given the nature of the secondary market, but it does not approach the level of scrutiny inherent with bank lending.

That's why I ask the questions.

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                     Talking about Banks

There is a bank in Southern California called Citizens Business Bank. Been around since 1974. Only $6.7 billion in assets. Has 45 branches. Serves the banking needs of businesses. Builds long term relationships with small and medium sized businesses, family owned and privately held in the community.

Citizens' has turned a profit 146 consecutive quarters. That's over 36 years. How?

"In 2005-2006, some of the banks were growing 20% a year - we were growing maybe 10%. We lost a lot of money on construction loans, but we limited these loans to no more than 10% of our portfolio, far less than many of our peers. We have to be smart about who we lend money to and how we lend money. The 146 consecutive quarters of profitability is one of the best records in the country. I think it comes down to knowing who your customer is. We're not trying to be all things to all people." Christopher Myers, CEO.

Isn't it amazing how knowing and serving your customer leads to success at any level of business?

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                                   Olympics

Early last year I heard Brian Clay speak. He won a Gold Medal for the USA in the 2008 Summer Olympics in the Decathlon. Amazing accomplishment.

He had a very simple message and I want to share it with you here:

Focus on 5 things in your life every day:

Physical

Emotional

Mental

Spiritual

Social

Goal: Rid daily distractions in each area.

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                    Basketball and Buffet

I love basketball. One of the most exciting sporting events in our country occurs every year. March Madness. The best college teams in the country play 67 regional, single elimination games, the ultimate winner then designated the NCAA Champion. Much of the excitement comes from unheralded teams beating higher ranked teams and advancing. Everyone loves an underdog.

Well, Warren Buffet has offered to pay $1 billion dollars to the person who can correctly guess the winner of each of those 67 games. Says Buffet, "This will be the most fun. Just imagine if there's one person left at the last game. I will go to that final game with him or her and I'll have a check in my pocket.... I think we'll be rooting for different teams."

How can you not love this guy?

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                           Business Upbeat

The National Association for Business Economics reports that businesses are generally more optimistic about growth in 2014, and expect little effect from healthcare reform or the reduction in Federal Reserve stimulus programs. 69% of respondents expect growth in their businesses to be in the 2.1% to 3% range. 40% expected to raise prices in the 1st quarter. 37% expected to increase employment in the first 6 months.

"The outlook for 2014 is strengthening," said Jack Kleinhenz, the group's President.

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I offer my opponents a bargain; if they will stop telling lies about us, I will stop telling the truth about them." Adlai Stevenson, Presidential Candidate, 1952.

A politician is a fellow who will lay down your life for his country." Tex Guinan, actress and saloon keeper.

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California had 39,145 sales of homes for at least $1 million dollars in 2013.

Tiger Woods has earned in excess of $1.3 billion dollars since turning pro in 1996. $1.16 billion resulted from endorsements....   Golf Digest, February 2014.

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If you enjoyed this Newsletter, tell a friend.

If you know how I can make it better, tell me.

Thanks for reading.

 Denny Stanz

CA Broker # 01915404