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FREQUENTLY ASKED QUESTIONS†–†NOTES
Q. What is a Mortgage Whole Loan?
Ans. A Mortgage Whole Loan is a loan secured by real property, and can be bought and sold (traded) among lenders and investors with all of its legal and monetary contractual rights in place. We primarily use the term “Note” to refer to a Mortgage Whole Loan or Loan.
Q. Is there a difference between the terms “Note” and “Loan”?
Ans. When used in the context of selling and purchasing Mortgage Whole Loans, there is no differenc the terms “Notes” and “Loans” are interchangeable and both are widely used. However, from a technical standpoint, the term “Note” refers to the actual promissory note, which is a negotiable instrument (a legal term meaning it can be transferred and assigned to a new owner) and represents a borrower’s unconditional promise to repay a debt subject to the terms and conditions thereof. As such, the Note is the key document evidencing a debt or a loan. In a real estate loan, the Note is secured by additional documents, such as a recorded mortgage (lien) or deed of trust on the underlying property, and, depending upon the property type, an assignment of rents and other security instruments. Thus, when a buyer purchases a Note secured by real property, the entire loan file, i.e. the Note, Deed of Trust and all supporting documents, is transferred or assigned to the buyer, and is collectively referred to as the “Loan.”
Q. What types of assets will be sold at auction?
Ans. Our auctions focus on the disposition of Notes (also known as “Mortgage Whole Loans”or “Loans,” as more particularly described below) which are secured by first mortgage liens (or deeds of trust) on commercial, multifamily and residential real estate properties. In some cases, loans backed by the (unrecorded) pledge of ownership interests in the entity which owns a real property so-called, “Mezzanine Loans ”are offered for sale. Additionally, ”pools“of loans meaning a combination of multiple loans sold as one package may also be offered.
Q. Who owns the Notes being offered at these auctions?
Ans. Typically (but not always), the Notes being offered are owned by lenders which originated the loans or may be offered for sale by a special servicer on behalf of a Commercial Mortgage Backed Security (CMBS) Trust that now desires to sell its interest as opposed to holding them or foreclosing on the underlying real property.
Q. Are prospective Note bidders allowed to conduct site inspections on the underlying real properties prior to bidding on Notes?
Ans. No, the current owner (holder) of a Note does not own or have any right to the real property†that secures the loan. Accordingly, the current owner (holder) does not have the right to allow third parties access to the property.In fact, the confidentiality agreements related to Note purchases are clear in prohibiting prospective bidders from contacting borrowers directly or arranging formal site inspections with borrowers or borrowers representatives. Therefore, prospective Note bidders must limit site inspections to what is available to the general public without illegally trespassing or violating the rights of third parties
Online Auction Process
Q. What if I use a broker, agent, advisor, attorney and/or contractor (one or more, “Assisting Parties”) to assist me in the due diligence and/or bidding process?†
Ans. In Note auctions, the Seller is represented by a Loan Sale Advisor. Bidders will be solely responsible for any and all compensation which may be due Assisting Parties working on their behalf in connection with a Note auction and subsequent purchase. In certain circumstances a finder’s fee maybe included in the Note sale. Please review each asset detail page to confirm whether a finder’s fee is being offered.
Q. How do I get started reviewing detailed information on Notes?
Ans. Certain information is available regarding the Note following your creation of a profile and your providing some basic user information. Prior to gaining access to the Documents tab (which is a secure data vault) for a particular Note, prospective bidders will be required to execute an electronic Confidentiality Agreement.In addition, each Note has a dedicated Loan Sale Advisor who can answer specific property or loan questions. Please see the asset details page for contact information.
Q. What is the Buyer's Premium?
Ans. The Buyer’s Premium is a five percent (5%) fee which is based on the Winning Bid Amount.† This Buyer’s Premium is then added to the Winning Bid Amount to calculate the Total Purchase Price. For example, if the Winning Bid Amount is $1,000,000, then the Buyer's Premium would be $50,000 (5% of $1,000,000). The Total Purchase Price is then calculated as the Winning Bid Amount plus the Buyer's Premium, or $1,000,000 + $50,000 = Total Purchase Price of $1,050,000. *A minimum Buyer's Premium may also apply for some assets. Please refer to the website Note detail page for specific information.
Q. Can I purchase more than one Note in an online auction event?
Ans. Yes. There are no restrictions on the number of Notes you can purchase or register to place bids on so long as you submit the required bidding deposit for each asset and provide sufficient proof of funds.
Q. If I buy more than one Note, what is my Earnest Money Deposit requirement?
Ans. If you buy more than one Note, you will be required to make a separate Earnest Money Deposit for each Note based upon the Total Purchase Price for each Note.
Q. What are the benefits of an auction?
Ans. The benefits of the auction process are numerous. Achieving a price through competitive bidding is, oftentimes, the only method available to determine an asset's true current market value. The auction provides a marketplace where sellers and buyers can meet. The buyer is exposed to multiple offerings simultaneously thus enabling market comparisons to be made quickly and easily. Additionally, the buyer is able to set their own price based on the research and due diligence s/he completes.
Q. Who is qualified to bid on Notes?
Ans. Each Note auction may involve different bidder qualifications depending on the face amount of the Note, size, property type and other factors. Each bidder is responsible for determining his/her own suitability for an investment in Notes and it is highly recommended that a bidder consults with his/her respective legal, tax and investment counsel to insure he/she has the requisite financial resources, risk tolerance, sophistication and legal knowledge prior to bidding. We encourage you to speak with the Loan Sale Advisor assigned to each Note of interest.†
Q. Are the terms, conditions and process of each Note auction different?
Ans. While the process of registering, placing bids, and the closing processfor the purchase of Notes will be similar in each auction, the particular terms and conditions, the deposit requirements and certain Note specific information for each Note auction can be found on the Note details page and in the secure data vault for each Note.
Q. Do I need to register to bid at the auction?
Ans.Yes, registration is required.We recommend that you register at least forty-eight (48) hours prior to the beginning of the online auction in order to have sufficient time to complete all of the necessary steps regarding the Proof of Funds process.However you may register at any time prior to the expiration of the bidding period. The registration is easy and there is no obligation to bid.†NOTICE†You must register separately for each Note asset that you want to bid on.
Q. How do I start the bidding process?
Ans. When registering for a Note auction event, prospective buyers will be prompted to complete the easy auction registration process. The process includes 4 easy steps:
Q. Is a deposit required in order to bid?
Ans. Yes. A bidder deposit is required to bid.This deposit requirement may not be the same for each asset. This asset level bidder deposit will be refunded following the auction in the event you are not the winning bidder. The amount of the asset level bidder deposit¬† will vary depending on the Unpaid Balance of the Loan. Please check the registration page for details.
Q. Will I be required to demonstrate proof of funds to bid?
Ans. Yes. To complete the registration process, all private investors (non-institutional investors) will need to provide the Auctioneer proof of available funds. Please be prepared to provide a recent bank or brokerage account statement which demonstrates that you have funds available (e.g. cash, stock, bonds, mutual funds) to purchase the auction asset. The statement must be less than 75 days old. Additional proof of available funds may be required during the auction if you bid more than the amount of the proof of funds already provided.
Q. Can I use credit card for the bidding deposit and/or the Earnest Money Deposit? †
Ans.A credit card authorization can be used for the asset level bidding deposit, however credit cards are not accepted for payment of the Earnest Money Deposit.
Q. I registered for the website, but why can't I bid?
Ans. You may have created your profile at www.Auction.com, but did not register to participate in an auction event or completed the Proof of Funds process. Please go to the“Online Bidding” tab, click on the auction event for which you'd like to participate and then click on the “Register Now” button. Remember, you must make a bidder deposit for EACH asset you intend to bid on. After placing your bidder deposit,please submit your Proof of Funds to NotesPOF@Auction.com
Q. I registered, but it didn't ask for a bidder deposit, how do I put in my bidder deposit?
Ans. Make sure you are registering for each asset you have an interest in.. Please go to the “Online Bidding” tab, click on the auction for which you'd like to participate, select the asset you would like to purchase and click on the “register for this asset” button
Q. I forgot my password, how do I get back in?
Ans. On the sign-in page, click on "Forgot Your Password?" and fill in the answer to your security question. Your password will automatically be emailed to your email address provided during the registration process.
Q. Can I put my purchase in my Entity name?
Ans.Yes, If you plan on purchasing any asset using a corporation or LLC (or any other legal entity other than your personal name), you should register under than entity. We will also need the following information on file:
Q. Can I assign my contract to another entity that I own if I win?
Ans. Yes, you will be allowed, one time, the right to assign the loan sale agreement to another entity providing the new entity has the same ownership structure as the original purchasing entity. Example: Purchasing entity has two members, each who own 50%. The new entity must have the same two partners and each much also own 50%. A third partner cannot be added and the percentage cannot change to 75%/25%. Please contact your loan sale advisor if you have further questions.
Q. Can I bid on more than one Note?
Ans. Yes. You determine your bidding limits, and as long as you have enough funds, you can bid on more than one Note. You must have also placed a bidder deposit on each asset you intend to bid on.
Q. When does the auction end?
Ans. The first Note closes at the posted end time and the remaining Notes (if any) will end in sequential order at various intervals. A Note will have extended bidding time added if a bid is placed in the final minutes of the auction as set forth in the terms and conditions.
Q. Do all the Notes close at the same time?
Ans. Properties are scheduled to end in sequence, approximately a few minutes†apart on the date and time indicated on the bidder page. End times for some assets may be extended in added time increments due to aggressive last minute bidding by multiple parties.
Q. What does the term "reserve" mean?
Ans.A reserve is an amount established by the seller which represents their minimum selling price. Reserve prices are not published and the starting bids do not represent the reserves.
Q. What happens to my bidder deposit if I'm not the winning bidder?
Ans. All deposits will be refunded and credit card authorization holds released as soon as possible following the conclusion of the auction if you are not the winning bidder.
Winning Bidder Process & Closing
Q. How will I know if I am the winning bidder?
Ans. If you are the highest bidder when the Note auction ends then you will receive a winning bidder confirmation by email shortly after the auction ends. The email will be followed up within 30 minutes by a phone call from one of our auction coordinators, who will discuss with you the remaining steps.
Q. What if I am not available to sign within 30 minutes?
Ans. You must be available by telephone to complete the gatekeeping process and execute your contract within 30 minutes. Failure to do so will mean you are in default of the terms and conditions of the auction, your deposit will be forfeited and the auctioneer reserves the right to place the¬† the Note back into the auction.
Q. I received an email stating I am the highest bidder, but no one has contacted me. What do I need to do?
Ans. You will receive an email when you are the current, highest bidder on a property. If, at the conclusion of an auction, you have not received another email indicating you were outbid, you should receive an email indicating you are the winning bidder for this Note. If you have not been contacted, please call customer service at 888-770-7332.
Q. I haven't received my Loan Sale Agreement, what do I do?
Ans. If you have not received your Loan Sale Agreement (and related documents) within 30 minutes of the conclusion of the auction, please contact the Contract team at†CommercialContracts@auction.com or call them at 888-770-7332.
Q. What is the cost to purchase a Note?
Ans. In addition to the standard and customary costs of reviewing and closing Note transactions such as title updates and reports, the winning bidder will pay a Buyer’s Premium on the transaction’s closing date in an amount equal to†five percent (5%) of the Winning Bid Amount††(the Buyer’s Premium is added to the Winning Bid Amount to determine¬† the Total Purchase Price paid by the Buyer)
Q. Is an earnest money deposit required by the winning bidder?
Ans. Yes.†A successful bidder will be required to deposit additional funds with the escrow/closing agent in an amount stated in the loan sale agreement. Such funds must be posted within 24 hours of being declared the winning bidder. The winning bidder will be required to pay the Earnest Money Deposit by wire transfer within 24 hours following the conclusion of the online auction. You will be provided with a receipt by e-mail showing that the escrow/closing agent received your Earnest Money Deposit. There are no exceptions to this requirement.
Q. What if I change my mind? Can I cancel the transaction after the fact?
Ans. Once the online auction is final, you have agreed to purchase the Note, including those Note sales which are subject to the seller’s confirmation. That is why it is important for you to conduct all of your due diligence prior to the auction and prior to bidding on the Note. Winning bidders may be subject to liquidated damages if they fail to complete the transaction in addition to losing their bidding deposit Please review the Auction Terms and Conditions for further information.
Q. What documents will the successful bidder be required to execute?
Ans. The successful bidder will be required to execute a Loan Sale Agreement, Loan Assignment and Assumption Agreement and other pertinent and customary documentation involved in the purchase, sale and assignment of Notes. Such documents will be available for review in the secure data vault and are non-negotiable.
Q. Where and how will Note closings be consummated?
Ans. Typically, Note closings occur at an escrow (title) office or law firm designated by the Seller, and upon the execution (and in some cases, recordation) of all documentation, title endorsements, the satisfaction of all closing conditions and Seller’s receipt of all funds due, the transaction shall close. Such closings typically are required to occur within ten (10) business days of being declared the winning bidder.
Q. What if I want to foreclose on the property (underlying collateral) or wish to restructure the current loan?
Ans. Please seek appropriate legal counsel to address any questions you have in this regard..
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