Russell Murphy: don’t undersell your trail

The general manager of Advance Investment Securities Australia talks through the typical mistakes brokers make when selling their trail books

Russell Murphy: don’t undersell your trail
The general manager of Advance Investment Securities Australia talks through the typical mistakes brokers make when selling their trail books

I’ve spent over a decade purchasing mortgage management rights and, to be brutally honest, mortgage brokers don’t help themselves when it comes to selling their trails.

Commonly the first questions you get from a broker are “how much & how long” and although that’s understandable, it’s premature.  Trail deals aren’t complex, time consuming or expensive but basic preparation will always pave the way to a stress-free settlement.  

Fairly early, we try to confirm just who owns the trails.  It might sound self-evident, but it’s always food for confusion.  Not that it’s deliberate, but commonly brokerage partners will have come and gone, so deals are ancient history.  Or different funders will have come and gone and who did what with whom is long forgotten.  

In one matter it was a simple office move where documents went astray.  In another it was where an LMI claim caused a file to be sent and forgotten.  It’s also very common for a broker to say “I own the trails” when it’s a family company or a Trust”, so by the time we finish the “how long” part of an early conversation, we ask people to track down their original Mortgage Management deeds with their funder & a few other bits of trail information.  

As for “how much”, the price is obviously a function of trail, but it’s also contingent on a lot of things, including our ability to protect the trail through ongoing contact with customers.  So early in the conversation, we like to know what sort of customer information will accompany the sale.  

It's not that we propose a hard sell to a new customer but rather want to be on the radar in the event of a future financial decision.   How customers records are stored and how they will be conveyed on settlement, whether paper or electronic, should be high up the homework list. Another “how long” issue can be that the trail has been charged as security for a business loan.  

Whilst it’s no big deal, if we find it during due diligence it’s bound to hold up settlement because our experience is that it can take time for a lender to track down an old charge.  It’s happened in at least two of our bigger purchases.  In one instance it required us to pay a considerable part of the proceeds to a bank to provide a release, so we’re very wary of hidden snags that could easily have been fixed prior.

Our other “stock” recommendation is a chat with the accountant about tax implications, because it helps everyone to step off on the same foot.  

Ultimately the price comes into focus relatively fast but the pace of the settlement relies on the time a funder will take to process novation deeds and our experience is that each has a markedly different process.  

Russell Murphy is General Manager of Advance Investment Securities Australia Pty Ltd (AISA) and has been involved in property finance since March 1974. AISA  involved in online distribution of home loans, the purchase of mortgage trail books, operation of commercial & residential securitisation warehouses, software development for the mortgage industry and operation of an offshore call centre.