It starts with a very direct question from your note seller.
“Can I get full value for my note?”
Right out of the gate, you have seemingly been boxed into a corner.
It is a yes or no question, but in reality, very few note sellers will receive par pricing for their note.
But they didn’t ask for 100 cents on the dollar, did they?
They asked if they could get ‘full value’ for their note.
In either case, the response is most likely the same. You basically need to reply in a way that defers the question and yet has them satisfied with the answer.
My response to the note seller is something typically along the lines of…
“The fair market value of your note depends on a couple of variables. Once I have that information we can supply you some options. Do you mind if I ask you a few brief questions about your note and the property you sold?”
Now, let’s look at a couple of things I have done here.
1. “Fair Market Value”
Everyone wants to be treated fairly. This tells them right from the start, I will be sure they get a fair number.
2. “Depends on a couple of variables”
People look at the positive side. They assume their note is great…and that is ok in the beginning. But it also gives me an out when we go down the road of no equity or poor credit. If there are five variables and two are bad, I also give them the ‘win’ of three of them being good. When I go back to quote the deal, I will lead with the good.
3. “Supply you some options”
Who doesn’t like options? It also opens the door for them to respond with something like, “Oh, I’m not interested in a partial.”* This lets me know they have probably already been talking to someone else.
*Side Note: I will almost always provide a partial quote, even if they didn’t want one. I have purchased more partials from sellers that initially didn’t want a partial than those that did.
4. “Do you mind telling me about your note and property.”
This is almost impossible to say no to. People want to talk about themselves. Plus, any reasonable seller understands I want to know a little info about what they are selling me.
About one out of a hundred people are difficult out of the gate.
I am not looking for a long-term courtship of these people.
If someone is adamant about an immediate quote (without giving me any info), I have two tactics left…
Tactic One: I am selling a car.
I say something along the lines of…
Me: “Let me ask you a question [name]. I have a car for sale. How much will you pay for it?”
Seller: “Well, what kind of car is it?
Me: “Oh, I can’t give you that info.”
Seller: “How many miles are on it? What year is it?”
Me: “Can’t give you that info either.” – I laugh.
“That is the same way a note is. You know that attorneys and closing agents all have their own version of what a real estate note should look like. You want top dollar for the note…and my job is to get you that. I just need to know some key details of the note to get you the fair market value of the note. There is no obligation. I just need some basic info about what I am paying for.”
Usually, that works.
Worse case, I just go to…
Tactic Two: Ballpark.
Me: “Without any details, there is a huge range in the fair market value of the note. Could be 60 cents on the dollar, could be 100 cents on the dollar. I would just be guessing. My job is to get you the best price and an accurate number. It sounds like you have a great note…I just need some info to nail down that offer for you.”
That’s it.
Yes, it is kind of trap, but it doesn’t need to be.
One thing is sure. Your first two minutes on a phone call sets the tone of the entire negotiation.
It is not about you trying to create a position of ‘power.’ It is your job to create an environment of working together to create a win-win situation. That can be done..even when the note seller’s first question is a tough one.
James, it’s important to understand who originated the Note firstly. The Buyer of the secured property is not the “originator” and so is simply required to comply with the terms as set out in the Note/Deed/Mortgage (ie: makes the required payment amount, on a particular day of (usually) every month, for a predetermined number of consecutive months – etc).
The Note owner or “Holder” (the person or legal entity who’s name is shown as the owner of the Note) has the right to sell at any time. So Fidelity Mortgage, as the Note Holder has the legal right to sell the Note they legally own/originated.
In the event a potential buyer wanted to make changes, THEN “all parties” must agree to have a new/amended Note drawn up and executed.
Your training states:
“The existing note and mortgage is a
legal document and can’t be changed without both sides agreeing in writing. ”
Not sure I understand this statement.
Does this mean that the property buyer ( party who makes the monthly payment)
must agree to the sale of the note?
Fidelity Mortgage sold my home buyer note to Wells Fargo without my knowledge or consent.
The Payor does not have to agree to the sale or ‘assignment’ of a note to another party. In that none of the terms of the note change. IF someone wants to change the terms (raise the interest rate, accelerate the term, etc) THEN the payor must agree. – This prevents someone from buying a note and changing the terms.