Note holders tend to ask the same handful of questions. Here are the answers that work, and why each one keeps the conversation moving toward a deal.
Screen callers before you explain anything
“I saw your ad. What do you mean you buy notes?”
Your best strategy is to ignore the question and ask one of your own: “Are you receiving payments on a mortgage now?” (Or a structured settlement, or whatever fits.)
Otherwise you may find yourself explaining note investments to someone who’s simply curious, or worse, to your competition. Don’t waste your time with people who aren’t holding notes.
“What do you pay?”
Again, don’t waste your time. Make sure callers understand you only want to start a conversation if they have something to sell. Ask again: “Are you receiving payments on a mortgage now?” It’s amazing how many people think they can sell a mortgage they’re paying on.
If they say yes, the answer to what you pay is “It depends.” Then go through the questions on your intake sheet.
Talk about the discount, not why it exists
“How much of a discount will I have to take?”
“As little as possible. Each note is different.” Then ask your questions.
I’m always happy when note holders ask this. It means they realize a discount is involved. It also means they know something about the time value of money, which lessens the chance they could later accuse me of taking advantage of a financially unsophisticated person.
I’d much rather talk about how much of a discount is involved than try to explain why notes are discounted.
Set expectations on timing
“How long does it take before I get my money?”
“Once you furnish me with all the documents I need, the process will take a few weeks.” Note the all-important conditions: once you furnish me with all the documents I need.
“Why does it take so long?”
“The title search and appraisal take the longest, and we have no control over those. It may very well be shorter.” In other words, any delays are somebody else’s fault. It’s usually just that way.
Answer questions about fees and documents
“Are there any points or fees I’ll have to pay?”
My answer: “No, there are no points, and I’ll pay all the closing costs. Nothing will be deducted from what I pay you.”
This creates goodwill and a cleaner transaction. If we’re buying the note for our own portfolio, it also keeps us in control: if we pay the closing costs, we pick the lawyer, and he works for us. That’s crucial to our closing system.
“What documents do you need?”
“Not many, really. I’ll go over that with you when we meet to complete our agreement to buy the note. Would 3 o’clock this afternoon be all right, or would 8 o’clock tonight be better?”
“What if I can’t find all the documents?”
“That’s OK. The lawyer or title company that handled the property sale should have copies of the key documents or be able to get them for us.”
When the seller wants a lawyer
“Can I use my own lawyer?”
“I would insist on it. I strongly encourage you to have your lawyer review everything in advance. Of course, you’ll have to pay your lawyer’s fee.”
Most note sellers don’t want to pay for a lawyer, and that last sentence makes them think twice. Another lawyer is usually the kiss of death for a transaction. But a seller who asks this question is afraid you’re going to take advantage of him.
The best way to dispel that fear is to do what he doesn’t expect: insist he consult his lawyer before he acts. “Whosoever shall compel thee to go a mile, go with him two miles.” (Matthew 5:41)
