“How do I hold on to the note seller after I give them a quote? They never seem to call back after our first conversation. I give hundreds of quotes, yet only get a few deals, and most of those back out before funding. Is this normal for the industry?”
To succeed in note buying, you need to understand three things before you ever give your first quote:
- You are dealing with a client.
- You are dealing with that client’s money.
- The note is usually the client’s largest asset.
Why trust beats the best price
A big misconception in the industry is that whoever offers the best price and closes fastest gets the deal. That couldn’t be further from the truth.
Look at the three factors. They all point to one thing: trust. It doesn’t matter how much you offer or how fast you close; if the client doesn’t trust you, they won’t deal with you.
So how do you build trust when your only contact is the one call they make for a quote? They don’t know you, they’re entering an area they know nothing about, and they may be risking their life savings. You have minutes to get over all those hurdles. It can be done, if you follow these rules.
Rule 1: Sound professional from the first hello
You’re running a business and presenting yourself as a professional. That message has to come across from the start.
If you work from home, get a separate business line. If a potential client calls for a quote and hears “Hello?”, you’re already heading downhill. If your eight-year-old answers, or they get a voicemail saying “You’ve reached the Joneses, leave a message after the beep,” you’re finished. They will seldom call back.
Set some household rules. Children shouldn’t answer the business line. Whoever you authorize to answer should always say something like “Jones Investment Services. May I help you?” Avoid background noise like crying children, barking dogs or a blaring TV. If no authorized person is available, calls should go to voicemail or an answering service with a professional message.
When a potential client calls, take charge of the conversation right away, courteously and professionally. Professional buyers usually start with something like this:
“I’d be happy to give you a quote. If you have a few minutes, I’d like to ask you some questions. They take about 5 to 10 minutes. Let me have your phone number and I’ll call you right back, so the call is on me.”
This simple, friendly opening sets the tone for the whole conversation and negotiation. It shows professionalism, courtesy and consideration. It tells the client you’ve done this many times, that you care about their time and expense, and that you’ll absorb the cost as a matter of business. It also obligates the client to listen and answer your questions. You’ve taken charge of the conversation, and therefore the negotiation.
Rules 2 and 3: Be confident and speak plain English
Rule 2: Be confident. When you talk to a potential client, radiate confidence. They have to be convinced you know what you’re talking about. Don’t fumble when discussing money. Have a set quoting procedure, and once you’ve confirmed they hold a note, work from a predetermined list of questions.
Rule 3: Be concise, but speak plain English. Only a handful of people understand our business, so avoid technical phrases. People feel uncomfortable when asked questions they don’t understand.
For example, instead of asking, “Are the original note and deed of trust held in an escrow account? If so, we’ll need an estoppel letter from that agent,” ask: “Does the buyer make the payments directly to you, or do they go to your bank first? Do you have the legal documents, or does your bank hold them? Can you get them to give you a signed statement showing the payment history?” You get all the information you need without making the client uncomfortable.
Rule 4: Ask all the questions
You can’t give an accurate quote with half the information. Many brokers hurry the conversation, thinking they’ll lose the deal if they don’t quote immediately. If the client is serious about selling, the opposite is true.
Most note sellers are first-timers, and they want to understand everything involved. Remember, it’s their money, and they don’t want to be hurried. If you’re asking pointed, concise questions and they grow impatient, they’re not serious, and you shouldn’t waste your time. Don’t let anyone hurry you into a figure until you’re comfortable you know everything.
Rules 5 to 7: Don’t beg, hesitate or apologize
Rule 5: Don’t beg. We’ve all been approached by people who wanted something from us. Even if they don’t say it, you can sense it, even over the phone. Maybe you haven’t closed a deal in months and your own mortgage payment is due. Put that aside. If you’re desperate for the deal, it comes across in your tone, and the client loses confidence in you.
Rule 6: Don’t be afraid to give the quote. By now you’ve asked enough questions to have a good picture of the situation. You know why they want to sell, what they need and what the note is worth. Give the quote with confidence. If you stumble over the numbers or present them apologetically, you’ve probably lost the deal.
This is very common among newer brokers. Why? Because they aren’t comfortable with having to discount the note, and they don’t fully understand the time value of money themselves. Expect the client not to understand it. As a professional, you should not only understand it but convey your quote so confidently that there’s no question about the legitimacy of your numbers. The time value of money isn’t unique to notes; it comes into play in every financial transaction. Why do you think banks charge interest?
Rule 7: Don’t feel guilty about discounting a note. The client will sense it. It shows in your manner, and it will either cost you the deal or, at the least, put you in a weak negotiating position.
Remember, you’re a professional. You know what you’re talking about. You care about your clients, give them the best service possible and pay a fair price for the notes you buy. Every potential client you talk to should hang up the phone with that same feeling.
