 President's
Corner
With
December coming to an end soon
it's your last chance to get a
couple of transactions closed
before the end of the year or
get some new transactions
started to start off 2013 really
well! Last month I spoke
at the NoteWorthy Convention and
my topic was "Push the Partial -
The Missing Piece of the
Puzzle". With standing
room only in my session I
exposed the reality of what is
currently happening in today's
note market and how to continue
to survive and grow your note
business by using partial
options.
Most note holders initially ask for a full purchase and want to sell
their entire note, or so they think. Many of them have just discovered the
fact that they have the ability to sell their note and have no idea that
alternate purchase options are possible or are even available. As a result,
many note brokers only focus on full purchases the majority of the time and fall
back on a partial purchase option only on inferior quality notes where
Investment To Value (ITV) limitations are in order.
But in a tight and competitive market, as we are
experiencing now, creativity and flexibility are a note broker’s best assets.
I have always believed, and have the statistics for my business to prove it,
that utilizing a variety of purchase options helps note brokers to better meet
the needs of a wide array of note holders. It may seem that in this tough
economy getting the seller as much money as possible by utilizing a full
purchase option is the best way to go, but it may not always be the best option.
Offering only
full purchase quotes is like having a toolbox that contains only a screwdriver.
It’s terrific for tightening or loosening a screw but hard to use on a bolt.
Discovering a seller’s true needs and structuring a transaction specifically
designed to meet those needs can mean the difference between success and
failure. Likewise, offering an alternative can sometimes help a note broker
stand out from the crowd.
One of the most common partial options is a Straight
Partial (also known as a Front Partial). As straight partial is the purchase of
the right to receive a number of payments amounting to less than the full
remaining term of the note, most importantly, the NEXT number of payments. For
example if the note is amortized for 30 years (360 months) we might buy the next
60 payments. Not 60 payments at the end of the note or in the middle of the note
but the next 60 payments.
Partials are always a great tool to use when the note
holder has an immediate cash requirement and only needs a specific amount of
money to cover a specific situation or for a specific purpose; when the seller
is reluctant to take the necessary discount on the full purchase option; or when
the quality of the transaction limits investment exposure.
Partials can be mush easier to sell to the note
holder by emphasizing the combined amount of the pay price for the partial and
the residual interest they may receive in the future. You can also stress the
possibility of selling the remainder of the payments if additional cash is
needed in the future. Finally, you can demonstrate how the specific partial
option meets the specific cash need of the not holder.
Don’t get stuck on only offering note holders a full
purchase option. Successful note brokers and note buyers know how to offer
partial purchase options to get more transactions to close. I
hope this helps and I wish you all a very merry and joyous holiday season!
Remember, Success Demands
Action! Keep on marketing, it’s
going to work! TWITA!
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