 President's
Corner
For the next three weeks I thought I would pull some
information from my research and
experience to share with you
some of the typical reasons and
excuses Note Holders give us and
what the best responses might
be. This will give you
better understanding of what
Note Holders might be thinking
and how to negotiate with them.
See if you have heard these
reasons and how many of the
responses you might have used.
Reasons for
Not
Selling:
1)
- My Note Rate is better than another investment I can find.
2) - I cannot
get a better rate than what I am currently receiving on my note and don't want
to discount my 8, 9 or 10% note because banks pay only 1%.
3) - They are
unsure where to put the funds from the sale of the note to get a similar or
better return.
Best Proven Responses:
1) Yes, you do have a good note rate and
that is why I can offer you such a good price. As with any other
investment the more risk you are willing to take, the more your potential
return. The highest rate investments carry the most risk. Just like
your note! You have a good rate but you also have some risk - property
damage, unknown liens filed against the property, borrower losing their jobs,
etc.
The other point to consider is that your
note is not a true "investment". That is, you collect interest on a
declining principal balance as opposed to an investment that compounds interest
on higher and higher principal. And your note has an end to it at which
point you no longer receive anything. If you invest what I can pay you
now, your investment can go on for as long as you choose and will continue to
compound interest growing even more.
2) Sometimes I cannot disagree with what
they are saying but more often than not I can. I will always explain the
difference between a simple rate and a growth rate. Then I will have
actual numbers ready before I call them. This way they can see that even
though they are selling at a discount, if they averaged "x" amount in a growth
rate over the same time they will either make the same or more money.
Plus, the bonus is they are controlling their money versus someone else, i.e.
the borrower. This almost always gets them thinking and allows for another
conversation. Also, I may bring up the fact that with rates low like they are
now is when we can pay the most for notes. Let them know that now is the
time to invest in another vehicle as rates begin to rise.
3) You can do much more with a lump sum
of cash now versus small monthly payments coming in, and yes, while you are
taking a bit of a discount, if you take this amount of cash and reinvest it,
even at a lower rate of return, over the long haul you are going to end up
ahead. This is because of that beautiful thing called compound interest.
You see, when you take a lump sum of cash and reinvest it you are really getting
triple interest. You get interest on principal, interest on the interest
and interest on the monies not paid in taxes. If you don't really need the
payment to live on, and if you want to end up with more cash in your pocket over
the long run, this might be the option that is right for you.
The bottom line with all of these
responses is to keep the seller talking. There is no one response or
one-liner that I can give you that will make the seller says yes every single
time, no golden phrase. I think the key to being successful in the note
business is getting to know the seller and "really" listening to what they say.
In return the seller begins to know and trust me. When I get them to let
their guard down I can typically find out what the real reason is they called.
Once in awhile they really are "just curious". However, most other times
they aren't. Sometimes you will find out the real reason for their call on
the first phone call and other times it may take several conversations.
Sometimes when I call to follow up I just call to check in on them and say hi
without even bringing up their note and I let them bring it up. Then we go from
there.
Next week we will
continue to look at Note Holder's reasons for not selling and the best tested
responses.
Remember, Success Demands
Action! Keep on marketing, it’s going to
work! TWITA!
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