by W. J. Mencarow, editor of THE PAPER SOURCE JOURNAL
“I saw your ad. What do you mean you buy cash flow notes (or mortgages, structured settlements, etc.)?”
Your best strategy is to ignore the question and ask one of your own: “Are you receiving payments on a mortgage now?” (Or structured settlement or whatever is appropriate). Otherwise, you may find yourself explaining note investments to someone who is 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 they understand that you are only interested in beginning 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 the question of what you pay is, “it depends,” and you then proceed to ask them the questions from your intake sheet.
“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 question. It means they realize a discount is involved. It also means they know something about the time value of money, and that lessens the chance that 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 rather than try to explain why cash flow notes are discounted!
“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 are what takes 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!
“Are there any points or fees I’ll have to pay?”
My answer is, “no, there are no points, and I’ll pay all the closing costs. Nothing will be deducted from what I pay you.” This creates good will and a cleaner transaction. If we’re buying the note for our portfolio, it also allows us to keep control of the situation: if we pay the closing costs, we pick the lawyer, and he works for us. This is 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 which handled the property sale should have copies of the key documents or be able to get them for us.”
“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 note seller who asks this question is afraid you’re going to take advantage of him. The best way to dispel this 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.” (Matt. 5:41)
THE PAPER SOURCE JOURNAL www.PaperSourceOnline.com 1-800-542-2270
