Posted by John Behle on November 29, 2001 at 14:57:01:
In Reply to: Note pricing guidelines? posted by Jess on November 29, 2001 at 14:27:31:
There are many more factors to a note than many people consider or use for pricing guidelines. There are a couple crucial premises that make my "style" much different and more profitable than most.
1. The "Bidding" concept. Bidding wars.
I don't generally get into bidding wars and avoid them. I also avoid a "bidding" mindset. First - avoiding bidding wars. I market in such a way that I generally get to the note before anyone else. Many times I end up being the only bidder on a note. I hear phrases like "I called you, because you're the only one I know that buys notes". My marketing gets me to the note first. Then, my negotiating and how I handle phone calls and conversations drastically reduces the chances of them going to someone else, seeking other "bids", wanting to deal with someone else, or ...... even having time to deal with someone else.
So, first off, I deal with notes that have less competition. Second, I minimize the competition in how I deal with the note seller. I solve their problem quickly in a professional manner and have the ability to back up commitments quickly. I might buy and fund a note before anyone else is even aware that it is for sale or has returned the call on their answering machine. There are thousands of "Broke brokers" that come out of the seminar mills, but most cannot back up their claims, move quickly or be professional problem solvers.
2. The "Bidding" mindset.
I totally avoid bidding when possible. It ISN'T an auction. It IS a human being with a problem. That problem may be raising money, or getting rid of a headache. The solution MAY mean selling the note, but it can also mean selling a partial, increasing their cash flow, paying off debts, reducing their debt ratios, creating and selling a note on another property, getting rid of a collection headache, or a myriad of other problems and needs.
To me, it's ludicrous for anyone to consider joining the ranks of poorly trained, note broker wannabes that run around bidding too high on notes they don't understand with sellers they don't understand and money they don't have.
To end up - if lucky with a paltry commission and high risk. Most would do better at real estate or insurance sales.
I'm an old time note investor - not a note broker. I offer creative solutions to problems and get the job done. I encounter VERY LITTLE competition from the graduates of the high priced seminars. Very few ever succeed and if they do, it is because they continued on and received more substantial and practical education.
To me, each note is unique. What do I pay for a note? How do I rate it? What if it is seasoned?
That is all irrelevant for a couple reasons. I don't publish rate sheets. I don't "quote notes". I don't buy notes - I solve problems. As I said, sometimes that may look like buying the note. If so, each deal is unique and seasoning is weighed with other factors - but - my mindset isn't "how much can I pay", it is "how can I solve the problem and make a profit".
Once I know the problem and the seller's needs, we can negotiate. Seasoning to me means little compared to LTV and ITV and the price or terms I negotiate.
How I find, negotiate, fund and qualify notes is covered very well in the video course.