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Examining the Mind of the Note Holder – Part 1 of 3

Written by Jeffrey R. Armstrong – President/Owner of Armstrong Capital

Your favorite Master Note Buyer – Straightforward, Honest, Fair…

Marketing for notes is more than just sending out a postcard or building a website.  There are many reasons why a note holder responds to your marketing efforts and then subsequently accepts an offer on their note.  For the next few months I thought I would address the mind of the note holder that will help you in creating more targeted marketing materials as well as when you are talking on the phone and negotiating with note holders.  The Reasons for Not Selling correspond with the Best Proven Responses below.  Have you heard some of these reasons for not selling?  Maybe some of the following will resonate with you.

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.

Remember, success demands action! Keep on marketing, it’s going to work! TWITA! (That’s What I’m Talking About!)

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