Last week we talked about the various discounts you can give a note buyer in order to actually sell your note to an interested party. This week we’re going to talk about actually selling your note. To find a buyer, you either have to have a built-in network of buyers interested in notes or you need outside help from a note broker to actually see your note sale to completion. This is the moment in the process that can either turn you on or off to the idea of selling notes. Let me explain:
The term note broker probably makes you think of a real estate broker: Someone with extensive experience in the note field who can guide you in the right direction. While that is true of experienced note brokers, there are many ‘rookies’ out there who are unfortunately, getting their experience by using the title ‘note broker’ and talking for you. These ‘rookies’ can quickly turn people off from investing in notes altogether. Here are the subtle but important differences you need to be aware of when selecting a note broker.
How to Find Legitimate and Experienced Note Brokers
The Inexperienced Note Brokers
Quite often the inexperienced note brokers are fresh out of some “training academy” and now know the power of the note market. They are eager to get going and usually start out with a large note buying firm. That firm has very specific criteria for the due diligence they require that broker to do before the firm will even look at a note they might be interested in buying. This is what drives experienced note sellers away from wanting to use note brokers.
Those starting out have no decision making power and will run you around in circles asking for 100% documentation before they present the note to the actual decision maker. As you have read from my previous posts, the only way to originate your own notes is to have 100% documentation, but you want that documentation only going to a few select people who can give you a definitive yes or no on your note. Having your note floating on the open market in the hands of several inexperienced note brokers only devalues your note when it actually reaches a true decision maker. A few key questions I ask prospective note brokers are: “Are you the decision maker when it comes to my note?” and “How many note sales have you done in the last 6 months?” If the answers make you question their experience, you need to either hoof it yourself, or work with an experienced note broker.
Experienced Note Brokers
I say all of that about inexperienced brokers, not to be negative, but because if you can find a good experienced note broker (and there are several on BiggerPockets) you will have a completely different experience that will help you move more notes and get you closer to your asking price. Experienced note brokers will work with you when you are originating your notes to give you perspective and tips on how to properly structure your note. This also increases the probability that you will make a note sale. I am thankful to the many experienced note brokers who helped me when I got started and led me down the right path in note origination.
Their guidance saved me from making costly mistakes that could have left me with a note that was only worth the next month’s payment. That is one of the reasons I spend time coaching and mentoring people who are just getting started. That guidance and knowledge was priceless for me and I believe in paying it forward. So, if you are going to use a note broker to help you sell your note, go with experience. It pays to work with someone who you can grow with.
Note brokers, experienced and inexperienced, can give you two distinctly different customer service experiences. They can either help boost your note selling career or turn you off. By asking a few key questions and working with the best, you will be well on your way to long-term success!
Photo Courtesy: Marco Arment