How to Buy Notes – A Note Buyer’s Dream… (Understanding Your Borrower’s Needs)

On how to buy notes:

You know, it’s amazing how the little things sometimes add up to a big deal for your borrowers.

What do I mean?

Well, let me tell you two little stories about Judy and Natalie, both of them borrowers in our portfolio.

Natalie pays regularly and on-time (hers was a performing 1st mortgage that I bought in a pool of non-performing mortgages), and she owes us approximately $93,000. She pays $680 each month, like clockwork, but right around the 5th of the month – her payment is actually due on the 1st.

So, when I called Natalie for the first time, guess what her biggest request was? She asked me sheepishly if I might be able to push her payment due date back from the 1st of the month to the 7th of the month so that her paycheck had time to clear in her account!

Why is this important – or even relevant to making money as a note investor?

Because it points to one simple thing in today’s market, and in human relations – EVEN when it comes to people’s financial relations.

It’s sometimes the little things that matter the most.

So when Natalie popped the question: “Dean, would it be possible to somehow extend my payment date to a few days later to allow my check to clear?” I answered her: “Sure. What date would like to be your new due date?”

“You mean, you CAN do that for me?” She sounded incredulous.

“Just like that?!”

Wow. Eye-opener for me in this note buying business, I tell you. That something as simple as changing a due date could make such an impact.

Needless to say, when I asked Natalie if she’d be interested in refinancing her note and asked if she’d mind if I put her in touch with someone on my team who could help her explore a refinance, she provided all the information that was asked of her immediately.

How to Buy Notes Lesson learned: listen to what your borrower wants or needs, and then, to the extent that you can deliver on that, do it. You’ll build a sense of “I-owe-you-one” from your borrower that might get you out of a deal.

Natalie isn’t refinanced yet, but I thought I’d share this little insight into human affairs with you.

And here’s a second little story. This one just happened to me today.

Judy called from Tennessee – she has one of the thickest accents I’ve ever heard.

And it’s … well there’s only word for it it’s “delicious.” She has such a sweet drawl it’s amazing. I just smile whenever she calls.

Funny, but you know how it is – there are some voices that just click for you – well hers is one. Now she’s pushing 65 and has 3 grandkids and is happily married … so I’m not talking THAT kind of sweet, but you know what I mean.

Anyway, guess what the first words out of Judy’s mouth were?

“Dean, I owe you all a HUGE thank you for paying my taxes.”

I was at a loss. Taxes? I quickly searched for her file online in my database. Ah yes, two weeks ago we’d run a tax review update (we do this the last business day of the month, calling the tax assessor’s offices on all of our loans to confirm status and amounts), and decided that it’d be best if we paid her 2005, 2006 and 2007 taxes current.

We advanced it to her loan obviously (property taxes advanced by you can be charged to the principal of the loan), and since her note rate is pretty high, we get to accrue interest on that advance. So from my perspective, it was both protecting our interest as well as making a smart business decision that would make us money.

And from hers, it was the sweetest and nicest thing we could have done, because we were “looking out for her”. The actual words she used with me were: “Dean, I want to thank you for helping me keep my house. I’ve been here 20 years and now I’m finally caught up thanks to the patience you’ve had with me.”

I was floored. Absolutely amazed at how a simple decision to protect our note position, pay the taxes owing so they wouldn’t fall further delinquent and threaten a tax deed sale (Tennessee’s a tax deed state, not a tax lien state – more on that in a later post), could be perceived by the borrower as a generous move to protect her own interests.)

Wow again. It was wonderful to sit there and bask in the praise that she was heeping to me over the phone. And it really was touching, I have to admit. I felt wonderful the rest of the day today only because it’s not that often that I get such warm thanks from borrowers when buying notes.

And I also learned today how useful it would be to explain advances to pay taxes and insurance for any other borrower in terms of helping to “protect their home” and to “help them to protect their home”.

The old adage win-win-win isn’t that much of a cliche now, is it?

Not when you look at what Natalie and Judy taught me.

More soon,

Dean

PS: More posts to come on how to buy notes.