I used be arrogant and cocky. I thought I knew every thing there was to know about the discounted mortgage business. I had bought thousands of notes at discount, I own 79 notes and make my living buying and brokering seven to 10 notes each month. I though I was an expert on buying discounted notes. But arrogance has a way of getting knocked out cocky people. Here’s the “wisdom” I picked up at a recent NoteWorthy Discounted Note Convention.
“We only quote on the phone. “Says Dick Hammarstrom, President of Covenant Financial Corporation. and one of the largest note brokers in the country. “We use the ‘shotgun’ approach and target a huge pool of note sellers. By giving quotes on the phone we can deal with many more sellers in a day.” “We do our entire closing on the telephone,” says Note Educator Hank Harenberg, of Capital Concepts, Inc. one of the most successful note brokers in the country. “We don’t see over four people a year in person in our office.”
“Don’t ever give a quote on the phone,” says ex-note buyer Mike Meeker of BAMaN Financial. Greg Hickman of Capital South Mortgage agrees. “Just the mere mention of the word ‘quote’ makes me sick. You never quote in this business. Never, ever. It is always preferable to meet with the note seller in person. The telephone should be used to set appointments, not for cutting deals.”
Multiple Profit Centers
Allen Myers, whose Private Mortgage Bankers buys up to $500,000 worth of paper ever month, says “The secret of success in this business is to have several profit centers. Work on and develop new markets that may become profitable. Develop different ways to make use of your business skills and staff.” Lloyd & Mark Walters; authors of How To Find All The Notes You Could Ever Hope To Buy, agree. “Be on the lookout for other ways to make money in your business.”
Walt Poser, a long time successful note investor and institutional note buyer says, “The worst advice for a new note broker is to attempt to develop more than one profit center. I have seen too many beginning note buyers accomplish nothing because they were concentrating on attempting to accomplish something in several areas at the same time. The implication is that you must focus on and become very good at one thing. After you become successful in one area you can consider branching out into other related areas.”
Meet The Seller
Fred Foote, whose First National Acceptance Company buys 70 notes a months says “you simply must meet face-face with the note seller. This is particularly true if you are buying a partial. Face to face meetings weed out the frivolous sellers. When they have made the effort to come to our office we know we can do the deal.”
“We discourage people from coming to our office,” say Dick Hammarstrom. “It takes too much time and you simply can’t get rid of them in short order if they have a poor note. We prefer to do as much as possible by telephone.”
Every note buyer says “Never buy a note without at least trying to get an estoppel letter.” An estoppel letter is a legal document from the note payor stating the balance and terms of the note you are buying. “To buy a note without an estoppel is like buying a pig in a poke.” Says noted attorney John Beck. Allen Myers agrees, “always insist on an estoppel, it stops many problems before they develop into monsters.”
Fred Foote says, “I never get, nor ask for an estoppel. It is a waste of time and alerts your biggest competitor to the sale of his note. Estoppels do not stop fraud, are difficult to get, and delay the close of escrow. I find them to be useless.”
All of this makes it difficult. I thought there were rules for success. All I had to do was to discover them and practice them. Why do the rules seem so fuzzy? The answer, I suppose is obvious. There very few rules, but there are lots of ideas. The successful business people among us will take these ideas and develop them into a successful enterprise. The less successful and less creative will try to follow the “rules” and will wonder why they are not making a seven figure income.
To be successful you must find what works in your market, with your personality, with your skills, your comfort level and for you. Perhaps we should develop our business plans with a kind of self assessment of our strengths and weaknesses and then tailor a business around them, using the ideas we like and discarding those we don’t.
Giving phone quotes, meeting note sellers, developing multiple profit centers, getting estoppels are not rules, they are ideas. There are really very few rules for this or any business.
Be careful of the proselytizers who tell you there is only one way to do things. It would be too easy if that were so. The profit goes to the creative entrepreneur who builds on the ideas of others. Two very successful note brokers, B. H. Tilton from Alaska and Fred Foote, both said the same thing to me. To paraphrase: “I love to hear the ideas of others and often wish I would have thought of them. But I take other people’s ideas and change them to make them work in my business.”
Let’s be stimulated by the ideas of others and creative enough to change them to work in our business. There are no rules or correct way to do everything, and when we think we know it all we are heading for a fall.
by Jon Richards