If a person from whom you want to buy a note has some objections to selling to you, treat those objections with respect. Never argue. Always agree with what they have to say, then add, “but…” and take it from there. For instance, what if a note seller feels the discount is too high? You can say, “You’re right, there is a discount, but with the extra cash you can solve your problem with the IRS and invest the difference in a new rental property.”
The same approach can be used outside of the note business. I have a friend who was looking for a tech job in Silicon Valley in Northern California. The small company he interviewed with told him, “I don’t need you. Our overhead is already too high. I can’t afford another employee.” His answer was, “That’s true— I agree with you, I see your point, but I will work for you for free for two weeks. If, in two weeks, I haven’t made you far more than the salary I’ll need, you don’t have to use me.”
Now, who can refuse an offer like that? He was saying, “I’ll work for you and make you profits of more than $2000 per week and you don’t have to pay me anything. And if I do work out for you, all I ask is the you pay a part of what I make for you.” When you make offers to people in such a way it is difficult for them to refuse to deal with you. You’ll find that if you perform, you will always have success.
DON’T TALK BEYOND THE AGREEMENT
The second thing I am learning every day is that, regardless of the contract you have with someone, it is only as good as the people who make it. If either side to the contract wants to get out of it, they can always do so. Contracts to buy a note are notoriously unenforceable. Once the seller wants to back out, all you have left is a lawsuit. I try to keep the seller from experiencing “seller’s remorse.” I send him a letter immediately after we open escrow pointing out the wise sale he just initiated. I reinforce all the reasons she should sell the cash flow. This “sale after the sale” is an important part of making sure the seller does not back out.
Finally, I have discovered that sometimes it is wise to use testimonials as to your good character and reliability. Rather than giving a reference to be used later, I found it very effective in negotiations to say to the person opposite me, “Look, John R. at [name the firm] has dealt with me successfully many times. I’m sure he will give me a good reference. I’d be happy to step out of the room while you call him for a reference on me.”
That way, if you can supply the name of a person who is respected in the industry, you may be able to close a deal that otherwise would have been impossible because the seller in question thought you were some sort of flake. Developing good references and using the name of someone well respected in the industry, like a corporate note buyer, is particularly valuable to younger note brokers, who may not be taken seriously by sellers of substantial cash flows.
In the process of negotiating, never lose your cool or give up, no matter how great an idiot you are dealing with. Don’t appear too wealthy, bright, slick or money hungry. Being sincere, understanding, helpful and interested in the other person’s problems is your best negotiating stance. I will continue to make mistakes, but they seem to become less important to the outcome of the negotiation as I learn more about dealing with people.