SFLLFR IINANCING:

A Unique and Timely Opportunity

How to Profit from the Nations Growing Real Estate Crisis
By W. Eddie Speed
W
hat images come to mind when you see the term, seller
financing? Perhaps you think about desperate homeown-
ers, dilapidated properties, and destitute buyers. Or that miniscule
segment of real estate sales involving fast cash and foreclosures.
Maybe it means little to you, or nothing at all. Maybe its time to
think again.
To paraphrase the old Oldsmobile commercial, this is not your fa-
thers seller financing. Seller financing has risen from the ashes of
the recent real estate meltdown to offer tremendous opportunities
for the entrepreneur and real estate professional alike. It now pres-
ents multifaceted business opportunities and very lucrative careers
for people from a diverse variety of backgrounds. Heres how seller
financing has evolved into an outstanding real estate-related enter-
prise, one that could be ideal for you:
As youre well aware, the banking and mortgage industries are un-
dergoing major turmoil. Hundreds of thousands of Americans are,
in fact, painfully aware of the recent developments in the housing
market and the lack of available funds to alleviate the crisis.
Too many financial institutions have been lending money in a blind
and reckless way for far too many years. As a result of subprime
lending and other risky practices, foreclosures have reached record
highs. Meanwhile, the number of conventional lending sources has
plummeted, as has the amount of money available for loans. Thir-
teen banks have folded during the first few weeks of 2009, adding to
the 25 failures just last year. These factors are having a devastating
impact on real estate sales.
Contributing to the problem is the soaring unemployment rate. The
number of jobless Americans is mounting daily, as multinational
corporations and small businesses alike struggle to remain solvent.
The unemployment rate now stands at 7.6%, and could approach a
double-digit milestone by the end of this year. (In fact, the rate in-
creased by a full percentage point while I was writing this chapter!)
Mounting unemployment will exacerbate the real estate crisis, caus-
ing additional foreclosures, fewer sales, and a further slowdown in
new-home constructionwhich is now at the lowest level on record.
Meanwhile, Americans are watching their overall wealth evaporate
as their home values plummet, retirement funds shrink, and other
investments disappear.
The pool of real estate buyers who still qualify for conventional
loans is rapidly shrinking, as well. Meanwhile, properties are flood-
ing the market at drastically reduced prices. In fact, housing prices
have dropped by 21% since 2006--and theyre continuing to decline.
Putting this into perspective, ABC News reports that you can now
purchase a home in Jackson, Tennessee, for about the same price as
a 2004 Ford Expedition. And in Phoenix, Arizona, the list price on a
handyman special could pay for a new Honda Civic!
Problem is, fewer Americans can afford either the house or the car.
JHF SILVFR IINING
Despite the weakand worseningreal estate market, theres a sil-
ver lining to the crisis. Thats right, its seller financing.
Seller financing is coming to the rescue of anxious property sellers
and eager buyers alike, serving those who arent able to meet their
real estate needs through traditional financing methods. Its filling
the void created by the mortgage meltdown by offering an
alternative to hard-to-come-by conventional loans. In fact, seller
financing is fast emerging as the solution to the collapse of lending
institutions and the shrinking supply of funds available for
mortgages.
Seller financing is fast emerging as the solution to the collapse of
lending institutions and the shrinking supply of funds available for
mortgages.
Its the viable solution for countless would-be buyers who no lon-
ger qualify for traditional mortgages. Its also the solution for hom-
eowners who are desperate to sell their properties, but are unable to
find prospects who qualify for conventional loans.
And for you, it could very well be the solution to your challenge of
finding a profitable future in a real estate-related industry.
WHAT IS SFLLFR IINANCING?
Seller financing is best described by comparing it to conventional
lending. The traditional method for buying property involves three
parties: the seller, the buyer, and a bank or other lending institution.
Once the seller and buyer agree upon a purchase price, the buyer
applies for a standard mortgage loan for the sales price, minus what-
ever down payment is to be made. Upon its approval, the lending in-
stitution advances the full amount of the loan to the buyer at closing,
enabling him or her to transfer it to the seller. The buyer establishes
a lengthy relationship with the lending institution, paying off the
loan plus interest over time. Meanwhile, the seller receives the full
price for the property in cash, and walks away at the closing without
any further involvement with the buyer or the property.
As the name implies, seller financing means that the seller finances
the buyers purchase of the property. This arrangement is also known
as owner financing or owner carry-back.
This alternative financing mechanism eliminates the lending institu-
tion altogether. In fact, the seller assumes the role of the bank. He or
she collects monthly payments from the buyer over time, rather than
receive a lump-sum payment for the full purchase price at the time
of the sale. In addition to a down payment, the seller receives many
years of steady, reliable income that includes a generous amount of
interest.
The specific conditions of the seller-finance arrangement are negoti-
ated between the seller and the buyer. This offers much more flex-
ibility than a traditional mortgage, and allows both parties to address
their particular needs. The terms of the sale include the same con-
tingencies as a conventional loan, including the repayment schedule
and a maturity date, as well as such contingencies as late fees, early
prepayment, and the sellers rights in the event of a default.
The agreement is then documented in a legally binding debt instru-
ment known as a seller-financed note. This is, essentially, a promis-
sory note. The buyer makes an unconditional promise to pay the prop-
erty seller (who then becomes the note holder) a specified amount
of money on a predetermined schedule, typically monthly. The regu-
lar payments include a portion of funds that pay down the principal
plus interest, at whatever rate was established in the contract.
When the terms of the loan have been satisfied, the buyer owns
the property outright. The two parties then sever their business
relationship.
The cash value of the note itself is determined by the buyers credit,
property type, buyers down payment, terms of the note (e.g., inter-
est rate, repayment, and maturity date), seasoning (i.e., how many
payments have been made), and the quality of the paperwork itself.
Thus, a note on the same property at the same purchase price can
be of greater or lesser value, in large part depending on how its
structured.
WHY SFLLFR IINANCF?
Simply put, seller financing is an alternative to traditional lending. With
few exceptions, its the only option for the buyer who is unable to quali-
fy for a conventional loan. This is significant today because the number
of buyers who can no longer acquire mortgages is soaring.
Changes in personal circumstances, such as reduced family income,
mounting debt, or investment losses, are lowering the credit scores
of many Americans. In the aftermath of the subprime fiasco, banks
and mortgage companies are tightening their lending criteria dra-
matically, as well.
As a result, at least 50%and some experts say 80%of the people
who qualified for home mortgages just two years ago no longer do.
Worse, this group will continue to increase in size. Using the more
conservative figure, this means that the number of people who can
purchase a home through conventional means has been cut in half
in just two years!
At least 50% of the peo-
ple who qualified for home
mortgages two years ago no
longer do.
Among the ineligible candi-
dates are countless Americans who are truly deserving of mortgage
loans. These are the people who can repay their obligationsand
they have the integrity to do so. Theyre honest, responsible and ac-
countable. Essentially, theyre the low-risk candidates who are now
denied financing because of tighter underwriting criteria and the re-
duced availability of funds. Chances are, you know some folks who
are in this situation right now.
Homeowners who are eager to sell are also paying the price for
these recent developments. Their properties are remaining on the
market for extended periods of timesome for a year or even lon-
gerwhile their property values continue to erode. In 2008, hous-
ing prices fell by 18% over the previous year, adding to earlier, sig-
nificant declines.
Seller financing is thus becoming an increasingly attractive solution
for property sellersand its a godsend for many buyers. By offer-
ing to finance the sale, owners attract buyers who cant purchase the
property through conventional means. They can apply less stringent
qualification requirements and offer more lenient terms than the lo-
cal bank or mortgage company. For anyone whos selling real es-
tate, seller financing creates a much larger pool of potential buyers.

SFLLFR FINANCING IS BFCOMING AN INCRFASINGLY
ATTRACTIVF SOLUTION FOR PROPFRTY SFLLFRSAND
ITS A GODSFND FOR MANY BUYFRS.
With more prospective buyers and less competition from other
sellers, the owner who offers seller financing can often command a
better price for the property and at a higher interest rate than he or
she can achieve through other types of investments.
In addition, both the buyer and the seller realize considerable
savings in closing costs. There is no private mortgage insurance,
nor are there other lender junk fees. There may also be a tax
advantage, since the seller can spread the tax consequences of the
sale over the course of years, rather than realize a single, sizable
gain. Another advantage is that the property can be sold as is,
sparing the owner whatever repair costs might be necessary if the
sale involved conventional financing.
As for the closing process, seller-financed transactions can close up
to 70% faster than conventional sales.
IRIMF IROPFRTIFS FOR SFLLFR IINANCING
1. Free and clear
Sellers who own their properties outright can readily
finance the sale without risk to their own credit. Since
they dont have to rely on the buyers monthly payments
in order to pay off their own mortgages, they dont subject
themselves to foreclosure. Roughly one third of all homes
in this country are owned free and clear. Thus, huge
numbers of properties can be seller financed without
risking this consequence.
2. On the market
As the housing market continues its downward spiral,
homes are remaining on the market for months, even
years. Meanwhile, owners are watching their properties
steadily decrease in value, while they continue to bear
the cost of maintaining them. These owners are becoming
increasingly motivated to sell by any means available to
them.
3. Owned by the elderly
Many aging homeowners become incapacitated and need
to move into their relatives homes or into assisted-living
facilities. Their homes, which are usually owned
Continued...
Most importantly, the owner has a better chance of selling his or her
property at its full retail value. This means a higher return on the
original investment plus interest, for a substantial and steady income
stream.
Heres a typical example of a seller-financed transaction. It involved
a house that recently sold at market value. The buyer put down 10%
cash on the $200,000 purchase, and is paying 8% interest on the
outright, are exceptional candidates for seller financing.
The senior seller can earn income from the transaction,
which can be applied toward new living expenses,
medical bills, or other needs. They also have the option
of selling their note or the property itself to a seller-
finance investor, and can receive a large cash payment
instead. The proceeds can be used to cover their various
expenses and/or be used to create dividend income
from investments.
4. Distressed
As described earlier, low-cost and rundown properties
are especially suitable for seller financing. Conventional
lenders are even less likely to finance these sales today,
given the negligible value of these assets and the riskier
nature of the buyers.
5. Vacant
Three out of every 100 single-family houses in the U.S.
is vacantand the number is climbing. Some are on
the market; others have been foreclosed; still others
have been abandoned. Vacant homes are much more
vulnerable to acts of vandalism, theft, and even arson.
These very real threats motivate owners to selland
they make seller financing all the more attractive.
$180,000 balance due over the next 25 years. He was willing to
pay the retail price plus interest thats higher than prevailing rates.
Why? Because seller financing allowed him to purchase the home
he wanted at a price he
could afford. He would not
have qualified for a regular
mortgage, despite a good
job and minimum debt, be-
cause of the strict qualifi-
cation standards demanded
by the lending industry today.
Instead of receiving a cash payment for the depreciated value of his
home, the owner sold his house at a great price, collected a gener-
ous down payment, and established steady monthly income over the
next two-and-a-half decades.
These days, breaking even in real estate is considered a success. But
with seller financing, property owners can realize a substantial gain.
Given the sluggish housing market and economic declines in gen-
eral, its no wonder that seller financing is quickly becoming a main-
stream mechanism for the purchase of real estate. Its closing deals
that wouldnt be possible through conventional means.
Seller financing is closing deals that wouldnt be possible through
conventional means.
SFLLFR IINANCINGS IIRST IORAY INTO THF bIG IFAGUF
Whenever banks and mortgage companies tighten their lending
practices, seller financing gains popularity. Exorbitant interest rates
can have the same effect. During the 1980s, for example, interest
rates for conventional mortgages soared past 18%. This weakened
the housing market by seriously reducing the purchasing power of
Sale Price: $200,000
Down Payment: $20,000
qualified buyers.
As a result, seller financing emerged as a specialty niche among
real estate transactions. This alternative financing method allowed
sellers to offer much lower interest than the standard market rates,
making their properties more competitive than those that were only
available through traditional financing.
By purchasing directly from the sellers, buyers could avoid the in-
flated interest rates and negotiate lower monthly payments than they
could arrange through traditional lenders. Lower interest rates meant
more money could go toward the principal. Because they could af-
ford better homes through seller financing, they essentially got more
property bang for their housing buck.
Meanwhile, sellers benefited by attracting buyers who otherwise
couldnt afford their properties. Thus, they created a larger pool of
prospects. By financing the sale themselves, owners could negoti-
ate terms that would yield their asking price plus interest over time.
They sold their properties faster than they could through conven-
tional means and at top dollar, too. This mutually beneficial arrange-
ment factored into many real estate transactions at the time.
As interest rates dropped, however, the need for seller financing also
declined. Buyers overwhelmingly turned toward conventional lend-
ing, which is always preferable to seller financingprovided its
available and affordable.
Conventional lending is always preferable to seller financingpro-
vided its available and affordable.
SFLLFR IINANCING IFTAINS A IOOTHOLD
When interest rates returned to a reasonable rate, seller financing
was limited to a small sector of the real estate market, specifically,
property that isnt normally listed and sold through a realtor. This
included various types of land, such as unimproved land, recreation-
al parcels, mobile home lots, and farmland. The other two types of
property that were seller financed were rehabbed houses and mo-
bile homes with land. Conventional lending has always been diffi-
cult to obtain for these sales, due to the nature of the property itself
and/or the buyer who might be interested in it.
The owners of these affordable properties often financed the sale
themselves, despite the poor credit of the buyer and with a small
down payment. For that market in particular, seller-finance activ-
ity was vigorousand it continues to this day. Between 2000 and
2006, some 150,000 seller-finance transactions have occurred annu-
ally, mostly involving these types of real estate.
For those of us in the note business over the past two-to-three de-
cades, seller financing has remained a lucrative venture, despite the
ready availability of conventional lending in more recent years. In
2006 alone, I purchased 2,200 notes from owners who had financed
the sale of their properties for their buyers. Many of the notes were
loans I could sell to aggressive funding sources that accepted the
risk. Others were bought that involved solid payors but on uncon-
ventional collateral, i.e., properties types not common to subprime
lenders.
SFLLFR IINANCING GOFS MAINSTRFAM
Recent upheavals in the housing market in particular and the econ-
omy in general are creating an extraordinary demand, once again,
for this alternative financing method for real estate. Increasingly,
traditional real estate is joining the mix.
Consider this: two years ago, about one in every 400 real estate
transactions used seller financing. Today, it accounts for one in ev-
ery 50 transactions. Thats
an 800% increase in just two
short years! Whats more,
some real estate experts
predict that seller financing
will soon become the sales
method of choice for one in every ten real estate transactions. Not
since the 1980s, have I seen such an extraordinary increase in seller
financing. Literally thousands of properties are now being seller fi-
nanced every day. Given current economic developments and fore-
casts, theres every reason to believe that this trend will continue.
JWO YFARS AGO, 1 IN FVFRY 400 RFAL FSTATF
TRANSACTIONS USFD SFLLFR FINANCING. JODAY, ITS
1 IN FVFRY 50.
CPPORTUNITIFS IN SFLLFR IINANCING
Understanding how seller financing works is important for anyone
who enters the business. But youre no doubt wondering how it can
work for you. There are four distinct ways in which the real estate
professional or serious entrepreneur can turn this silver lining into
silver and gold: Brokering notes, investing in notes, manufacturing
notes, and/or extending his/her expertise beyond the note business.
To understand these various profit centers, its useful to look at the
origins of these activities and how the industry has evolved to where
it is today.
bROKFRING OTFS
When seller financing emerged as a note business in the 1980s, its
primary goal was the purchase of notes from individual owners and
their simultaneous resale to note investment companies, that is,
funding sources. Entrepreneurs would locate seller-financed notes
and then negotiate with the note holders to sell them at a discounted
price.
For a variety of reasons, note holders agreed to relinquish their notes
along with the steady, long-term income they were deriving from
them. In return, they received an immediate, lump-sum payment in
cash. Some note holders needed the money for unexpected expenses
or to pay down their debt, and some found that the monthly pay-
ments were too small to put to any real use. Others wanted to rid
themselves of the monthly management hassles and paperwork re-
quirements of carrying a loan; still others wanted to invest in more
lucrative opportunities. A few simply wanted to splurge. And some
recognized that they wouldnt live long enough to collect all the
paymentsand werent interested in bequeathing the note to their
heirs. These reasons account for most of the individual note sales to
this day.
Heres how a note is bought and sold: The broker contacts the note
holder to determine whether he or she might be interested in selling
the note. If so, the broker contacts the funding source to determine
what price its willing to pay for it. The discount price typically
ranges between 60% and 80% of the notes unpaid principal balance.
Before presenting the offer to the note holder, the broker subtracts
his or her own fee from the total, which can range between 7% and
10% of the sale or even more. The broker contacts the note holder
and offers to buy the note at the adjusted price (the discounted price
minus the brokers fee). At closing, the broker receives his or her fee
and the balance is paid to the note holder.
Brokering notes is a very low-risk venture because the person who
buys and sells notes can earn thousands of dollars from every trans-
action without using a dime of his or her own money.
MARKFTING AND FGOTIATION
Marketing and negotiation skills are absolutely critical to
the note professionals success.
Done right, marketing allows both the broker and the
note investor to find seller-finance notes, particularly
the most valuable ones. Their marketing methods may
include direct mail, websites, email campaigns, classified
advertisements, signage, telephone calls, presentations,
and/or other communication devices. With a compelling
marketing message and a superior list of note holders,
the professional note buyer can identify quality prospects
and encourage them to sell their notes.
Likewise, the note manufacturer and investor can identify
properties suitable for seller financing, and market to
those owners. The seasoned note professional uses
proven marketing techniques to offer his or her expertise
to others, such as, realtors, property owners, and note
investors, so that they can finance the sale of properties
themselves. In the increasingly competitive environment
of seller financing, the note professionals success
will depend greatly on his or her ability to get the right
message to the right people, and compel them to act in
the right way. Marketing is at the core of that process.
Negotiation factors greatly in every seller-finance
transaction. By applying shrewd negotiation tactics, the
note professional can entice the prospect to do business
with him or her, often turning the naysayer into a note
seller. The negotiation skills of the note buyer or investor
will then determine how profitable the transaction will be.
A skilled negotiator can establish a lucrative contract,
including a heavily discounted purchase price, a generous
yield on the investment, substantial commission, and/or
any number of other conditions that will result in the ideal
transaction.
The note broker can earn thousands of dollars from every transaction
without using a dime of his or her own money.
Brokering notes remained the central activity of seller-finance busi-
nesses for many years. It has numerous advantages, including high
income potential, a flexible work schedule, minimal operating ex-
penses, and a nationwide territory from which to draw clients. In
fact, I have brokered notes in all 50 states from my office in Texas.
Its also fairly easy and quick to enter the note industry as an entre-
preneur and begin earning commissions.
INVFSTING IN OTFS FOR CNFS CWN IORTFOLIO
In the early days of seller financing, brokers soon took notice of
the investment opportunities in this unique real estate activity. They
recognized the long-term value of seller-financed notes in terms of
appreciating assets and regular income streams. They began selec-
tively buying them for their own portfolios rather than simply nego-
tiate deals for others. These note investors assumed the role of the
property seller, and began acting as the bank for the buyer. By using
other investors money, they were able to reap the rewards of these
transactions, again, without investing their own money.
As with their note brokering activities, the investors sought qual-
ity notes with substantial returns, and then purchased them from the
owners at a discount. By holding onto the
notes themselves rather than sell them
to a third party, however, the investors
collected significant revenues through
monthly paymentssteady income that
would often span generations. In fact,
their annual income from note payments
greatly exceeded the commissions they would have earned by sell-
ing their notes to others. Savvy note investors would cherry pick
JHF IROFIT IOTFNTIAL OF A OTF
Holding a note to maturity can be exceptionally lucrative.
Heres an example, using a simplified scenario:
Lets say that a buyer needs to borrow $100,000 for the
purchase of a house. If a bank lends him the money at
a 6% interest rate for a 30-year term, the buyer will pay
$599.55 a month. Over the course of the loan, the bank
will collect $215,838, for a 216% profit.
But lets say that the buyer cant obtain a conventional
loan. To sell the house, the owner agrees to finance
the sale but at a higher interest rate, say 10%. That
establishes a monthly payment of $877.57. The seller,
who now becomes the note holder, wont receive the total
proceeds from the sale for another 30 years.
This is where the note pro comes in. He negotiates with
the note holder to sell the note to him at a 25% discount,
or $25,000 off the total value of the note. The note holder
immediately gets $75,000 in cash from the investor, rather
than collect a much larger amount of money that dribbles
in over the next 30 years.
The note pro himself now receives those monthly
payments of $877.57 from the buyer. Because he paid a
discounted price for the note and the payments include
a higher interest rate, the note pro will collect far more
on that loan than the bank would. Hell receive $315,925
over the course of the loan for his $75,000 investment,
which is a $416% profitnearly twice that of the bank.
the best notes for their own portfolios and broker the rest for a nice
profit.
This remains an attractive revenue stream for many note professionals.
In fact, the nations most successful note professionals invest in
notes for their own portfolios.
OTF MANUFACTURING
The glut of unsold properties on the market, the shortage of con-
ventional funding sources, and worsening economic conditions
are creating a phenomenal upswing in seller financing, the likes of
which Ive never seen. Perhaps the greatest business opportunity
from these developments is the manufacturing of notes. Increas-
ingly, note manufacturing has evolved into a prominent specialty
within the industry.
This activity began in the 1990s, when professional real estate investors
purchased distressed or otherwise affordable properties, rehabilitated
them, and then sold them to other buyers, financing the sales.
For the first time, properties were being purchased before the seller-
financed notes were created. It was the buyers of these rehabs
that is, the professional real estate investorswho then created the
notes for the resale of their properties. Savvy investors purchased
properties at bargain prices but with good resale potential. They then
offered to seller finance the sales to low-risk buyers. They manufac-
tured notes and then held them for their own, long-term income.
In addition, with the help of note specialists, many of these inves-
tors bought properties, manufactured notes, and then sold the notes
to funding sources. Some professionals did both: They created these
transactions for others but retained ownership of a portion of the
notes as compensation.
Whether they held the notes for their own portfolios or resold them,
real estate investors were the first to manufacture notes as a business
model.
A CNCF-IISKY bUSINFSS
In the early 2000s, the business of manufacturing notes often
proved costly. Individuals who purchased their homes through seller
financing were, as a group, much riskier than they are today. Thats
because it was easy, too easy, to obtain a conventional loan instead.
Furthermore, it was less expensive.
Subprime lending practices and other acts of gross negligence with-
in the industry allowed nearly anyone who could fog a mirror to get
a loan. Too often, banks and mortgage companies were overly eager
to approve questionable applications. Saving both time and money,
JHF IOW IOWN ON IOWN IAYMFNTS
A large down payment from the borrower is always a
plus. By contributing a significant amount of money
toward the purchase, the buyer has plenty of skin in the
game from the very beginning of the transaction. This
person is less likely to default on the loan. He or she will
also feel more ownership of the property, and will likely
take better care of it.
Even if the buyer abandons the property despite the large
down payment, the seller can now use those proceeds
to help mitigate any losses, reclaim the property (the
collateral), and put it back on the market. The seller might
even come out ahead.
On the other hand, the buyer who puts little money
down has little to lose by walking away. With minimal
investment in the property upfront, hes also more likely
to leave it in a state of disrepair. Meanwhile, the seller
has little to show for that failed transaction. Instead, he
gets stuck with considerable work required to restore it to
a saleable condition. Only then can he put it back on the
market and try to recover his losses.
they performed only cursory screenings of applicants, failing to
verify applicants statements or examine other sources of pertinent
information. With less stringent requirements, lenders were able to
qualify more borrowers and process more loans, often for people
who clearly couldnt repay their debt.
As a result of their predatory lending practices and lax underwriting
standards, banks and mortgage companies rejected only the riski-
est of all buyersso those buyers turned to, you guessed it, seller
financing. A few successful investors manufactured notes for these
Bad creditNo creditNo problem types, but they structured
their businesses around low-end properties and high-volume sales,
with plenty of defaults in mind.
Unfortunately, many property owners entered into seller-finance
agreements with that same careless approach. They didnt pull a
credit report, verify income statements, examine the buyers em-
ployment history, or investigate his or her liabilities. Like the big-
gest names in banking and lending, their negligence has resulted in
costly defaults and foreclosures.
Seller financings reputation as a risky business venture has been
well earned. But all that is changing.
SFLLFR IINANCING: FW
& IMPROVFDAND MAIN-
STRFAM
The recent collapse of many
banks and mortgage companies
has had a phenomenal effect on
lending practices and, conse-
quently, on real estate activity.
Lending institutions have tightened their underwriting criteria dras-
tically, making it far more difficult for borrowers to qualify for loans.
Many applicants who would have received conventional loans just
two or three years ago are now being rejected.
A considerable number of these candidates are just missed bor-
rowers who fall narrowly outside the newer, stricter lending criteria.
These are reliable, low-risk prospects who demonstrate the ability to
meet the terms of their loans. And they have every intention to do so.
They would have easily qualified for conventional mortgages in the
past but no longer measure up on paper. Perhaps a credit problem
of long ago or a recent change in employment now raises questions
and closes doors.
Theres a good chance that you personally know someone in this
situation.
In addition, fewer funds are available for lending, which has created
a supply-and-demand problem. Traditional lenders now reserve their
limited assets for their most credit-worthy candidates. Increasingly,
even the low-risk borrowers are now turning to seller financing.
The impact of these recent developments on the note industry has
been dramatic. The quality of the average seller-finance candidate
has improved greatly while the demand for seller financing has
soared. Done right, seller financing has become a safe betand a
lucrative business venture.
Seller financing has become a safe betand a lucrative business
venture.
The profile of the typical note manufacturer has changed, too. Once
specializing in financing rehabs for risky buyers, the seller-finance
specialist now serves a broad range of clients and properties. He or
she has become more sophisticated in the business of seller financ-
ing, becoming well-schooled in the intricacies of the practice.
Creating quality notes for quality buyers requires the same metic-
ulous process used by responsible banks and other lenders. Note
manufacturers take applications, scrutinize credit information, ver-
ify data, evaluate properties, structure the terms of the sales, and
collaborate with affiliated businesses and agencies. But unlike their
peers of the subprime-lending era, seller-finance specialists apply
common sense to their decisions.
I IO IILIGFNCF
Approving your seller-finance buyer is a lot like choosing
your life partner.
Few people enter marriage without having first gathered
considerable information about their mate. It starts with
that first encounter, when your date presents himself or
herself in the best possible light. He appears honest; she
seems responsible. As you get to know each other, you
like what you see and you want this to work. You make
plans.
Smart couples approach the altar having already
discovered and judged their fiancs background,
character, values, strengths, and weaknesses. They
conduct their own due diligence before their I dos.
Many singles even hire a private investigator to do an
independent background check on their potential mate
before proceeding with the romance. Its smart with
dating; its smart with lending. And it sure beats eloping
after a brief encounter!
To avoid the same pitfalls that brought down Bear Sterns, Morgan
Stanley and others, the note manufacturer must be thorough when
qualifying buyers and approve only those of the highest caliber.
This is why due diligence is so critical in the note business. The
savvy note manufacturer will ensure good underwriting, not only
to achieve a smooth and successful transaction but also to minimize
defaults and maximize returns. A thorough and independent inves-
tigation will reveal the accuracy of the buyers statements regard-
ing assets, income, employment, debt, and so forth. Due diligence
allows the seller to make sound decisions based on solid facts, not
subjective impressions, and to distinguish the quality borrower from
the risky one. This is especially critical because the number one vari-
able that affects the cash value of the note is the buyers credit.
JHF NUMBFR ONF VARIABLF THAT AFFFCTS THF CASH
VALUF OF THF NOTF IS THF BUYFRS CRFDIT.
Ronald Reagan said it best with his signature phrase, Trust but
verify.
The note manufacturer must also understand all relevant legal is-
sues, regulatory matters, and documentation requirements. By ap-
plying their advanced knowledge and sound principles to the manu-
facture of notes, these specialists can help ensure that the products
are investment quality, with top-dollar value and exceptional resale
potential.
Many note manufacturers underwrite the loans before theyre even
made and then manage them thereafter. Increasingly, though, theyre
lending their expertise to others. Or, more accurately, theyre selling it.
Middle-class homes, condominiums, commercial buildings, and
more are being seller financed like never before. Even luxury homes
and million-dollar estates are selling via owner-carried notes. This
creates a clear and growing demand for the note professionals ex-
pertise in creating quality notes.
Many industry leaders are now reaping huge rewards by providing
technical support and consultation to others. These experts assist
realtors, professional real estate investors, and individual property
owners who are eager to finance the sales but dont know how to
structure a quality note. The note professional can earn consulting
fees of % to 2% of the loan amount. Not only do these specialists
earn generous income from their expertise during the note-manufac-
turing process, but they also establish the right to broker these notes
from their clients in the future. This adds yet another dimension to
the business of seller financing.
bFYOND SFLLFR-IINANCF OTFS
The fourth profit center in this industry
goes beyond the seller-finance notes per
se. True, the industrys leading note pro-
fessionals conduct all aspects of the busi-
ness, from buying and selling notes to
manufacturing notes, investing in notes
for their own portfolios (and finding some
real bargains during the process), and sell-
ing their expertise to others. But they also understand broader issues
relating to the real estate and mortgage industries.
This allows the seasoned seller-finance professional to foray into
other specialty areas, such as non-performing notes. This is a par-
ticularly lucrative venture involving the purchase of bad notes from
the banks and mortgage lenders at bargain prices. The note profes-
sional generates significant income from low-cost investments and
high-dollar resales.
Experienced and knowledgeable note professionals are also adept
at flipping properties; purchasing and subdividing large tracts for
numerous small and more lucrative sales; and devising other cre-
ative real estate transactions. In addition, theyre frequently offered
exceptional real estate bargains and other lucrative opportunities, be-
cause of their reputation and numerous contacts within the industry.
A SAFF bFT
If you decide to pursue a career in the note business, its essential
that you develop a thorough understanding of seller financing. Like
most ventures, you need to learn the rules of the game in order to
achieve success.
Using an analogy, lets say youre at a blackjack table in Las Vegas.
Before placing any bets, you need to understand how the game is
played, what it takes to win, and how to apply that knowledge to
increase your odds of success. With even a rudimentary understand-
ing of blackjack, for example, youd know better than to take a hit
if you have 18 and the dealer shows a 4. The more you know, the
better you are at playing the game. But if you know little, what stays
in Vegas is your money.
Similarly, a lot of people who seller finance property or invest in
notes are recklessly gambling with their own resources. Thats be-
cause they dont understand the basic principles of seller financing
and how best to apply them. Rather than analyze the opportunities
carefully and then judge wisely, they unwittingly close risky deals
and then pay the costly consequences. As with blackjack, you need
to know the odds of winning before playing your hand.
Smart seller-financing is profitable. I know that personally, as do most
of my colleagues in the business. There are plenty of aces in the huge
and growing pool of existing notes and opportunities to create your
own. There are also plenty of resources for acquiring expert knowl-
edge in every aspect of seller financing to help ensure your success.
JHF bASIS bASICS
During my 29 years in seller financing, the question Im most
frequently asked by property sellers is this: At what point
should you make a very aggressive underwriting decision?
The answer depends entirely on how much youve invested
in the asset. If its worth $100,000 and youve invested
only $25,000, you have a low basis. With a low basis in a
property, you can better tolerate a default risk.
In a way, youre like a pawnshop owner. Youve taken as
collateral an item whose value is far greater than the money
youve loaned. If the transaction proceeds as planned, your
customer repays the loan with interest, and you make a
profit on your loan to him. If your customer defaults, you
take possession of the collateral. Having invested only a
fraction of its retail value (i.e., the small amount youve
loaned your customer), you can now sell it to someone else
for a healthy profit.
Thats why the higher the percentage of your investment
in the property (your basis), the less risk you can afford to
take. Lets say youve invested $75,000 in that $100,000
property. Youre now at a risk of losing much more, should
delinquency and default occur.
With a low basis you can lower your underwriting standards.
Ive known and even consulted with real estate investors
who maintained a fairly liberal underwriting practice. These
transactions succeeded because the investors had a low
basis in their properties. With an inordinately low investment
in the property, say 20 or 30%, you can tolerate the
additional risk. This strategy, however, is more challenging.
It demands greater attention to detail, and requires more
time and resources to service the portfolio. But if you have
a low basis, you can apply lenient qualifying criteria and
still be successful.
With a low basis, you can create a solid portfolio. And that
will allow you more time on the beach.
ITS A GOOD JHINGITS A GOOD JIMF
Seller financings time has arrived. Its now much more profitable than most
areas of real estate, other sales ventures and investment opportunities.
You can be extremely successful in this business, if you use a methodi-
cal approach that calculates the risks and weighs the benefits. Add a lit-
tle elbow grease and youre on your way to a secure future. Trust me,
I know . . .
Having purchased more than 30,000 seller-financed notes and handled
more than half-a billion dollars in sales, Ive seen a pattern of success
and failures. These arent just theoretical concepts; theyre actual expe-
riences involving a range of variables. Not since the 1980s, have I seen
the extraordinary increase in, and necessity for, seller financing. With due
diligence, good judgment, and some common sense, you too can become
very successful with seller financing.
In addition to achieving your own financial goals in this business, you
can provide a much-needed service to others. Theres heartfelt satisfaction
in knowing youve helped other people to realize their dreams of own-
ing their own homes, despite the financial challenges that so many are
facing today. And the proceeds from seller financing return to the local
community, rather than enter the balance sheet of an institutional lender
somewhere else.
Seller financings time has come. And the timing couldnt be better. n
MARKFTING TIP #1:
IN THF KNOW
Ability is nothing without opportunity Napoleon Bonaparte
Napoleons quotation really hits the nail on the head. No matter
what your particular skill, its useless to you and the world if you
lack the opportunity to apply it. Youre like the pianist without a
piano. Your potential is silent.
When it comes to the note business, theres plenty of
opportunity to apply your abilities and reap the rewards. Just
two years ago, only 1 in 400 real estate transactions involved
seller financing. Today, 1 in 50 transactions is a seller-financed
sale. Some real estate experts predict this could increase to as
many as 1 in 10. For everyone in the note business, opportunity
is abundant. Better still, there are relatively few seller-finance
specialists to handle all the potential transactions.
But opportunity alone isnt enough. We can learn much from
Napoleon by flipping his quote. As for the note business, Id
say, Opportunity without ability is nothing!
It takes know-how to succeed: knowing how to find quality
notes, knowing how to market effectively to prospects,
knowing how to negotiate with note holders, knowing how to
manufacture notes, and knowing how to close deals. Calling
yourself a note professional without acquiring the necessary
skills to perform every task competently is like calling yourself
an architect because you own a yardstick. You need to have
the right tools and you need to know how to use them.
Thats why you should take advantage of every opportunity to
learn. Attend seminars, take online courses, go to professional
meetings, and study industry materials. These will help to
increase your level of expertiseand thats the nitty gritty of
note business success!
An aside: To be fair to Napoleon and his quotation, seller financing
wasnt big in his day. But then, neither was Napoleon.
MARKFTING JIP #2:
GRFFTINGS & SALUTATIONS!
Dear Sir or Madam . . .
Dont you just cringe when you receive letters that greet you
with such blatant indifference? This generic, gender-neutral,
form-letter formality leaves me cold. Although its hardly
inviting, we guys might be okay with the dear-sir salutation.
But should you call any woman a Madam? (And if you
already do, I doubt you do so in a formal letter!) Its time to
fight the trite and personalize your correspondence a little
even if you wont be naming names.
Instead of the bland and disinterested Dear Sir or Madam
mix, why not try Dear Colleague, Dear Representative, To
Our Friends in Real Estate, Hello!, To a fellow professional,
Dear Note Owner, or simply, Greetings?
Of course, you should use the individuals name whenever
possible, not only in the salutation but within the letter itself.
Personalizing the letter with the recipients name and, better
still, citing specific information about the property, will go a
long way toward enhancing your credibility. Imagine youre
Joe the Note Holder, and you receive a letter that starts
with, Dear Joe Jones: The note you hold on the Elm Street
property could pay off your debts in just weeks. Do you want
to know how? Wouldnt that opening get your attention?
Just be sure you substitute the persons data for each
placeholder. Theres nothing worse than sending out
messages that say, Dear [Insert Name], followed by [Insert
Name] throughout the body copy. Ive been tempted to reply
to such emails with, Dear Your Company Name: This is
Insert Name Speed . . .
When you complete your perfect message, youre now ready
to sign off. But you might want to consider a friendlier and
fresher close than the typical . . .
Very truly Yours, W. Eddie Speed
MARKFTING JIP #3:
IISHING FOR GOLD
If youre an investor who finances sales for your buyers, you
want to get the most bang from your advertising buck. Too often,
though, seller-finance advertisements address the broadest
audience possibleand focus on the least qualified candidate.
These ads attract buyers with lousy credit, zero assets, sporadic
employment, and/or substantial debt.
Thats why your promotional materials should always target
the most promising prospects. And thats true no matter what
marketing media you use. Whether you seek buyers through
newspaper ads, yard signs, websites, blogs, email blasts, flyers,
direct mail, billboards, Craigs List or any combination of marketing
tools, market to the folks you most want to reach.
How do you lure the best buyers? To use a fishing analogy, it
starts with the baitor more accurately, the line that you use.
Bad Credit? No Credit? No Problem!
Sound familiar? Search this line on Google and youll find more
than 287,000 listings. Earlier today, I even heard it on the radio.
Perhaps youre using this line yourself.
Theres a fundamental problem with this marketing approach. The
bad-credit/no-credit message speaks to the folks you least want
to attract. It announces, albeit unintentionally, No qualifications
required! If you can fog a mirror, you can get a loan.
Thats why you almost never find good-credit buyers with bad-
credit ads. Quality prospects dont consider themselves as
high-risk types, so they wont respond to this message. Before
spending one more dime on this kind of advertising, you should
ask yourself: Is this the buyer Im looking for?
Fish for anything that bites and youll waste your time and your
tackle tossing those unwanted nibblers back into the pond. In this
business, its what you hookand keep-that counts.
Market wisely and youll catch the prime candidateshook, line
and sinker!
MARTKFTING JIP #4:
OTF JHIS!
When was the last time you received a handwritten note?
Unless youre a bank teller involved in a robbery, its likely
been ages.
There was a time when handwritten notes were commonplace.
Then along came the mass-produced greeting card, the
typewriter, and now the computer. Even preprinted names
on holiday cards have become acceptable substitutes for
handwritten signatures. Photocopied holiday letters are gaining
such popularity, there might soon be a central production
source for those, as well.
All these timesavers have reduced the handwritten note to
near extinction. Thats a shame, because nothing stands out
like a handwritten note. And nothing gets remembered like it,
either. After all, Hallmark does pretty and witty, but it doesnt do
personal. Neither does your keyboardnot like a pen gripped
between your fingers.
For your business mailings, you might lack the time and the
digital stamina to handwrite messages to all your prospects.
Still, you should at least consider writing a brief thank-you
note to the few people who respond. You might also handwrite
addresses on your envelopes. (Did you know that 60-70% of
direct-mail envelopes are tossed, unopened? Thats because
theyre so impersonal!)
Even a Post-It note with a hand-scribbled word or two
(Thanks or Call me!) can add a simple yet personal touch
to your computer-generated, mass-produced letter. At the very
least, hand sign your lettersor make them appear to be hand
signed.
Make note to handwrite your notes! Youll more likely be
remembered by the note owners on your list. In return, theyll
hand it to youtheir business, that isfor paying special
attention to them!
MARTKFTING JIP #5:
IANG!
Made you look! No, Im not upset. Im just illustrating the power of
a good headline. As you can see, a good headline prompts you to
read the message that follows. And thats why quality headlines
are essential for effective marketing.
Too often, however, headlines dont make you look. In fact,
an average of four out of five people read only the headline
of marketing materials and then move onto something else. A
mediocre headline means youve wasted most of your marketing
dollars on a message that few people will read. Dang!
Whether its on your web page, your brochure, or even your sales
letter, the headline is the most important wording of your entire
message. Written right, it compels your prospects to continue
readingand thats where you turn them into customers.
Years ago, this theory was tested on a long-running advertisement.
When only the headline was changed (and much improved), the
response rate jumped by 1700%! Studies show that as much as
75% of an advertisements success depends on its headline.
For a gotcha headline:
Raise curiosity. Chances are, you started reading this because
you wondered why I was so angry.
Ask a question, because theyre hard to ignore. Imagine if the
dairy industry replaced its wildly successful Got Milk? with a ho-
hum Buy Milk.
Cite a problem: E.D. Got You Down? (Note the added use of
a question.)
Offer a benefit: Lose Weight While You Sleep!
Tap into an emotion, such as fear: Internet Predators May Be
Stalking Your Child!
Refer to the news: How Record-High Foreclosures Affect
You!
Create an attention-getting, compelling headline on everything
you write. Otherwise, you might be uttering a few curse words
over your response rates!
MARTKFTING JIP #o:
JOP JIPS
We Americans are assaulted by a constant barrage of marketing
messagesthousands of themevery single day. As a result,
few get our attention. Fewer still get acted upon.
When promoting your business, you need to cut through the
clutter with powerful messages of your own, so that prospects
will pay attention to youand theyll respond. Heres how:
Personalize your message. Address your prospect by name on the
mailing label and in the salutation. Refer to the property location,
size of the note, or anything else thats specific to them.
Avoid bland headlines. Whether youre sending a sales letter or
a postcard, grab your readers attention with a headline that will
make them want to read more. (Sorry, but your business name
aint it!)
Focus on your prospects needs. Remember those old posters
where Uncle Sam says, I Want You? These days, people dont
care what you want; they care about themselves. Thats why
todays recruitment message is, Be all that you can be. Dont
focus on what you do; focus on what you can do for them.
Tell them what to do. Include a call to action. Call me today,
Visit our website, and Return this postcard are more effective
than simply citing a phone number or enclosing a reply card.
Give them a reason to do it. Offer a free report, complimentary
evaluation, no-obligation quote, or anything else of value. Or
simply explain why selling their note makes sense.
Add urgency. By adding now, today, hurry, or some other
timely reference, youll encourage a prompt response. In fact,
thats why operators were always standing by. Those gals were
eagerly awaiting our calls, so we just had to respond right away!
To boost your marketing efforts, apply these tips . . . and do it
now!
MARTKFTING JIP #7:
WFLL MFANING ADVICF
Have you heard the one about the blonde who stops off at a library,
goes to the front desk, and says, Id like a burger with fries. The
librarian replies, Cant you see this is a library?! The blonde looks
around and is startled by her surroundings. She then turns to the
librarian and whispers, Id like a burger with fries!
With apologies to blondes, including my own wife (sorry, honey),
this story illustrates that understanding whats said is not the same
as understanding whats meant. And that leads to this months
lesson.
Do prospects understand you when you offer to buy their notes?
When you explain the numbers, the discount, the payment schedule,
and so forth, do they understand what youre saying? Or are they
confused by the industry jargon and the complex calculations?
Too often, the only message note owners understand is this: Theyll
get less money if they sell their note now than if they hold onto it.
Some deal, huh? If they only understand the bottom line, theyll
likely say no.
Thats why your prospects should learn what it could mean to them
if they sell their notes. They could pay down their debt, saving
considerable interest over time. They could splurge on something
of personal value, e.g., a grandchilds education, a new vehicle,
or a vacation. They might invest in something that will increase
in value over time. Have they considered that the declining dollar
means that their buyers monthly payments will be worth less over
time? All these have meaning.
Discover what matters personally to your prospects, and then
help them understand how their notes can be transformed into
something of real value to them.
Translate facts into meaningful benefits. And if it helps, add a side
of fries!
MARTKFTING JIP #8:
AMF IIGH!
Developing a great company name is arguably the most important
marketing decision youll ever make. Jerry Fisher
Your business name is at the core of your professional identity, creating
first impressions and establishing lasting ones. So, what goes into a
great company name?
Descriptive: A descriptive name pays off big time. Bundys Very Used
Cars gained national attention when they renamed it Rent-a-Wreck.
Jiffy Lube, Payless Shoes, and Hamburger Helper are also highly
descriptive.
You can rescue a vague name by adding a descriptive word. For
example, Gotcha Covered could represent any number of businesses,
but Gotcha Covered Upholstery is clearly defined.
Positive: An upbeat name boosts business big time. The Ohio-
based company that sells gourmet brownies as corporate gifts is
perfectly named Brownie Points. On the other hand, Granny Joes Ice
Creamatorium gives me the chills.
Memorable: Names that are easy to remember have an edge over the
competition. Royal Flush Plumbing is memorable because its both
clever and descriptive. The high-fiber cracker company, Bowel Buddy
Bran Wafers, is also memorable, but I wouldnt want to touch the box!
Be memorable but positive.
Relevant: Irrelevant names provide zero marketing value. Naming your
company after your dog, for example, will be meaningless to others
unless, of course, youve named your pooch Note King. Similarly, you
should avoid using your own name or initials. Thats because people
dont care who you are; they want to know what you can do for them.
Easy to Spell: Avoid odd spellings, unusual words, or foreign terms.
Theyre more difficult for prospects to find online or in directories. Any
wonder why Krispy Kremes sales are plummeting? Okay, thats a
stretch, but you get the point!
A lousy business name can really take the wind out of your sales.
Choose wisely!
MARTKFTING JIP #:
IORSF IUCKY!
Youve probably heard the story about the boy who was
caught digging through a pile of horse manure. His friend
asked, What are you doing? Are you NUTS? The boy
replied, Heck no! I figure with all this manure, theres got
to be a pony in here somewhere!
Now, Im not going to liken seller-financed notes to horse
manure, but this story does offer an interesting point. Often,
note owners dont realize what they might have in that
pile of note paperwork. To most of them, seller-financed
notes represent little more than a monthly payment. No
cash value, no growth, no options, no changejust a
regular payment, month after month. But notes are also a
burden, especially around tax time. With defaults on the
rise, they also carry some increased risk. Regardless, few
note owners consider the possibilities and the downsides
of these assets.
With a little guidance by an industry pro, note owners can
conjure up all sorts of options for their notes. With some
imagination, for example, the note can become a ticket on
a cruise line, the keys to a new car, or a kitchen remodel.
It can be the answer to mounting credit debt and those
wasteful interest payments. Or it can mean the tuition
for a college education, an early retirement, or a sound
investment with solid growth potential.
The lesson here is to dig deep. Find out what your prospect
really wants or needs. Help him or her see how that note
can be transformed into something truly meaningful and
highly valued. Maybe even a pony.
MARTKFTING JIP #10:
IICKY, IICKY!
Recently, I saw a billboard that featured a larger-than-life image
of a little girl. Cute kid but even at a drive-by glance, I could
see that she was picking her nose! Not only had the business
owner used her own name as the headline (a definite no-no),
she added this unfortunate subheading: Are you picky? Let
me help you! I never did figure out what was being advertised,
nor did I care.
This brings us to this months message: Use visual images
that support your business image, not undermine it. Your
accompanying copy should send a positive, relevant message,
as well.
When Kraft Foods introduced a new cheese product, the
headline teased, We cut the cheese so you dont have to.
Clever, yes. Even funny. But unless youre selling Beano, you
dont want people seeing your product and thinking of, well,
you know. Kraft later pulled the ad. They pulled the product.
No word as to whether they pulled the finger . . .
Sometimes, a double meaning is unintended. Heres an actual
headline from a mortgage company ad: Ask about our plans
for owning your home! This begs the question, wouldnt you
rather own it yourself?
Finally, avoid images and messages that mean something only
to you. A picture of your poodle or your current girlfriend, no
matter how adorable, wont captivate your note owners. Theyd
rather look at their own pets. Likewise, naming your business
after your late parakeet will serve neither you nor your bird.
Instead, create a positive, benefit-rich message with words
and images that are relevant to your prospects. Then theyll
pick you!
MARTKFTING JIP #11:
IO THF IUSTLF!
Things may come to those who wait, but only the things left by
those who hustle. Abraham Lincoln
Are you a hustler? In the note business, that can be a good thing.
If youre seeking substantial success, it can be a necessity.
Hustlers chase after notes. The really good hustlers chase after
the really good notes--those with the right loan size, collateral,
lien position with a qualified payor, and a motivated seller.
The operative word is chase. Not attempt. Not inquire. But chase.
Chasing means both perseverance and speed. When chasing
after that note, you dont give up after your initial contact, nor do
you wait weeks for your prospect to return your call or respond
to your mailing. You move quickly and persistently. You chase
each note until youve closed the deal--or the owner closes the
door on you. (Figuratively speaking!)
Its becoming increasingly important to hustle after notes. Thats
because owners are turning to seller financing like never before.
Just two years ago, 1 in 400 homes were sold through seller
financing. Today, its 1 in every 50. With the continuing upheaval
in conventional lending, theres every reason to believe this
trend will continue. With even more opportunities to create,
broker, and/or invest in notes, why would you need to hustle? In
a word: competition.
Realtors, mortgage specialists, and real estate investors are
beginning to recognize seller financing as a viable business
model, especially compared to their traditional professions. As a
result, theyre entering this field in growing numbers. Yes, there
will be more notes--but there will be far more note specialists
vying over them.
Nows the time to kick-start your note business. Market more
aggressively. Pursue quality prospects more persistently. Follow
up more diligently. Go hustle or go bust!
MARTKFTING JIP #12:
CN OTFS AND JOILFT IAPFR
Want to turn note owners into note sellers? Consider
applying the powerful force of emotion to your marketing
messages. Heres why: Most buying decisions are based
on emotion and then justified with logic. The decision to sell
is usually based on emotion, as well.
Even the most mundane transactions are guided by emotion.
Lets say you need to buy toilet paper. Concerns about your
budget might draw you to the cheapest brand. If youre
anxious because youre in a hurry (perhaps you really need
toilet paper!), youll grab the first package you come across.
A desire for comfort due to a tender tush might steer you
toward the softest brand. For your guest bathroom, youll
impress visitors with the scented, fluffy stuff in soft pastels.
(Or so my wife tells me.) Although subtle, emotion is behind
each decision.
For discretionary transactions, such as the sale of notes,
emotions rule. Therefore, your marketing messages should
address an underlying emotion. This can have a powerful
impact on the readers reaction.
For example, you can raise the very real emotion of fear
with a headline like this: Do Overdue Bills Keep You Awake
at Night? You then alleviate the fear by presenting your
solution: youll buy their notes; theyll get cash, theyll
pay down those debts, and theyll sleep well at night. The
factshow much money, how soonprovide the logic that
will justify their decision to sell.
By tapping into emotion, you relate to your prospects on a
personal level. You feel their painor joy, desire, greed,
pride, whatever. Indeed, your marketing messages should
address a variety of emotions, because individuals respond
to different emotional triggers. One toilet paper does not
suit all!
MARTKFTING JIP #13:
???
Whether theyre raised or answered, questions are fundamental
to effective business communications. Questions raise curiosity,
and engage the person who is being asked. They create dialogue
and allow the transfer of information, typically in both directions.
Questions and their answers are fundamental to developing a
relationship.
But questions need not be limited to two-way conversations
between individuals, either in person, over the phone, or via email.
Questions can also be effective when raised in print, even though
the communication is one way. In fact, questions in marketing
materials can turn ho-hum factual matter into aha! revelations.
Questions make terrific headlines in print ads. Perhaps the
most famous is the United Dairy Industrys Got Milk? Imagine
if, instead, the milk-moustache ads said, Buy Milk. You likely
wouldnt buy it, let alone even think about it. But Got Milk? gets
you to thinking beyond the message itself. Do you have milk? Do
you need milk? When will it run out? Should you buy some more
milk now? Next thing you know, youre heading to the store.
Questions compel readers to look for answers, or to check to see
whether their answer is correct. That makes them want to learn
more.
Questions can also challenge a persons assumptions. Hows this
for a headline on a note pros sales letter: Is your seller-financed
note actually costing you money? See? Made you think!
Questions often prompt readers to seek answers directly from
the source of the marketing message. Lets say that a note owner
calls you for the answer to a question you raise in your marketing
materials. This gives you the opportunity to question them in
return. Their answers will then allow you to provide personalized
informationinformation that can lead to a sale.
Questions work wonders. Dont you agree?
MARTKFTING JIP #14:
IOMANCING YOUR IROSPFCTS
Do you remember your worst date ever? Chances are, you spent
the entire evening with a self-absorbed loser who cared nothing
about you. The conversationor monologuewas all about him
or her. Your date showed little interest in listening to you, let alone
learning about you.
You probably recall that the first date was also the last date.
Businesses often commit this mistake when marketing to potential
customers. They focus entirely on themselveshow magnificent
they are, and how fortunate the person would be to have their
products or services.
When businesses act like that self-centered date from the dark
side, they rarely get a second chance. Their prospects dont
call them in the morning. They never get to first base, let alone
score.
When marketing your business, how can you avoid getting
dumped by your potential clients? Simply put, you need to romance
your prospects. Like an admirer pursuing a romantic interest,
you need to commit your time and attention. This approach also
requires multiple touchpoints. (No, not the touching of points that
could get you slapped!)
Touchpoints are the individual contacts you make with your
prospects. Each one reinforces your identity and reminds them that
youre interested in them. Whether a phone call, email message,
letter or other communication, touchpoints build relationships.
And the best relationshipsthe ones that serve your needsalso
serve their needs.
So become familiar with your prospects. Listen to their concerns.
Discover their interests. Demonstrate your interest in them. Send
them relevant information. Drop them a handwritten note. Call
them to follow up on an inquiry. Thank them for their time.
Be that perfect date, one who is interesting, sincere, valuable,
trustworthy, and grateful. Your prospects will drop their other
suitors and commit to you!
MARTKFTING JIP #15:
IFADY, FT, GO!
If you dont have a website, youre one of only a few business
owners who havent joined the cyberage. Some 30 billion web
pages now deliver information, create leads, promote products
and services, entertain, share ideas, or conduct commerce
online. The total number of web pages has tripled in just two
years.
In the note business, a website wont likely find many prospects
for you. The Internet wont drive a lot of traffic to your site.
However, a website can be a powerful tool for marketing to
your potential customers. The mere existence of a website
helps establish credibility and engenders trustand it gives
you an exceptional vehicle for promoting your services.
Having a web address on your business card, letterhead,
and promotional materials tells your prospects that you run
a legitimate, up-to-date business enterprise. And when they
visit your website, they can feel all the more confident about
doing business with you. You can post your professional
experience, sales history, and testimonials. Cite awards and
specialized training, if appropriate. Add a blog, and report the
latest industry developments. Include a photo so theyll start to
feel as though they know you.
What else to include? You can offer plenty of useful information
about seller financing on a frequently-asked-questions page
(FAQs). For example, you can describe the process of selling a
note. You can list the reasons why your website visitors should
consider selling their notes. As important, you can tell them
why they should sell their notes to you!
So, get yourself a website, a domain name, and an associated
email address. Then put your web and email addresses on all
your printed materials. And dont forget to invite callers to visit
your website, as well. Soon, therell be 30 billion and one!
MARTKFTING JIP #1o:
IAMILIARITY bRFFDS CONSFNT!
Imagine your doorbell rings. You answer it and find a stranger
standing there. He says, Let me buy your house for cash!
Now, the last thing youd say is, Okay. Write me a check. You
wouldnt sign your property over to a complete stranger, and
certainly not on the spot. Odds are, you arent even thinking
about selling your home. This encounter wont likely prompt you
to consider it.
Too often, note brokers approach their unsuspecting targets
as aggressively as this unwelcomed visitor. They wave cash
at unacquainted note owners, expecting deals to close when
its only the doors that do. Discouraged, they cross names off
their lists, never to contact these people again. Eventually, they
drop out of the business altogether, leaving promising prospects
behind.
Fundamental to your success as a note broker is your ability
to establish relationships. Familiarity leads to sales, so get to
know your prospects. Your first contact should be introductory,
not a cold call and a hard sell. Let them know who you are and
why youre interested in their situation. Approach them with the
possibilities their notes might bring them. Deliver friendly, timely
and useful information. Be interested and interesting, helpful
and trustworthy. Offer a free analysis. Show whats in it for them
to do business with you. Remember, even the Fuller Brush Man
demonstrated his wares before asking for the sale.
By getting to know your note owners, you can give them
personalized service. You might recommend, for example,
that the individual should consider a partial sale, receiving less
money but at a smaller discount, instead of relinquishing the
note altogether.
When note owners are familiar with you, guess whom theyll call
when theyre ready to sell. And guess what theyll say. Okay,
my friend. Now you can write me a check!
MARTKFTING JIP #17:
bFFP
Does this sound familiar? You call your prospect, eager to chat
about that note youre anxious to buy. Youre pumped up to go
live. But instead of a friendly hello, you hear, At the tone . . .
So now youre faced with that blasted recording. What do
you do? Do you simply hang up? Do you fumble through an
awkward sales pitch? Do you mumble your number and wait
for a call back? Do you even have a clue what youll say?
Heres why you must have a phone script in place before
you place that call: According to a recent survey by Selling
Magazine, more than 70% of all phone calls go straight to a
recorded message. That means that your odds of reaching a
living, breathing human being are only about one in four.
You should be prepared to leave a message with every call you
make. And to help you do so, here are some phone recording
tips:
Be pleasant and friendly.
Be brief.
Introduce yourself, cite the reason youre calling, and leave
your callback number--slowly and clearly.
Personalize your message. You can refer to the location of
the property, the size of the note, or some other specific piece
of information that shows youve done your homework.
Give them a reason to call back. For example, you might
offer a substantial price for the note; assure them theres
no obligation; or offer additional information, such as a free
report on the benefits of selling now.
Before you get another beepin phone message, prepare
your response. Leave behind a well-crafted recording so your
prospect will want to hear more. Next thing you know, your
phone will be ringing!
MARTKFTING JIP #18:
IROM bOMBS TO OTFS, JIMING IS VFRYTHING!
One of the best-kept secrets of World War II was the Japanese
Balloon Bomb. Our enemy built more than 10,000 paper balloons
and attached them to firebombs. Once filled with hydrogen, the
balloons floated across the Pacific Ocean. About 1000 of them
landed in North America, mostly in the Northwest. Two of them
drifted all the way to Michigan!
The balloon bombs were designed to set the United States on
fire. Our government took the threat so seriously that it dispatched
nearly 500 military aircraft as interceptor planes. In addition,
2700 soldiers were assigned to extinguish balloon-bomb fires.
Yet the weapon system was a complete failure.
Why? Because the Japanese launched their secret weapons
from November 1944 through March 1945 thats right, during
our wet, winter months. Only a few minor brushfires occurred,
despite the incendiaries that were scattered widely over the
United States.
Having heard nothing about the fate of their balloons, the
Japanese abandoned their potentially devastating weapons
project. Soon, our dry season was on its way in. Had they only
waited . . .
The lesson here: Timing is everything.
Whenever your note owners say theyre not interested, that
might be true today. But in a month or two, maybe more, their
circumstances could change. A medical emergency, relocation,
daughters wedding, sons college expensesyou name it
could result in a very different response. Even some time for a
little afterthought could make a difference. Dont write them off.
Instead, give them time to reconsider.
Dont make your communications a seasonal activity, or worse,
a one-time event. If a prospect says, No, it might really mean
No, not now. In a few months, you just might spark something.
MARTKFTING JIP #1:
IFACH CUT AND JOUCHPOINT SOMFONF
Here, kitty, kitty, kitty, kitty . . . If youve ever owned a cat, you
know that one here, kitty is never enough. The feline mantra
requires at least three repetitions, maybe a dozen, to achieve
its effect. Sometimes, kitty never responds, no matter how
often you call. Nor how loudly you yell. Nor how determined
you sound.
The same is true for your prospects. Call them once, and they
wont come running to you. More likely, they wont respond at
all. Like cats, prospects are skilled at ignoring their pursuers.
Being loud or determined wont help. It usually requires several
contacts e.g., sales letters, postcards, phone calls, and email
messages -- to get the note owner to respond to you.
Each contact is called a touchpoint. Touchpoints are
invaluable because they help establish your identity as a
serious note broker. Well-crafted touchpoints will get your
prospects attention, create interest in your offerings, spark a
desire to learn more, and prompt action.
As you might guess, it takes multiple touchpoints with the
note owner to reach a transaction. Some studies suggest at
least five touchpoints are required; others call for seven. Your
prospect might need even more.
Regardless, one touchpoint is never enough. You can prove
this to yourself by answering: What commercials do you recall?
What direct mail do you remember? What ads have you seen?
Odds are, you were exposed to numerous messages about
the products or services that come to mind. (And its likely that
a talking lizard was among them!)
For a successful note business, you need to create multiple
touchpoints. Together, theyll turn note owners into note sellers.
Here, client, client, client . . .!
MARTKFTING JIP #20:
JHF SFCRFT TO SUCCFSS!
Youre about to learn the real secret to success. Ready? Okay,
here goes: There are no secrets. Not one.
If you want to be successful, the lessons are already out there
for the learning. Just follow the lead of successful people in the
note industry.
Observe what the seasoned note professionals are doing and
how they do it. Attend industry conventions and courses, read
relevant materials, participate in workshops, and discuss the
note business with colleagues and the pros. Watch the news
for economic trends and real estate developments.
Become an expert at marketing your services in ways that
will get the attention ofand a positive response fromyour
prospects. How? By analyzing the strategies of the seller-
finance experts. Do they market through intense direct mail
campaigns? Follow leads aggressively? Offer free reports and
cash bonuses? Maintain an active and comprehensive website?
Identify prospects through scrubbed database searches?
You can also learn from the experts mistakes. Youll avoid
costly pitfalls by gleaning insights from their experiences rather
than learning from your own mistakes.
Among the things youll learn is that learning never ends.
Youll learn that times change and so does the business. What
worked before might not any more, so the successful note pros
change with the times. Youll also learn that you must put time
and energy into your business, that you should never give up
at the first no, and that its all worth it in the end.
So, whats the secret to my success? Its no secret. I simply
apply the proven methods for finding notes and negotiating
sales. And since there are no secrets, you now know how to
profit from notes. Just follow my lead!
MARTKFTING JIP #21:
bUT WAIT! JHFRFS MORF!
Sound familiar? If you watched television during the 1950s
and 1960s, you couldnt help but catch Ron Popeil, hawking
everything from the Veg-O-Matic and Pocket Fisherman to
Spray-On Hair and Egg Scrambler in the shell. And you heard
this legendary line.
Beyond the sheer novelty of the Ronco products were Popeils
pioneering methods for marketing them. For example, when it
seemed as though the offer couldnt get any better, a voiceover
would announce, But Wait! Theres More! What followed was
an irresistible bonus: two for the price of one, free shipping and
handling, a lifetime guarantee, bonus accessories, or some
related gadget, absolutely free. If you act now!
We can learn a lot from Ronco advertising. The commercials
always delivered proof (product demonstration), proclaimed
exclusivity (unlike anything else), boasted superiority (better
than anything else), created urgency (for a limited time only),
presented a call to action (Call the number on your screen!),
and promised convenience (Operators are standing by!).
Perhaps most compelling, Popeil always stressed the
exceptional value of the item, in terms of consumer benefit as
well as the dollar value. One would be a fool to turn down such
a deal!
How effective are these methods? Ronco products have
generated more than $1 billion in sales.
When marketing your note business, think Ronco. Explain why
youre the superior choice. Show proof of your claims through
testimonials from satisfied clients. Offer a valuable bonus, such
as a free report or a small cash bonus. Add urgency by placing
a time limit on your special offer. Make it convenient to reach
you, day or night. And announce that that the offer is available
only from you. Soon, youll generate a better response from
your own marketing efforts. Ginsu knives, anyone?
MARTKFTING JIP #22:
CARD SMARTS
Whats the most important marketing piece youll ever use? Its
your business card! These portable billboards carry your message
directly to the consumer. In fact, your prospect will actually have
physical contact with your information.
Here are a few tips for getting the most marketing mileage from
your business card:
Quality: Spring for high-grade card stock and professional artwork.
Your business cards should also complement your stationery
and envelopes, with matching color and texture. Consider adding
premium accents, such as embossing or foil. Eye-catching,
top-quality cards earn a second look, and are more likely to be
saved. Better still, they suggest youre an established, successful
professional.
Content: Some cards dont even hint at the nature of the business;
others offer little more than names and numbers. Go beyond the
basics by including a meaningful message. Let prospects know
what you doand why they should do business with you. Include
a descriptive, positive and distinctive slogan that will compel the
reader to contact you. And dont forget your web address!
Flip Side: Note that 50% of your cards limited space is on the
back. Use that area to cite a testimonial, list your services, offer a
bonus, post your credentials, or provide other useful information.
Distribution: Include your card whenever you mail anything even
remotely relevant, such as a mortgage payment or other financial
correspondence. You never know whos on the receiving end.
(Perhaps someone with a note?) And always carry cards with
you. A chance encounter with a fellow passenger on a flight, for
example, could lead to a deal!
Collect Them: Whenever you meet another business person, ask
for one of their cards. Then follow up with a note referring to the
pleasure of meeting them. Before sealing that envelope, dont
forget to include your card!
MARTKFTING JIP #23:
UMBFR CNF AND CNLY
Do you remember when Avis, the car rental company, ran
commercials touting, Were Number Two? They grabbed the
competitive edge by declaring, We try harder! Aviss first-rate
campaign about a second-rate position boosted its business
bigtime.
But second place is rarely a plus. Often, coming in second is
more like being in the back half of a two-person horse costume.
We all know that Sir Edmund Hillary is recognized as the first
person to climb the summit of Mount Everest. But who was second?
That equally awesome feat was achieved by Hillarys companion,
Sherpa Tenzing Norgay. In fact, Norgay made Hillarys ascent
possible. Do you remember the second man on the moon? That
was Buzz Aldrin. (At least the name sounds familiar.) And some
folks would be hard-pressed to name the second president of
the United States. It was John Adams, who had also been vice
presidentthats right, second placeto George Washington.
Worse than second place, though, is last place. In the note
business, theyre one and the same. Miss a deal to someone
else, and youve come in last. No runner-up trophy, no silver
medal, no consolation prize.
The lesson? Strive to be first. Commit to doing whatever it takes
to ace out the competitionall the competition. Find top-quality
notes and market aggressively to their owners. Build relationships
with your prospects. Follow up on each call, email message, and
direct mail piece. Add value to your communications by sharing
free reports, no-obligation quotes, and other bonus offerings. Do
whatever it takes to convince owners to sell their notes to you
before your competition even discovers those gems.
Become number one by conducting first-rate marketing
campaigns and providing first-rate service. When conducting
your note business, move to the front of the horse!