Here is a little peak at life in the note buying business.
In January I received a phone call from a man. He told me he was 85 years old and that he had a few million dollars worth of notes and property that he was considering selling. In particular, he said he had 4 notes that he was willing to sell as a package. He would not sell them individually. Plus, he told me he would be willing to sell them for 95% of the remaining principal balance.
I responded by saying I knew nothing about his notes and asked if he had ever sold a note before. He said he had been a builder and real estate broker for over 40 years and certainly had sold notes before. So I said that he would surely be aware that in the current marketplace no-one will pay 95 cents on the dollar for a note. In a very courteous way, he offered me his cell phone number, and said if I or anyone i knew would be interested in paying his price, please call him. He thanked me and hung up.
In July, this gentleman called me again. He began by reminding me he had called me in January and wanted 95% for his package of notes. I told him I remembered him. He then said he was willing to sell his 4 notes for 85%. Would I be interested?
At this point, I am thinking two things. First, something has happened in the last 6 months that is bringing this man around to some semblance of reality. Second, he is fishing and I will waste my time talking to him.
I choose option 1 and try to get him talking.
I find out that he and his wife are in a big downsizing mode. They are considering a move to Hawaii. They want to sell everything except a condo they own here on the mainland. He also tells me he will be receiving chemo treatments beginning the following week. So I guess I learned his motivation.
Here is what I discover about his package of 4 notes. 2 properties were sold to a contractor who works for him. The other 2 were sold to a disabled veteran. Each of the properties were sold about 4 years ago with little or no down payment. The current values are less than the note balances. The interest rate on 2 of the notes is 4%; it is 5% on the other 2. The property taxes on all 4 properties are in arrears. He believes the credit situation of his 2 buyers is poor, though he did not obtain their credit scores. The contractor has a huge unpaid medical bill and the seller says he would not be surprised if a lien has been placed against the contractor's home.
The good news is that all due payments have been made.
After gathering all this information, I summarize for him by saying the issue is not whether he can get 95% or 85% for his notes. The question is whether anyone in the note buying business would want to buy his notes at all! Why would anyone want to throw their money into this mess when they can find a more stable investment elsewhere?
He remained stoic throughout. I am sure he has done a lot of negotiating in his career, and it was coming through the phone line. I liked him and I think he liked me. I told him I would make a few calls, but I expected no interest or perhaps interest in the 50%-60% range. I asked him if he could stomach that based on what we knew at this point. He told me to do what I could.
I called him several days later. I had a potential buyer who would be at 60% maximum, subject to documentation. He said he wanted to talk to his wife, and if he didn't call me back in the next day or two, then we have nothing more to talk about.
15 minutes later the phone rings and it is my new best friend. He says he talked it over with his wife and they would be willing to sell for 70%. I thanked him, gave him my phone number again, and very courteously, asked him to call me when he was willing to sell at our price. He said he understood and we hung up.
I expect a call in January - keep you informed!
Regards,
Denny Stanz
760-245-5366
760-245-5367 fax
dennystanz@verizon.net
www.CaliforniaNoteBuyerLLC.com
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