This idea and concept is borrowed from Tom Henderson and Lawrence Tepper, two seasoned pros in the note business.
Value – “The monetary worth of a thing.” So says Webster’s dictionary. Webster’s goes on to give eleven(11) definitions of the word value.
But in the minds of many note holders, there is no discrepancy as to the value of their note. The value is as they see it, based on their perception of the quality of the terms agreed upon, their buyer, the property condition, the neighborhood, price and market conditions, etc.
But, value means different things to different people. The payor – the person who bought the property, living in it, and making the monthly payments, may have a very different perspective on what he feels is the value of the note. In part, this may be based on the nature of the relationship between the two, and how easy or difficult the negotiations were.
How about a note investor? He is an outsider looking dispassionately at the seller, buyer and property. He is risking capital. Think he may have a slightly different feeling as to the value of the note the holder wants to sell?
How about a note appraiser? He does not own the note. He does not want to buy the note. He is being asked to give his professional opinion – for a fee – as to the value of a particular note. He has no skin in the game, if you will. He is several steps removed from any interested parties. Think his view of value might differ from the noteholders?
How about heirs? They invested nothing, and one day a note is part of an estate they are about to inherit. If the heirs have different needs, live in different cities, have different levels of education or business experience, do you think there may be a difference of opinion as to the value of the estate note?
If a noteholder has an urgent business opportunity, with a resulting urgent need for cash, might his opinion of the value of his note be different if that urgency did not exist? We know the answer.
At some point in life, we have all been in a situation where we say to ourselves, as sellers, “My “____________” is worth more than your “___________.” It’s just human nature to have a skewered view of our possessions. The key is to be open to the possibility that our emotion is getting in the way, and we might be wrong.
Remember, beauty is in the eye of the beholder!
