Recently I received a phone call from a note holder. She introduced herself then said, “I just have one question, and depending on your answer, this could be a quick conversation. What is your interest rate?”
I was taken aback for a second and then asked “I am sorry, what do you mean?”
She said “If I sell my note to you, what rate will you now charge my buyer?”
This note holder’s belief was that selling her note would harm her buyer, because we would change the terms she agreed to with him and charge a higher interest rate. She wanted nothing to do with that.
I explained that a note buyer buying a note is like a home buyer buying a home “as is.” Whatever warts the home may have, the home buyer accepts those warts. After the buyer takes possession, he can fix those warts. However, in the note business, when we buy “as is” – we buy the warts – and the warts stay.
We had a nice conversation and she felt better, but was not ready to to sell her note.
Since we are a small niche in the real estate industry, many people don’t know we exist or don’t understand our business. This lady’s question illustrates the point.
