Saturday, January 30, 2010

Broker Chains: The Real Reason They Don't Work

If you've been working in distressed assets and Bulk REO for a while you've undoubtedly run into "broker chains". You know the scenario: a "guy" who knows another "guy" whose partner knows the seller (or buyer's) "rep", etc.

But why don't they work? Leveraging relationships is the key to success in any business. And personally I have a small core of "brokers" who I DO work with. So why do MOST broker chains end up a tangled mess. And more importantly how do you avoid them, or when in one, how do you navigate it.

The first thing to consider is the nature of communication. Ask yourself this question: "Do you know the formula for communication?" (Yes, there actually is a formula). And if you don’t, chances are your associates don’t either.

This formula is rather simple, yet VERY powerful. It consists of:

The Cause Point (the one originating the communication)
The Receipt Point (the one receiving the communication).
The "particle" (word, email, letter, etc.) that “thing” being communicated across space from A to B

These first three components most people intuitively know. But even here there can be trouble. What about the person who just “won’t listen”. They are unwilling or unable to be a Receipt point, thus they never “receive” any communication.

Some might believe that effective communication ends here. But in fact this is where it begins.

So what else is needed?

The first is Intention. Cause point A must INTEND that receipt point B receives the "particle" (word, email, letter, etc.). I'm sure you can think of a time when someone spoke to you or you to them, and you were thinking about or doing something else. Did you really get it? Or did they get you? Chances are there was very little INTENTION on the communication line. And thus that "particle" never really made it across. Without Intention, communication cannot happen (and I will show you why in a moment).

The next component that is usually missing is ATTENTION. If Receipt point B is not really paying attention to Cause point A (for any number of reasons least of which is they are trying to be a Cause point instead of the receipt point, meaning they simply are trying to talk, not listen) then they WILL NOT receive the "particle". They won't get the communication, even if they nod or gesture, or even say, "yeah, yeah I got it". And I’m sure I don’t have to mention the instance when 2 or more people are talking over one another. Without ATTENTION, no communication can take place.

The final component to a true communication is DUPLICATION which leads to UNDERSTANDING. And it is here that most communication fails, and what makes "broker chains" a true nightmare.

What is Duplication? Simply did the particle sent form A (cause point) arrive UNALTERED to receipt point B. If it made it unaltered, and the other points mentioned above are in, then it can and usually IS duplicated. You said “the sky is blue”, and they heard “the sky is blue”. Thus DUPLICATION and UNDERSTANDING.

Ever get on a deal and find out what you were told from another “broker” isn’t what the Buyer or Seller actually said. For if the aforementioned points are not IN, FULLY (meaning one is not aware of their existence, necessity, or importance), then the receipt point WILL NOT duplicate and understand what is being said (the particle being sent from Cause to Effect). Yet being unaware of any of this, they usually THINK they understood just fine, and then relay that "particle" of communication on in its ALTERED state as if it were the truth, fact or thing told to them. And thus we have the nature of broker chains in this industry and why they almost NEVER produce a successful trade.

This is a technical way to describe a phenomenon we all played as a kid: the game of "telephone".

This is also the exact mechanism of WHY most broker chains (and sometimes even direct buyer/seller communication) fails. One or more of these component parts are missing from the communication.

People are talking (sometimes a lot). But they are NOT communicating. No duplication and understanding was received. Nor imparted (as the formula works exactly the same way when Receipt point B, becoming now a cause point, returns a communication particle back to Cause point A, which becomes a receipt point). And with a breakdown in communication, all else will fail.

Knowing this data has saved me A LOT of heartache. When I am given information, I always assume the person relaying it to me did not fully or properly duplicate what they were told. This isn't to say they are bad or stupid (though sometimes both are also the case), but simply they are unaware of what TRUE communication consists of. The only way to avoid this situation is to track back to the "source" of the communication to make sure what you are told is in fact true. And then make sure all these points are in.

This one activity, if done by all trying to do business in this space, would eliminate 90% of the tail-chasing, mind-numbing aggravation so prevalent.

Why not try it?