The past couple weeks have been pretty slow with calls, in fact I just got my first 3 calls in the last 2 weeks today. Unfortunately two of the calls told me to take them off the list as they either did not own the house or did not want to sell the house. The other caller wanted to know how I knew the house was for sale since they just inherited it. I will call this person back tomorrow to explain how I “knew” the house was for sale although I risk getting yelled at.
Usually when I talked with a caller, I like to present myself as an Option that can offer them multiple Options. In my first contact with the seller I don’t want to come across as a sleazy investor, but more as someone who can offer them a few ways to get out of their situation, what ever that situation may be. In a book that I read over my vacation, Switch, it describes a scenario where if you offer to many options to someone it only serves to overwhelm and confuse them. This leads them to reject fully reject you in order to take on a more familiar and safe option. So be careful to not overwhelm them. Have you ever had trouble deciding which new restaurant you wanted to eat dinner at and then decided to go to your tried and true favorite? I know I have.
After talking with quite a few other investors at the meetup meetings, I’ve come up with 4 options I can offer a potential seller that would lead to a win/win situation for the both of us.
All Cash Offers
This option is designed to place money in the hands of the seller quickly. The benefits to the seller are a quick and certain close, no need to worry about financing falling through. Sellers who are likely to take this offer are ones who need out quickly for a variety of reasons such as pending foreclosure, money to pay bills or just don’t want the hassle of maintaining a house in another state.
A great option for the home owner who can wait for a payday. Owner financing is when the seller, in essence, becomes the bank and finances the purchase of the home minus any down payments. Terms can be very flexible and be setup to suit both the seller and buyers needs. For instance, you could agree to pay a 20k down payment, and then pay the remaining balance upon you selling the house.
With this option you will be able to offer the owner more money because you won’t need to pay finance charges to a bank or hard money lender. The seller will also be able to get some quick cash now and higher price for their house.
A final option I like to offer the sellers is to list the home (or refer the listing to another agent) to attempt to sell it for retail value. This is the most familiar option for the seller and if the above two options are rejected can still create a win situation for both parties. As investors this is our least favorite option, but money is money.
With probate properties I don’t think this option will ever come up because if a house can not be sold for what is left on the liens, it will need to be sold by the estate and then the remainder of the balance will be paid off by what is left in the estate. The killer here is that while a property is still in probate, a sale must be approved by a judge which complicates things greatly. I will say that it’s possible for a house to be sold out of the probate process but I’ve yet to actually witness this. However I do know a few short sale investors who would be happy to accept a lead if I come by one.
If you have been reading my blog for a while, you know that I’m trying to partner up with other investors until I get a few deals under my belt. This strategy really limits my risk and provides me with a great way to network with successful investors. With each of the options above I know an investor who will partner with me and take me through the process. The only down side is that I’m only going to be getting a portion of any profit, but that is a small price to pay for some awesome mentorship.
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I agree – people like options. And, having options provide avenues to create win/win situations. A lot of those “sleazy investor” type people go into deals having only one option – win/lose.Sure, sometimes a deal like this can be put together. But, it's only for the short term.
In a win/lose situation, there is always one person feeling cheated. And, believe me this is not good for business. News spread and word gets around. In the long term, these types of “sleazy investors”who only create win/lose situations get bad reputations and no one wants to work with them. And, having a bad repuation is not good for business.
Thanks for sharing the options you offer, good stuff!
While I agree that having different options is good, I also agree that having too many options will confuse someone and a confused mind always says….NO! (And at restaurants, I always have problems picking out what to eat….I change my mind like a billion times…too many darn options!)
I think I'm leaning towards, in my business, to have a few options for a deal but NOT to present them to the seller all at once. For instance, I have a plan A which is all cash, then if they reject that offer I'll say something to the effect of “ya know I was really thinking about your situation and trying to come up with a way to help you out and to get you closer to the price you were hoping for” and then BAM…I present plan B which includes owner financing.
Etc. etc. I think you get the point. Just to be completely honest and fair, I have never to this day in my 11 years of investing ever presented someone with more than 1 option when attempting to buy their house. So this multi-options way, will be something new to me completely.
Scott, this is great info. You have a knack for presenting information in a clear, easy-to-read, format, which appeals to me (and my academic, paper-writing background!).
I know that one question I've been trained to ask when talking to a seller is (after getting their asking price) “Are you needing this in all cash?”. It's helped me to see what they're really after.
Also, I had a probate property whose only option was a short sale! We couldn't offer the mortgage balance, and the estate didn't have enough money to pay off the mortgage. The only solution was a short sale, which she wasn't interested in, or for her to try to list it (which is the direction she went).
Another benefit I've seen with strategically offering different options to them is that, in the process, they feel educated and appreciative to you for shedding light on the reality of their situation. Nearly every single caller I've spoken to thanked me for taking the time to explain what their options were, why I felt those were their options, and how I came about thinking that.
That feels good!
My top goal, outside of being a successful investor is to always have a good reputation and to stay to my word. I believe by helping people and being sincere about it, you'll go a long way.
I agree with the approach you outlined for the most part, but it's important to not just rattle the options off one after another as one gets rejected. Be sincere and if one of your options fits their situation, suggest it.
Thank you very much Kelly. I always think I write like a fifth grader, always using small words and no fluff. LOL
That's good to hear about a short sale coming out of probate. I'll keep that option in the hopper
Agree 100% Scott. I would never just rattle off a bunch of different options. I'm usually pretty good in the sincere part as well (I'm also somewhat anal lol)
When you present options, it gives them the feeling you are there to help them. That's exactly what you are there for. If you are not there to help the seller or have that mentality it will ultimately show up. I haven't closed a deal yet, but if I can't help a seller, I get them in touch with someone who can. Build that solid reputation and deals will become easier down the road imo. Good luck.
Hey Scotty, I love giving options! One point I'd like to raise is that its important to write the options down on paper! I've tried having the conversation on the phone and its not nearly as effective as providing a written document (I do a letter of intent) that breaks it all down succinctly. It's much easier to have the conversation about the options when you're referencing the written document. It's so much easier to find out what's important to the person when you have a (written) starting point to work from.
When you initially get contacted by the seller do you go over any options then? or wait until you're ready to make an offer and then give them 3 offer options?
Scotty, I wait until I make the offer. In the “screening” conversation with them, I try to get enough information to know what they are motivated by based off of why they want to sell. In cases where there is no mortgage on the home I ask the seller “So what do you plan to do with the money once you sell?” That helps me to know what else they have going on and whether they may be interested in a seller financing scenario.