Presenting Offers – Part 1

Posted on February 10, 2014 by

In our last article, we talked about Constructing Offers, so now we have to decide how to present them. The first step is to decide what your offer’s going to be. If you’ll remember, you can either lease option the property from the seller, you can buy it with owner financing, you can take it subject-to the underlying debt or sometimes you can pay all cash when you’re dealing with FSBOs.

You make this call by looking at the math on the property information worksheets as we discussed last month and deciding what your exit strategy is going to be. Are you going to stay in the deal or get out of the deal by flipping it on an ACTS?

Your next step, when you can get a YES on the property information sheets, is either: I will sell for what I owe, I will lease purchase, or I will con­sider monthly payments. Then it’s time for you to pick up the phone and call the seller to verify the facts you have are correct and to have a preliminary negotiation of what the seller has in mind. This is where scripts are very important, and you must get to the bottom line as to the seller’s true intent before you can make an appoint­ment. Many people who are new in the business go ahead and make the appointment without being clear about whether the seller’s really motivated or not. And, even if they were sometimes, it’s not clear what we’re going to do when we get there even if the seller is motivated. So, before I go any further, let me back track just a hair.

If the seller says, “I will sell the house for what I owe on it”, you have a couple of options. You can either take over the debt subject-to or you can lease purchase it. Your decision will be based on whether there’s any equity left in the prop­erty and whether you see a monthly spread on the payments and, in some cases, the closing costs if you decide to take it subject-to and the seller is willing. For example, if you live in Maryland, you have a 3% transfer tax, so taking over a $200,000 debt would indicate $6,000 just in transfer fees. There should be a lot of equity in this deal for you to consider that. However, if you lease option it, there are no transfer taxes, thus no closing costs, so that might sway your decision.

If the seller says, “Yes, I will consider a lease-purchase”, then you have to call and confirm that and then discuss if they’re okay with your rent being the same amount as the underlying payment, and then the price, of course. Sometimes there is a lot of equity in the property and the seller is going to want a price considerably higher than that. And if so, you’re probably leaning more toward an ACTS deal if they leave little or no equity in the property. If they will leave equity in the property because the market value that you have investigated is lower than the asking price, then you may want to stay in it on a sandwich lease option, or in the case of getting the deed, stay in it and sub-lease it out to a tenant buyer.

And, then of course, if the seller says they will accept monthly pay­ments, that opens the door for owner financing, which is my fa­vorite kind of financing, and I simply want to know if they will take little or no down payment and a small monthly payment. I’ll likely stay in the deal and create an instant payday from a lease option deposit from my tenant buyer and a monthly spread for a lot of years to come while owning the property. If they want retail price and a higher payment and/ or a down payment, then I’ll likely sign it up and ACTS it and just get an assignment fee.

Now, I know I went through that pretty quickly, but you must un­derstand what I just said in this previous paragraph, or you will not be able to adequately prescreen prospects and construct deals much less present them to the seller. Of course, if you do not understand this, the smartest thing for you to do is to get to my Quick Turn School as fast as you can and spend four days doing nothing but making sure you understand how to process these leads after you get them.

I will confess the hardest job we have with students is not getting them to this point, but to get them to the house and get an agreement signed, largely because they’re a little unclear on what they’re trying to accomplish. Once you pass that hurdle, the rest is easy. You can screen them in seconds. You can make the calls in minutes, and then set yourself up with ap­pointments to go out and get the contract signed. And of course, until you do, not much else is going to happen.

Caution: be careful not to do too much negotiating while you’re on the telephone. All you’re trying to accomplish is to make sure the seller is motivated and to find out what’s on their mind as I previ­ously discussed. This is not the time to get into the nitty-gritty details and scare the seller off with too much conversation prior to a face to face meeting. If they’re motivated and flexible, go. If they’re not, don’t go. But, don’t work hard to talk yourself out of a deal because you don’t have all of the answers. Sometimes, you need to get to the house, make the acquaintance and get a relationship going, and that makes it easy to open up the conversation to get to the bottom line on many of the deals.

Okay, once you get past this hurdle, your next job is to make an appointment. I’ve enclosed an Appointment Script, and I suggest strongly that you use it. If you’ll take a look at it, you’ll see that I want to know if the person I’m talking to is the only owner, because if you go to the house and both owners aren’t there, you’re wasting your trip and probably creating a problem for yourself. Can you imagine one of the sellers trying to explain this to the other seller after you’re gone? So, don’t go unless all owners are present. Secondly, if you do, you can’t leave with an agreement because all owners have to sign the agreement, or you don’t have an agreement.

You’ll also notice that I point blank ask them, “If I come out and look at your house and I like it and you like me, are you ready to get the paperwork done while I’m there to sell your house today?” If I don’t get a “yes” answer to that, I am not going. So, the smartest thing for you to do is use the Appointment Script provided and make the appointment, and then you won’t be making trips to the house for nothing.

Ron LeGrandRon LeGrand is the world’s leading expert in residential quick turn real estate and a prominent commercial property developer. Ron has bought and sold over 2,000 single family homes over the past 30 years, and currently owns commercial developments in nine states ranging from retail, office, warehouse, residential subdivisions and resort

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