CA Option Money

[Kimberly 0]

I just got off the phone with a fsbo. He bought the house a little over 1 year ago. He's moving to another state for a better paying job. His asking price is just under 6% over what he paid for the house. When he heard the amount of the option money/assignment fee he goes, "WOW! That's more than a Realtor makes." He wanted to know why I should get that much. I said it's because "I can get your house taken care of in 2-4 weeks, not 4-6 months like a Realtor."

 

Can anyone think of a better/more appropriate response? That shouldn't have been it. Realtors commission is 6-7% here, although there are some flat fee that are $3,000. My figure was 3-5%. I know what he paid and he can't afford an agent without taking a hit financially.

[Mr.B 0]

I wouldn't even mention my "fee" until it was all settled. I would basically agree on a sale price with the Seller then just add my Consideration fee on top of that. Then if the seller questions it, just tell them "You didn't think I did this stuff for free did ya?"

 

~Mr.B

[mpine 0]

I went with....

 

Frances, A realtor will take 3-6% wether they sell the house or someone else sells the house. With me, I only get paid when I deliver, and then it is the buyer who is compensating me never you.

 

Win-Win... no realtor fee, top dollar...

 

It did get me in the door and it got her to drop her listing with her realtor a month early.

[Kimberly 0]

I wouldn't even mention my "fee" until it was all settled.  I would basically agree on a sale price with the Seller then just add my Consideration fee on top of that.  Then if the seller questions it, just tell them "You didn't think I did this stuff for free did ya?"

Mr. B,

 

I didn't mentioned my "fee" until he asked. While it is true I was born at night, it weren't last night! Well, except for the Ipod. He wanted to know how I got paid. I went through MC's, "I expect it to be in the _____ to _____ range" script. That's when he went "Wow! ..."

He may just be greedy and to get it I may have to offer to split the money -- nope, not unless he asks or I think I'll lose it altogether.

 

 

Mike,

 

Frances, A realtor will take 3-6% wether they sell the house or someone else sells the house. With me, I only get paid when I deliver, and then it is the buyer who is compensating me never you.

 

Win-Win... no realtor fee, top dollar...

I'll remember that when I call him tomorrow to, ahem, assist with the decision making!

 

Thanks guys,

 

Kim

[Adam King (MI) 1]

Kim,

You just weren't talking to a motivated seller. Simple as that.

 

There's a line Barry and I came up with a year ago about CAs.

 

Mr. and Mrs. Seller, we can move your property faster than any other way, get you more than you could any other way and no out of pocket expense to you.

 

End of story.

 

If they still have to know how you get paid, (Which eventually they will find out) you can work with it when that time comes. If they still have a problem with you getting the whole option (Which happens quite a bit), make sure you have your minimum and stick to it.

Regards,

Adam

[Kimberly 0]

Adam,

 

You just weren't talking to a motivated seller. Simple as that.

Probably so, however this guy goes South October 1.

 

Mr. and Mrs. Seller, we can move your property faster than any other way, get you more than you could any other way and no out of pocket expense to you.

That is exactly what I should be emphasizing more than anything else, and I haven't. Thanks Adam!

 

If they still have a problem with you getting the whole option (Which happens quite a bit), make sure you have your minimum and stick to it.

I'm greedy like they are and want the whole thing. They'd better have a good sob story if they want some of it. They wouldn't ask a Realtor for part of the commission, which is larger percentage wise and coming out of the seller's net.

 

Kim

[puls1234 0]

Kim,

 

There is a secret to doing this on the CA. The key is not to mention money even if he asks you. What I do is tell him before hand that what is so wonderful about this mr. homeowner is that the tenant buyer pays me and not you! End of story. No more said. Finished.

 

Then you go on to tell him the other benefits...

 

1. T/b does all maintenance

2. No realtors fees!

3. No closing costs!

 

Its that simple.

 

Pete

[Adam King (MI) 1]

Kim,

 

I'm greedy like they are and want the whole thing. They'd better have a good sob story if they want some of it. They wouldn't ask a Realtor for part of the commission, which is larger percentage wise and coming out of the seller's net.

 

There's nothing wrong with being stern on taking all of the option. That's a lesson that I learned too late, but still don't regret. There are also advantages to "not" taking it all, but that's only a personal opinion and deals with legal stuff that may or may not happen.

 

I really like what Pete has been doing with his approach to CAs. I have just done way too many CAs my way before I was introduced to MC's. Also, mine disclose who gets what and how it works before we even start looking for a tenant/buyer and this sometimes opens me up to "we want some of the option also". I have continued to use this method instead of MC's primarily because MI is such a big disclosure state and I have been given praise from my attorneys for doing it this way. This doesn't mean in any way that my way is better than MC's. If anything, my way is much harder, more complicated and set up for more liability for the un-experienced. It took me a long time to get the documents right and MC's are simple right out of the box.

 

Again, Pete's method of sales is fantastic. Create the system, stick to it and people usually will go along with it. He is living proof you can make a good living out of nothing but CAs.

Regards,

Adam

[Kimberly 0]

There is a secret to doing this on the CA.  The key is not to mention money even if he asks you.  What I do is tell him before hand that what is so wonderful about this mr. homeowner is that the tenant buyer pays me and not you!  End of story.  No more said.  Finished. 

 

Then you go on to tell him the other benefits...

 

1.  T/b does all maintenance

2. No realtors fees!

3.  No closing costs! 

 

Its that simple.

Okay Pete,

 

Here's what I'm doing. I make the call and follow the script in the manual -- altered per what I found on an older post to adapt the script for CAs -- works great, 1 out of 5 say work the numbers. When doing this part, "I get paid by the tenant/buyer" is my answer. Sellers accept it without a hitch.

 

It's when I'm calling back with the numbers that I'm mucking it up. I'm guessing I'm explaining more detailed than necessary.

 

When going over the numbers with them, should it just be:

"Mr/Mrs Seller with a Lease Purchase you'll net $178k to $182k with no closing costs, no maintenance and repairs and no Realtors fees! Now Mr/Mrs Seller, selling on your own like you are, while you don't have any Realtor's fees, 99% of traditional buyers aren't going to come in and offer you your full asking price. They've been taught they are supposed to haggle over the selling price, and not buy unless they can get you down some. The buyer's goal is your bottom dollar. How much do you think they'll try to get you to lower your price?

5%?

Okay, we'll use 5%. And Mr/Mrs Seller when selling the traditional way, you usually have to help the buyer with some of the closing costs. Let's estimate the closing costs you'd have to pay at 2%. So you are currently asking $170,500 - the 5% the buyer will want off the selling price and - the 2% closing costs, that leaves you with only $158,565. So Mr/Mrs Seller which sounds better to you? $158,565 or $178k to $182k with no Realtor's fees, no closing costs, no maintenance and repairs?"

 

The figures, not the words, are actual from a deal tonight. I know this guy isn't that motivated yet -- he's being also being transferred, but not until December. However, he has dropped his price a lot for the neighborhood. He comps at $185k now. His company is providing generous moving benefits/allowances yada, yada, yada.

 

Kim

[Mr.B 0]

Kim,

 

  There is a secret to doing this on the CA.  The key is not to mention money even if he asks you.  What I do is tell him before hand that what is so wonderful about this mr. homeowner is that the tenant buyer pays me and not you!  End of story.  No more said.  Finished. 

 

Then you go on to tell him the other benefits...

 

1.  T/b does all maintenance

2. No realtors fees!

3.  No closing costs! 

 

Its that simple.

 

Pete

Kim after doing this, if the seller is still insistent on the Option Consideration being shared or split, I would simply challenge their motivation.

 

I would say, "Mr / Mrs Seller are you saying that IF I don't split up the Option Money Then we can't do business today?"

 

Then just listen, don't say another word.

 

If they say Yes then there NOT MOTIVATED! Say, "Mr / Mrs Seller I'm sorry you feel that way but I have to feed my family too. Give me a call if you change your mind.

 

Then walk away.

 

~Mr.B

[Kimberly 0]

I really like what Pete has been doing with his approach to CAs...<snip>...Also, mine disclose who gets what and how it works before we even start looking for a tenant/buyer and this sometimes opens me up to "we want some of the option also".

Pete,

 

Adams post brings up another point. The contracts have a blank for the option money and the date it was paid. I remember from the conference call earlier in the summer, you said (at least I think it was you) that you write in "to be determined" and "on a later date" or something similar. Aren't they then asking, "what's that and how much am I getting?"

 

Kim

[Doug Pretorius (ON) 9]

Kimberly, you're saying WAY too much! And that entire paragraph was negative, it sounds like you're trying to beat the seller down on their price like investors do. Or at the very least you're trying to prepare them for a disappointment.

 

I would drop all of that. When you call them back, here's what I'd say (actually, this is exactly what I DID say, which got me the appointment with my now infamous seller )

 

ME: "Hi Mr Seller this is Doug. I did my research on your house and the area and everything checks out."

 

SELLER jumped in: "What research did you do?"

 

ME: "I verified prices on comparable houses. Now Mr Seller, I need to see the house, whats a good time for us to meet?"

 

SELLER: "Can you make it tonight?"

 

ME: "Great. About the numbers: I can get you $164,500 with $1,250 a month for 2 years. $300 of the $1,250 will accumulate towards the tenant/buyers down payment."

 

SELLER: "Sounds great!"

 

ME: "Ok, see you tonight."

 

 

Moral: Don't badger the seller about their price, talking about 5% off here, and 2% off there. If their asking price isn't in line with your comps, just ask them to comfirm where/how they came up with that price because it doesn't match up with your research and you want to be sure neither of you are missing something.

 

If their price IS in line, then tell them everything checked out.

[Kimberly 0]

Doug,

 

Thank you very much -- at least now I know where I was messing it up and can fix it.

 

THANKS!

 

Kim

[Mr.B 0]

Not to be Capt. Obvious here, but in a CA do we really care how much the seller is selling the house for?

 

I think in a CA situation I would simply find out how much the seller whats to get for their house, then add my fee plus any rent credits (if thats something the sellers wants to do) on top of that price. If their house is a 100k house and that puts them at 130k does that really matter to me in a CA situation? No. I personally don't care how much they want to charge for their house at this point. If they say gee I don't know that we could get someone to pay that much for the house, then I would ask if they would like to go down on their asking price.

 

In the end its up to the T/B to do their Due Diligence.

 

Just a thought.

 

~Mr.B

[Kimberly 0]

Not to be Capt. Obvious here, but in a CA do we really care how much the seller is selling the house for?

Mr. B --

 

Do you want YOUR name associated with grossly overpriced houses that don't sell?

 

If the homeowner is way out of line, and you add Option Consideration and Rent Credits on top of that, the price will be so far out of line there's NO WAY a buyer could qualify to purchase it.

 

I think it would be better to go after those who are realistic and motivated. They'll get more out of their house. The buyer, if he behaves, will have a true opportunity to purchase a house. You've helped both the seller and the buyer, and you are building a good reputation in the community so folks will gladly send you referrals.

 

Kim