I Have A Commited Buyer.

[JCannon 0]

I have been corresponding with this potential T/B (from Craig's List) for a couple of days. Here is how it has basically gone so far.....

Hi,

Can you go three years with those terms, if so I will take the property for myself

.

 

Me

Doing a three year lease with the same terms will probably work for us. Let

me know if you are ready to move ahead with the deal and we can arrange a

final meeting at the house.

Just to clarify, the pricing and terms are as follows.

 

36 mo. lease

$1,300 per month (with 50% rent credits)

$6,000 non-refundable option consideration (100% of it goes towards purchase

price)

$250,000 - net purchase price after 36 months factoring in Option

Consideration and Rent Credits. That would make the initial Gross purchase

price $279,400.

 

The current market value of this house is at $250,000. So as you can see it

is a great deal for any Tenant/Buyer that would like to move into the

property.

 

If you can contact me via email or by phone we can figure out a time to

finalize the deal.

 

Thank you and I look forward to hearing from you.

 

Buyer,

Here is my offer:

 

$250 Purchase Price

$1300 mo rent $400 credit towards purchase

$6000 non refundable option consideration toward purchase

3 year lease option

Owed at end of three years $229.600

 

If this is agreeable I can meet a property tomorrow.

 

What do I do from here?

Do I ask the owner if he will settle for this asking price?

Three years from now this home could very well be worth $350,000 or more!

Should I counter offer with a slightly higher purchase price? Or maybe a higher rent rate, like $1450 for example? This will at least generate a measly $5400 more over three years for the homeowner. Or I could ask for $10,000 down. (6 to me and 4 to owner)

 

Who do I talk to first? The Seller or the T/B?

 

I do have some other prospects but none right now that give me much reason to get excited.

[Doug Pretorius (ON) 9]

JC, what are you doing?! You aren't a realtor or an FSBO, you do not entertain "offers". You are a bank, you dictate terms!

 

Tell him you weren't making him an offer, you were telling him what he has to pay if he wants the house, and then ask: Do you want this house? If he says yes, tell him to meet you there with a cashiers check.

 

If he doesn't show up, call him and tell him you have another deal, he can be you're new bitch

 

Unfortunately you gave him the impression that you are willing to let him dictate terms when you said yes to 3 years on the same terms. In the future ALWAYS exchange something of higher value in any negotiation.

 

Here's an example:

He wants 3 years, so you drop the rent credits to 25% and increase the price by 10%. And while you're at it, increase the OC to $7k, since you'll have to sell the new terms to your seller and you should be compensated for that.

[Sold ! 0]

36 mo. lease

$1,300 per month (with 50% rent credits)

$6,000 non-refundable option consideration (100% of it goes towards purchase

price)

$250,000 - net purchase price after 36 months factoring in Option

Consideration and Rent Credits. That would make the initial Gross purchase

price $279,400.

 

Faulty and fuzzy logic. WAAAAAAY too much information for a TB. If anything, work it BACKWARDS from $279,400. That would give him a $250K out of pocket in 3 years.

 

Do you actually HAVE enough spread and/or a hot enough market to be able to offer 50% rent credit for 3 YEARS?

[MichaelC 160]

JC, I agree with what's been said. Don't get into the habit of negotiating deals with prospects, especially if you are working a CA. And you don't want to be running back to the homeowner asking to change this or that. Your credibility becomes suspect when that happens.

There's an old expression in real estate: Terms gets Price. Meaning, if I am giving terms, I'll be receiving top dollar in exchange. What you've done now is open the door for this t/b to begin making all sorts of demands and changes to various points in the contract. In the future when this happens, politely explain to the t/b that the terms are already quite generous and fair. Remind him of the low down payment required, the rent credits, the year's time before having to finance, the appreciation that is going to them, etc. That should squelch the t/b's need to try and nickel and dime you.

As for this particular t/b, I would get back to him and explain that you spoke with the homeowner and he is steadfast in his terms. Take it out of your hands, while appearing to be sympathetic to the t/b. Kind of like good cop/bad cop. "I want to help you, guy, but this owner knows he is already offering a great deal."

Then, go and repeat all the advantages of this deal. If he is smart, and if he is serious, he'll give what you are saying a lot of thought.

[JCannon 0]

Doug, Sold, MC, thank you for the replies. I have a hard time telling the T/B's "This is the deal, take it or leave it"

 

I am preparing to send him this email. Please let me know if you would add or take anything away before I send it.

 

I spoke with the homeowner and he is steadfast in his terms. He may consider a three year lease but he wants to receive $250,000 at the time of close.

  

     I want to help you get into this house but the owner knows he is already offering a great deal.

 

Low down payment, rent credits, having two years to finance the house and especially keeping ALL of the equity for yourself since $250,000 is today's market value on the home, make this a fantastic deal.

 

    Let me know if you are still interested.

 

    Thanks for your time.

 

Thank you all.

[MichaelC 160]

JC, I don't want you telling any prospective t/b to "Take it or leave it." In so many words, perhaps. But do it in a kinder, gentler way...unless you're dealing with a real wise guy. Then all bets are off and play with his head.

Your email response is excellent. Direct, rational, and to the point. I'd go with it as is.

[JCannon 0]

After sending the current email, this is his lates "offer"

 

all sounds good but i would like the $6000 earnest deposit to come off the 250k purchase, so I will owe 244.000 at end of three years and I can agree to that.

 

Thanks,

 

With this, all I would need to present to the owner is $244,000 net to him instead of $250,000 and change from a two year to a three year lease.

 

Is it time to go to the seller? Or should I make up the $6000 by increasing the rent?

[MichaelC 160]

JC, for my sake, tell me once again the original terms of this CA.

[-Tony- 0]

I'd tell him: Look the appreciation rate here is blah... the house is worth 250k now, in three years the estimated price of this property is blah... and you want to squabble over 6k after I gave you a years appreciation. I don't mean to be rude you seem like a nice person but, I will need to get a lease application and run your credit before we continue with this.

 

I hate to see you miss this house because you don't like my more than generous terms.

 

I have attached a lease apt if you could fill it out and fax it to 1-xxx-xxx-xxxx

 

Thanks

JC

 

personaly I would have cut the rent credits out after 12 month or with a 3 yr l/o explain you would reduce the rc to 25%

 

It seems you are catering to this guy, don't leave it open to discussion.

 

what is your average appreciation...tell him and show him the math (only because you gave him to much info)

 

OR

 

Email back sorry we couldn't help you thanks JC

[JCannon 0]

The original terms are as follows

 

Purchase Price - $272,600

Rent - $1,300/mo. w/ 24 month lease and 50% Rent Credits

$7000 Option Consideration

$250,000 net to seller (if all 24 months are needed to purchase house)

 

As far as my market analysis, rent rate is market value and Comps. on this property are at $240 - $250,000, depending on lot and landscaping. Base price on new builds, not including lot, landscaping and upgrades is $238,900. Homes in this area have been appreciating from 20 - 50% per year over the last two years. The market will probably cool down a little to maybe 15 - 25% for the next couple of years.

 

The lease begins Feb 1st, so at this point I am willing to take as little as $4000 just to get this 1st deal done.

 

Tony, I see your logic and I look forward to having that much confidence in my deals.

 

The way I see it is all I need to present to the seller is that he will net only $6000 less and he will see 12 more months of cash flow. As far as the seller knows all is well. I haven't come to him with any hint of needing a change in the terms and ideally, I don't want to but if the seller says yes, I get $6000

[-Tony- 0]

with appreciation like that man I would turn that into a slo pretty quick specially if I could get 3 years.....

 

The way I see it is all I need to present to the seller is that he will net only $6000 less and he will see 12 more months of cash flow

 

Sorry but wrong..... the purchase price will be reduced by 6.5k more in rc's so his net loss will be 12.5k

 

this is my opinion but I would set it up like this 12 month l/o 310k 1300 rent (I would try for 1500 at least) 100% rc w/ 10k option 75% w/ 7 - 9.99k (maybe tie the 1500 rent in with the 100% rc's as well)

 

Put an add like this

 

Rent-To-Own 100% Rent Credit

build equity faster with no Bank qual

4/2/2 xxxxsqft great area call 123-4567

 

Don't for get market rents go up every year (75-100) so with this bozo trying to 36 month your loosing $ there too....

 

in three years using 20% appreciation the house should be worth right around 430k (that is why I say get the slo). Do you think that would make the owner happy if you said your working with him to sell his house for 250k and it's worth 430k???

 

I think this guy is playing you.....

 

Is this an up scale house or average working class area.....market it appropriately

[JCannon 0]

with appreciation like that man I would turn that into a slo pretty quick specially if I could get 3 years.....

Is this an easy transition even though I have CA docs all in place?

Sorry but wrong..... the purchase price will be reduced by 6.5k more in rc's so his net loss will be 12.5k

I was planning on increasing the gross purchase price to allow for the extra R.C's.

 

I know I have a deal here that has potential for bigger profits than just the $7000 I am looking for. For personal financial reasons (not loan sharks ) I need to get this deal done A.S.A.P.

 

The only draw back with this property is it is only a two bedroom. It does have a den though.

 

What is my next step with this guy, something like, "After talking with the owner and going over our market analysis again he has concluded to stay firm on $272600 purchase price, $6000 down, $1300/mo. with a 24mo. lease. This still allows for huge equity build up over the next two years."

 

This guy seems to be stuck on a 36 mo. lease. Should I add, "if you are more interested in a 36 mo. lease we will have to increase the purchase price to 295,400."

(272,600 + 7,800 RC + $15,000 more net to seller)

[MichaelC 160]

JC, Tony has taken a harder line than I have advised, but I must say I totally agree. I'm asking you to show more patience than I would if I were in a similar situation, because I know this is your first deal and you are anxious to get it closed. The other thing is that you opened the door by agreeing to any sort of concessions with this t/b in the first place. To try and turn around afterwards and say, "Forget about what I said previously. The original terms stand. Take it or leave it!", would have certainly cost you the deal.

There are any number of ways you can go with this deal and this prospect. I don't think you should go back to the homeowner, though, and ask for any softening of the terms. Based on what you wrote, JC, this deal is an excellent one as is for any t/b. Here is one suggestion:

Tell the t/b the agreement will stand as originally written. If a third year is needed, an extension clause can be written in to the Agreement. The extension can be at the discretion of the t/b, in exchange for additional option consideration in the amount of ______. However, during that third year, the rent will increase to _____, no additional rent credits will be extended, and the purchase price will be ______.

What you are doing is giving him his precious third year, but "penalizing" him for doing so. Just a thought. If this all comes to pass, I can help you with the specific wording of this. Let me know...

[JCannon 0]

The extension can be at the discretion of the t/b, in exchange for additional option consideration in the amount of ______.

 

Is that additional consideration money paid when he extends the lease and is it paid to the seller?

[Kimberly 0]

The extension can be at the discretion of the t/b, in exchange for additional option consideration in the amount of ______.

 

Is that additional consideration money paid when he extends the lease and is it paid to the seller?

<{POST_SNAPBACK}>

Yes.