First high end house

[Mark in St. Louis 0]

I just hung up the phone with a gentleman that received one of my direct mail pieces to expired listings.

 

I am meeting with him tomorrow morning at 8:00 am and need some advice on something.

 

He actually has 2 houses, each on a 3 acre lot that are side by side. They have been listed for over 8 months, and he has already moved on to Florida. So, they are both vacant and he now has 3 mortgages. Can you say M-O-T-I-V-A-T-E-D S-E-L-L-E-R

 

Anyway, he is fed up with the Realtor and wants to try something new. He is in town for tomorrow and then heads back to Florida.

 

First house is a 3/2/2 ranch and is close to the bread-and-butter price range for my area....$179,900. He said he need $1400/mth on this one to cover his mortgage. That is also witin the normal rental range for the area. So, I was going to go for a sandwich L-P on this one.

 

The second house is more of a high-end home. Its a 5/3 with a 4-car garage. 4500 sq/ft. This one is worth about $375,000 and he need $2500/mth to cover his mortgage. The house is obviously abouve average in price and $2500 is a bit above market rent. How shoul I approach this one? Should I go for a sandwich L/P or just know going in to shoot for a CA? I'm a little unsure how to present my services to a seller on this type of home.

 

Here's the thing, he dosn't want to deal directly with the tenant-buyers, since he lives in Florida now. Because of that, I'm thinking he probably wouldn't like the idea of a CA or even me assigning the contract.

 

Also, he want me to bring two sets of blank docs with me tomorrow morning for him to take back to Florida. He said when he cancels the listing, he will call, we'll work out the numbers over the phone, and sign and mail everything back to me. I told him ok. Any problem with that?

[MichaelC 160]

The calls keep rolling in........keep up the marketing efforts, Mark. They are obviously paying off and will continue to do so. This gent is clearly motivated. Don't be shy about cutting yourself a sweet deal here, while at the same time meet his primary need: debt relief.

The first property you described seems to be well suited to a sandwich lease. If your due diligence suggests you have enough of a spread to make this type of deal worth your while, then by all means go for it. Based on your post this guy needs that monthly payment covered. Take care of that first. Then, lock up a nice purchase price that gives you some fat back end potential. For example, it is presently listed at $180K. Well, it hasn't sold yet. If the Realtor brought him an offer of $165K do you think he would take it? Very likely. If so, factor in the commissions and closing costs of about eight percent and he will net about $152K on the deal. I'd explain just that to him and offer $152K. You're there right now, ready to business today. If he says no, (and he probably will), you have room to work your way higher. If the Realtor is asking $180K do you think you can ask even more since you're offer lease purchase terms to your tenant/buyer? If so, you have yourself a nice deal. As always, go for time, too.

The other property, based on your figures Mark, is upper end for your area. Meaning you are working with a smaller market of potential buyers and tenant/buyers. The lease purchase concept still applies, but your approach will differ. You'll need additional marketing time and so your start date needs to be pushed back. Personally, when I look at the whole picture I would opt for a Cooperative Assignment. Why be in the middle of a $2,500 per month payment?

You say the homeowner doesn't want to be dealing with tenants and toilets. All the more reason to explain to him the advantages of this type of deal: tenant/buyers versus tenants; no maintenance and repair responsibilities, etc. This is where your job as an investor turns into becoming an educator. Give him a copy of your Lease Purchase Advantage document, explain why this is a better way, and how his hands on requirements will be minimal. If you can succeed at easing his apprehensions regarding long distance tenants you just may get him to do the deal.

Finally, do not leave blank contracts with him, or any other homeowner for that matter. Never. Tell him it is against company policy, or that you've been advised against it by your attorney. But, with blank contracts in hand you may have just put the homeowner in business and he has no need for you. If he wants to review the contracts do so with him. If he says he wants his attorney to review them, ask for the attorney's name and phone number. Then, you can contact the attorney and see what it is he would like to know about your contracts.

[AngelMG 0]

Michael,

 

Finally, do not leave blank contracts with him, or any other homeowner for that matter. Never. Tell him it is against company policy, or that you've been advised against it by your attorney. But, with blank contracts in hand you may have just put the homeowner in business and he has no need for you. If he wants to review the contracts do so with him. If he says he wants his attorney to review them, ask for the attorney's name and phone number. Then, you can contact the attorney and see what it is he would like to know about your contracts.

 

We have made this mistake of leaving the documents with people. Sometimes it has worked out fine, they have still come back to us, but one person we think did exactly that and we should have known better because they were rental properties we were looking at with her.

[option8 0]

Mark in St. Louis (and Michael, feel free to comment)

 

If they insist on taking contracts to an attorney to review, you could also sign it up with the clause that the contract will be in effect unless you get written notification that it is cancelled and give them 48-72 hours to notify you. Most people say they want the attorney to review, but many actually won't, particularly if they are motivated.

 

Be sure to prep them for what their attorney might not like, but "it's company policy", "we must make a profit", etc.

 

Motivated sellers won't balk at this.

 

option8

[Mark in St. Louis 0]

Well, I guess I'll have to chalk this one up to experience.

 

I read the replies here (which I appreciate very much) after I got back from the appointment with the seller.

 

I gave him the documents to take back with him to Florida. I just though it would be easier that way. He was only in for the day.

 

He said he has informed his Realtor that he will be cancelling their contract by next weekend if they don't produce anything by then...which of course, they wont.

 

He seems motivated, and realistic. He hinted that he would be willing to take less than his mortgage payment each month if necessary. He realizes that it would still be better than paying all of it.

 

There are a couple of problems I see with the houses:

 

1) They are in a rural part of town that is a bit of a drive from everything.

2) The houses (actually the land) are in a flood plain because of a dry creek behind the property. When it rains very, very hard (5" + in a day then the 3 acre backyard floods to within 75' of the house. The house itself is elevated above the flood plain.

 

He mentioned to me that he is worried that if he doesn't get something done before Christmas, then the houses will sit until spring. He said he couldn't afford that and would probably lose them if that happened.

 

I'm happy to say that I presented the situation to him like you recommended in your reply Michael. Made me feel good when I got back to my house and read it.

 

I let him know that a sandwich lease purchase was possible on the smaller home (not my exact words of course), but the larger home may require me to assign the contract and terms to the tenant-buyer.

 

He was very familiar with everything I spoke of so I guess we'll just have to wait and see. I will be following up with him next Monday to see if he cancelled his Realtor agreement.

[MichaelC 160]

Mark, you handled it well. Keep us posted as to what happens when you speak with the homeowner again.

If they insist on taking contracts to an attorney to review, you could also sign it up with the clause that the contract will be in effect unless you get written notification that it is cancelled and give them 48-72 hours to notify you. Most people say they want the attorney to review, but many actually won't, particularly if they are motivated.

 

Be sure to prep them for what their attorney might not like, but "it's company policy", "we must make a profit", etc.

Very good ideas. Thank you, Option8.

[-Tony- 0]

Finally, do not leave blank contracts with him, or any other homeowner for that matter. Never.

 

my Mom-in-law use to get her resumes done on paper that couldn't be copied.

 

Then again I am not a good typiest so for me to have to type them out would take forever.

[pilot76180 51]

"We would like our attorney to reveiw these contracts" says the seller. "Fine, call him or her and let me know when we can all meet at the attorney's office. Our company has a trmendous amount of time and money in these contracts, and it is against company policy to let them float around. So let me know when we can meet with your attorney. You may also want to see if your accountant can meet with us as well." Let the seller know you aren't playing games here. You are a serious busness person and don't want to be wasting your time or toyed with. I let a seller talk me into that trap because they were nice. I haven't heard back from them and I will NEVER do that again. Now you have an attorney who doesn't have a clue about L/P telling them incorrect things. If you tell them to set up a meeting, they won't do it. It will cost them money to talk to their attorney.