Posted by Russ Sims on June 12, 2000 at 12:41:35:
Amber; Sooner or later you will come accross a seller who is so motivated that they won’t care if or how many “subject to” deals that you’ve done. They’ll just be happy that you can offer them a solution to their problem. Our first “subject to” started out as a lease/option. The seller was being transferred by the Army and was due to leave town in 6 weeks. We pitched the lease/option and said that we’d basically pay them what they owe plus closing costs, and they were ready to sign. Then we looked at their loan papers and discovered they owed about 8K more than they had said. We decided we couldn’t do the lease/option becuse there simply wasn’t enough margin. As it was there would have been a $100/month cash flow and a slim 13K markup. But with the added 8K on the loan balance? No way. So we left telling them that we were going to put our heads together to try and figure put a solution to the problem. In the mean time we researched buying “subject to” (thanks to Bill Bronchick and his “cash cow” course)and discovered that this deal would fly due to the enhanced margins a “subject to” deal would allow. So we called the seller back and told them that we had some good news (they had been eagerly awaiting our call!). We met with them, explained the “subject to” purchase, and they readily agreed. Within 3 weeks we had a buyer with 5K down (we are selling on a land contract at 9.25 % interest) and the cash flow from this property is $225/month. It would have been $100/month as a lease/option!! The point here is that we were the only ones offering a solution to these sellers.We must have presented ourselves professionally because they never questioned our track record.
People like this are out there! After one or two you will have references to give from here on. For the present, never give misleading “false” references to sellers. When they ask about your background, be honest with them. Say that although you haven’t bought any homes this way before, you are someone they can feel good about doing business with. Then produce a couple of letters of references from past employers, school teachers, or family friends. If your credit is good, offer to let them see your credit report. Do you have a spouse? If so drag him to the initial meeting with the seller. I did this with my wife when I first started. She’s not really into the real estate thing but she gladly accompanied me on those first meetings. The common perception is that married people have more stability. Couples are more likely to want to do business with couples.It really is true that after you get the first one under your belt, the rest come a lot easier.
I see no problem with leaving a sales contract with the seller to review. Allowing them to do this indicates that you have nothing to hide. In fact I suggest they review the contract at their liesure before signing. There’s no way I can produce a sales contract, trust agreement, warranty deed to trustee, assingnment of beneficial interest form, etc, etc and expect them to fully understand all of it and sign on the spot. It might work for some but not for me. A lease/option is simpler so I’ve signed many on the spot…but a “subject to” deal is more involved.
I usually pitch the lease/option over the phone, because there is the least resistance to it. Then I meet with the seller and explain the benefits od selling “subject to”. Make sure the seller is at least predisposed to discussing lease/options before meeting with them. Because 9 sellers out of 10 won’t want to discuss it at all, and you’ll waste a lot of time being rejected by these folks…Good Luck
Russ