Posted by Jim_NC on December 13, 1998 at 12:17:20:
It all really boils down to how motivated the seller is and why they are trying to sell their house. The biggest factor on whether they’ll l/o you their house is debt relief. If the seller is moving away for a job transfer and has no choice but to leave the house vacant a l/o sounds really good to them. After all, they are going to have to live somewhere else and make rent or house pmts on the residence they move to. If you don’t make the house payments for them who will? HE will. Most mortgage co. will give the seller credit towards their debt to income ratio if they have the house rented. Another good scenario is someone who owes close to what their house is worth. They are not selling expecting cash out of the deal. They just want out of the payments. It’s just a matter of convincing the seller that they will not have any problems with doing a l/o. They are not “landlords” because you take care of all the “landlording” things. If you run accross a seller who has 30K equity and wants his cash NOW to put down on their new house, he will probally not do a l/o. Move onto the next one.
It’s just a matter of “listening” to the seller. If you let him/her talk long enough, they will tell you why they are selling and what their motivating factors are. Don’t do all the talking. Just LISTEN.
Ok all you lease optioners…I’ve got a question for you…
When trying to get a potential seller to lease option to you instead of sell outright, HOW DO YOU SELL THEM ON THE IDEA?
I know a couple of reasons are that the seller would be able to keep the tax write-offs on the property, and also when the house does sell, there will be no closing costs or agent fees, etc.
BUT, what about the question of “but I don’t want it to stay on my financial statement…I want to be able to get another loan for my new home…I don’t want the liability…I just want to get the money and not mess with renters…”
How do you successful Lease optioners sell the sellers on doing these?
I think this is probably the biggest key to these deals…if you can get the seller to agree to a L/O then the rest is history!
For the folks who say ‘but I don’t want it to stay on my financial statement…I want to be able to get another loan for my new home’ I usually tell them I can’t help them if they really need ‘new money’ to buy another home. But I also note, if they can’t sell, a renter who wants to be a buyer is better than a renter who is just ‘passing through’. It kind of rolls into the folks who say 'I don’t want the liability…I just want to get the money and not mess with renters…" I tell them, 'Sell the house. I encourage you to sell the house. (most of the folks are calling you b/c they CAN’T sell the house). But if you can’t sell the house or don’t want to sell it a real low price or with real estate commissions or if you have decided to try to rent the house, go the ‘rent-to-own’ route. The house ‘moves’ quickly, you get the opportunity to sell w/o real estate commissions, and you’ve got a tenant who wants to eventually buy (whether or not they will is another story). And the way most of the courses on this site teach (if you are doing a sandwich lease option), tell them your rent will be guaranteed during the term of the lease just in case of a ‘lemon tenant’ (no vacancies)… what management company will offer you that? Hope this helps.
A person willing to do a L/O does not want to or can’t make the monthly payment. Most of the motivated sellers will give up what little equity they might have to get out from under the monthly payment. Same for those that have a little more equity and want some cash in the future. If they want cash now they either keep looking for retail buyers or they discount for my cash offer.
Some of the least motivated sellers are those that want the cash to be able to get a new house. Some of the most motivated are those that are making two payments. If they are willing to let me in for little cash I can do a contract for sale instead of the L/O and many mortgage companies will not count it against their ratios.
I don’t think it is so much of a slick sales approach but more if they are motivated and the situation fits the criteria they I can help them. If they want all cash now and near FMV it is time to move on.
There will be closing fees such as title insurance and recording fees. If you have the seller pay half and the buyer pay half you do not incur any costs.