Posted by HR on November 12, 1998 at 06:15:59:
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Educate Me On Sellers Thoughts - Posted by JLM
Posted by JLM on November 11, 1998 at 10:56:13:
When you are trying to do a L/O or buy and sell on a simultaneous close, how do you handle the seller? He knows i am an investor, so for a lease option, he knows that I am going to be trying to lease and sell it for more than I am paying him. How do you get him to let you show the house? If the seller understands that I will be L/O the house back out, I could see him/her not liking it but coming to grips with it. But for a Buy/Sell w/ a sim. close. Same question how do you get him to let you show the house if he still lives in it, knowing that I am going to be getting a higher price. If the seller finds out, why doesn’t he/she go around me? I guess I am trying to figure out the psychology of dealing with sellers in these situations. Also, how do you deal with the close on a sim. close? I really do not have the funds to close until my buyer closes, so how does my seller get his money or is this just paperwork, because it takes a couple days to actually receive the funds on both sides. Sorry for the long post. Just trying to learn.
Thanks,
JLM
Re: Educate Me On Sellers Thoughts - Posted by Ray Richardson
Posted by Ray Richardson on November 11, 1998 at 13:12:05:
I’ve been wondering the same things, JLM. I’m just learning about L/O’s but potential seller objections keep popping into my head:
“You mean we’re still responsible for any really major repairs?”
“You mean that at the end of our term, you don’t HAVE to buy our house?”
"You’ll be subletting it to someone else? How do I know they won’t trash the place? (do I now tell them “because I’m taking a fistful of option money from them that you AREN’T getting from me??)”
Sorry to muddy the waters further, JLM, but you got me going…
-Ray
Re: Educate Me On Sellers Thoughts - Posted by JohnBoy
Posted by JohnBoy on November 11, 1998 at 19:05:42:
“You mean we’re still responsible for any really major repairs?”
Mr. Seller, I’m coming in as a tenant and I’m also taking responsibilty for all the minor repairs so you won’t be bothered with phone calls in the middle of the night. If you were to rent this property out to someone else as a rental property, you would still be responsible for major repairs. You would also be responsible for ALL the minor repairs. You would have to deal with all the minor problems, phone calls in the middle of the night, renters paying late or not paying at all. You could end up with legal costs to evict any tenants that don’t pay. If they were to destroy your property you would have to deal with the repair costs from the destruction they caused. You would also have to deal with vacancies until you placed new tenants in the property. That means no income to cover your mortgage payments while the property sits vacant and extra money coming out of your pocket to pay for the damage they caused. How many months would you have to have a solid tenant in here paying on time to make up those losses??
When I come in to the picture I’m signing a LONG term lease. This means no vacancies for you, no phone calls in the middle of the night from problem tenants to fix minor repairs, no late payments to deal with. I take care of all this for you. Your contract is between you and I. If I have a problem with a tenant, I’m responsible for that tenant. If your property sat vacant any time during our contract I’m still responsible for the payments to you. I’m taking away ALL of the daily headaches a landlord would have to deal with. Certainly that has to be worth something, wouldn’t you agree??
“You mean that at the end of our term, you don’t HAVE to buy our house?”
That is correct, I would not be obligated to buy your property at the end of the contract term. But our agreement is for 3 years (or whatever time frame). What would happen at the end of that 3 years if I decided not to buy your property? For one, you would still own the property which in all likely hood be worth a lot more than what its worth today. That means you could sell it to someone else at that time to for more than you can sell it today. You could also sell it for a substantial discount and get the same price I would be obligated to pay for it at the end of our contract term. Thats about the worse case your looking at and I would give you 60 days notice prior to our contract expiring so you would have time to market it or list it with a realtor before any payments stop coming in to you. But in all likely hood that wouldn’t happen. I’d either end up buying the property myself if my tenant did not, or I would find a buyer myself before our contract expired. After all I would have a good amount of equity built up over 3 years to just walk away and give the property back to you. I do not take on all this responsibilty just to walk away from it at the end of our contract. The end is where I make my profit. If I felt there would be a problem with getting your property sold I wouldn’t bother with signing a long term agreement to start with. But if your really concerned about me not buying the property at the end of the term, I’d be willing to sign a longer term now if that would help with any concerns you may have. After all, the longer I pay your mortgage down the more you would make in the end if I ever was to not buy the property. Would a 10 year term be better for you?? 
"You’ll be subletting it to someone else? How do I know they won’t trash the place? (do I now tell them “because I’m taking a fistful of option money from them that you AREN’T getting from me??)”
Mr. Seller, you really don’t know if they would trash the place or not. But thats why your agreement is with me. If I place a tenant in here that trashed the place I would be the one responsible to repair it, not you. Your contract is with me, I’m responsible to you for anything one of my tenants would do to the property. Thats why I completely screen my tenants before I allow them to move in. I pre-qualify them to make sure they could get financing in the near future if they can’t qualify for financing today. The purpose of the tenants I place in a property is to purchase it. If not today, then in the near future, otherwise I don’t place them into one of my properties. I only deal with tenants that can get financed in the short term and I offer them a credit that applies to the purchase price as an incentive to purchase the property by the time their lease expires with me.
If I was having a problem with tenants trashing properties or tenants that don’t have a chance in getting the financing with-in a year or two, I wouldn’t be in this business very long. The tenants I place are people who have a desire to own a home of their own. Thats what I do. I place future homeowners in a home they call there own.
This is one of the reasons I enjoy this business so much. Not only am I helping people obtain the opportunity to own a home of their own, but I’m also helping the sellers get out from under two mortgage payments, landlords that are tired of dealing with the day to day headaches that go with owning rental properties and in the process I make a small profit to pay my bills and feed my family. Its a win/win/win situation for everyone involved.
My tenants get the chance of home ownership.
You get all of the benefits of still owning the home and retain any tax advantages without the day to day landlord headaches or paying a management company any profits you might make to oversee your property. And you have a long term lease with me that guarantees your payments every month whether I have a tenant in here or not. What management company would offer you all that?
And I make a small profit for solving everyones problem.
Re: Educate Me On Sellers Thoughts - Posted by JLM
Posted by JLM on November 11, 1998 at 13:28:21:
Ray,
Those are some more questions that I also had, but I did not want to ask them all at once. If you learn any of these answers, let me know and i will do the same.
JLM
Re: Educate Me On Sellers Thoughts - Posted by JLM
Posted by JLM on November 11, 1998 at 13:19:20:
Ray,
Those are some more questions that I also had, but I did not want to ask them all at once. If you learn any of these answers, let me know and i will do the same.
JLM
Wow! Thanks JohnBoy! - Posted by Ray Richardson
Posted by Ray Richardson on November 12, 1998 at 08:30:01:
I’ve printed your post and plan on reading it about 10 times. Thanks again!
-Ray