Getting Seller Financing w/ Real Estate Agent Involved - Posted by Sean Cowdrey (CA)

Real Estate Investing
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Posted by JoeB(Atlanta) on February 09, 2000 at 22:10:22:

Hi Sean, you can try a letter of intent w/all 3 offers just to see what kind of response you’ll get. Remember, agents don’t like anything out of the ordinary. So the agent may insist that you immediately write it on a contract.

But I think your biggest hurdle is the average agent is NOT going to understand nor be able to “sell the sizzle/benefits” of your 3 offers. Spell out the benefits in clearer terms, assume you’re explaining this to your grandmother.

I wrote an example after each of your offers:

Your#1. $260,000, $10,000 down, seller to finance $250,000
New#1. $260,000 with $10,000 cash down pmt paid at closing by seller, remaining $250,000 paid to Seller at 10% interest, $2100/month for up to 48 months (balloon), whatever remains will be paid in lump sum at that point. Secured by a 1st mortgage on the house.

Your#2. $290,000, zero down, seller to finance at interest only monthly payments, ballooning in 7 years
New#2: see example #1 above, spell out benefits/terms

Your#3. Lease w/ option to purchase: $1400/month rent, 5-year option to purchase for $314,000 (asking price), 50% rent credit to purchase price. (The rent is below FMV which is probably closer to 1700.
New#3: Buyer will have an option to purchase the house for full asking price of $314,000 and will Lease the house at $1400/mo for up to 60 months before purchasing. Buyer will handle all maintenance, etc, etc. $700 of each month’s lease pmt will be credited toward reducing the purchase price.

I know it seems like I went into way too much detail, but I’ve NEVER met an agent that could (a)understand these offers without all that detail and (b)could ‘sell the sizzle’ (explain the benefits) of anything other than a purchase with cash or new mortgage, to a Seller. Since your written offers will be ‘selling themselves’ (you won’t be there when the agent pitches this to the seller) you may need to spell them out more.

P.S. seller financing and lease-options are still ‘scary, alien, way-too-creative words’ to most agents, because they’re unusual…so don’t get your hopes too high.

Best of luck,
Joe Brillante

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Getting Seller Financing w/ Real Estate Agent Involved - Posted by Sean Cowdrey (CA)

Posted by Sean Cowdrey (CA) on February 09, 2000 at 20:40:12:

4+2.5 in my neighborhood in So. Cal… Vacant, no TDs. The elderly owner is no longer able to care for himself so moved in with family. It’s in an inter vivos trust, i.e., “living trust,” and his granddaughter is the trustee. When I saw the house was vacant, I wrote a letter to the address (assuming, correctly, that the mail would be forwarded to the granddaughter), stating my interest in buying the house if they were selling, call me before a broker gets involved, etc. A few days later, a real estate agent calls (aargh!) and gives me the spiel.

It WAS rundown needing some landscaping, paint, cleaning, but they, unfortunately, did all of that. Put it on the market in Nov. for $339K, dropped it in Dec. to $324K, and last week dropped it to $314K. Comps in the neighborhood run $345-380K.

I popped into an open house last week and asked the agent if the seller would be interested in seller financing. “Possibly.” I planted the idea that the owner might enjoy receiving a steady monthly income from the property, etc. She calls back later and leaves a message that they might consider carrying 10%. I want 100% financing, but maybe would throw up to $10,000 as a down. This won’t cover the agent’s commission, though.

I’d like to buy the property as my personal residence, and am considering sending the agent a letter of intent listing the following 3 scenarios and invite your comments please:

  1. $260,000, $10,000 down, seller to finance $250,000

  2. $290,000, zero down, seller to finance at interest only monthly payments, ballooning in 7 years

  3. Lease w/ option to purchase: $1400/month rent, 5-year option to purchase for $314,000 (asking price), 50% rent credit to purchase price. (The rent is below FMV which is probably closer to 1700.

Do you think a letter of intent is the way to go, or should I just make an offer with one scenario.

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Re: Getting Seller Financing w/ Real Estate Agent Involved - Posted by Russell

Posted by Russell on February 10, 2000 at 13:38:15:

Sean,

I have yet to make my first deal - still in the information gathering/learning phase. However, I read something in Carleton Sheets course that may be of interest to you. He said making multiple offers (i.e. “three” separate contracts) can be a very powerful tool when the seller is willing to negotiate. The idea is: If a person is faced with several choices, he/she is more likely to choose one of them versus having just one offer which could be rejected or almost certainly countered. Also, he recommended putting the following statement in the addendum: “Buyer reserves the right to accompany broker to present offer.” Contractually, you would have the right to do just what it says. That way you could meet the seller in person to present the offers and give them your best pitch on the benefits that each would provide.

As I said, I have not done a deal yet, but this makes perfect sense to me.

Hope this helps.

Russell