How do you realy get them to do it? - Posted by John Buwa

Real Estate Investing
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Posted by Bill Gatten on May 13, 1999 at 13:33:41:

Alex,

Though I heartily recommend Bill’s course: with all due deference (sincerely), what you suggest is a means of “getting around” the Due-on-Sale Clause via a land trust conveyance vs. “avoiding it.” On the other hand, if the trust’s Grantor would stay on as a Beneficiary of the trust, with Power of Direction (such power subseqeuntly becoming mutual with the Assignee), and with an agreement to forefiet its interest upon revocation: compromise of the Due-on-Sale Clause can be avoided [virtually] completely:

No sale of Real Estate (personatly only is assigned)
No divestiture of, or impact on, lender’s security interest
No relinquishment of control
No Release or compromise of Borrower Liability
No clouds on title
No impediments to lender’s pathway to foreclosure
No alienation of title
No compromises for seller or buyer (a Limited Power of Attorney can be given to 2nd co-beneficiary relative to specific issues such as those that concern improvments, repairs, termination, sale, etc.)

Bill

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How do you realy get them to do it? - Posted by John Buwa

Posted by John Buwa on May 12, 1999 at 01:46:12:

Ok, i am trying my best to get started in rei, every day i go thru my classifieds, looking thru the fsbo adds and faithfuly calling everyone i ask them simply this:

“Hi, i was calling about the house in the paper” Yes? “I was wondering if you would consider selling your home on a lease with option to purchase?” No!

What am i doing wrong?? Noone will entertain the idea! I want to start out my rei with l/o as it is the most economical for me. I live in a large city, so its not a small market. For the ones i found that will do l/o is usualy already advetised as a l/o and not deals at all, most of them are probly rei themselves as they are wanting 5k down, etc… etc… Any help on how to get started?

John

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Re: How do you realy get them to do it? - Posted by The Baze

Posted by The Baze on May 12, 1999 at 19:50:53:

John,

Jim Piper couldn’t be more right. In the beginning I did exactly the same thing, “Would you consider a lease purchase?” After 100 no’s and then reading this board and buying a couple of courses from here, I hit upon the “secret”. Who do people want to deal with? People they like & trust. So now that’s my objective. I’m up front and honest w/ them and I let them know I’m out to make a buck, but that gets them to know I won’t be trying something underhanded. They’re more likely to open up to me. The list of questions Jim gave you is perfect. So I guess the point is, don’t try to get people to do what you want them to do. Find out what they want & see if there’s a way you can give it to them and still get paid.

Tom Bazley

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Just a few thoughts. - Posted by Dan_MA

Posted by Dan_MA on May 12, 1999 at 13:21:45:

John,

I am knew rei especially crei but I’ve been in sales for the last ten years and some thing s only come wth time and experience. I found that when I started out I was nervous to ask questions I did not want get a bad reaction etc… What you will find is the more you ask questions the better your time is spent and also you will become more profitable. I used to sell cars at a new dealership. I always asked if somebody wanted to lease a car and they usually said no. Why? I didn’t address their needs. You see you have to find out what makes a customer tick what they want. In the car example I wuld have a customer who had say $1000 for a dp sales tax registration etc… and they wanted to buy a new car for $250 a month. Well no traditional financing would accopmplish this and I knew that right away. What I learned to do was nod my head and listen I would filter out eveerything they said except for the key points that gave me a lead in to sell them a car. After a while you get tuned into hearing the right stuff and discarding the junk. I’m sure all the rei’s opn this site already know what they want to hear when they make that call. The 3 yes’s is an example.

Yes I already baught a house.
Yes I want to move.
Yes this yes that whatever it is the yes’s are what you have to work from. When people want something and you are in a position to provide it you will almost always win. It’s just a matter of finding out waht they want and what you can use from your toolbox to fill thier need. The trick is to create a solution to the problem not try to generate another problem for the seller. They are nervous tired and sick of dealing with trying to sell thier home. So be the hero and reap the rewards.

Dan

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Re: How do you realy get them to do it? - Posted by Scott (AK)

Posted by Scott (AK) on May 12, 1999 at 11:12:29:

There are many questions to ask…Like JPiper said below, as they answer questions you pose that let THEM list a number of reasons why they should do a deal with you.

One of the most important questions to ask, in my opinion, is “May I ask why are you selling your home?” Chances are if the answer would make you motivated, it makes them motivated.

When I first started I too had a MAJOR problem with this. Mainly because of a reason stated below. I work long hours in the military. I need to maximize my time and use it effectively. For this I came up with two methods that have worked great for me in the last year.

The first is very targeted letters, postcards, and ads which get motivated people to call ME.

The second most important thing I did was to learn to “prequalify” using some of the questions in all the posts below. ALWAYS remember there is a fine line as to where you will start to scare people away with all your questions on the phone. Sooner or later you need to recognize the potential for a deal, make an appointment, and put a human body behind that voice on the phone. Until you are in front of the seller you are just a voice. Voices cannot sign contracts, yours or the sellers. Get in front of the seller and build a relationship.

Joe Kaiser has always been someone I keep my eye on. He has techiniques that seem right up my alley. His Lease Option course has a line in it I try to keep at the forefront of my mind when I am returning calls.

“Dare I say even friendly”.

I found when I took making a buck off the front burner, placed it on the side burner, and learned to try to be a friend, even if the terms of what I could do were not acceptable, we all parted happy. I think that is a major key. Most people I have talked with have absolutely no problem with you making a dollar as long as they feel you are EARNING the dollar.

So, put the money in the back of the mind, learn to ask motivating questions, when you get answers that you can work with. Outta the seat and into the car!

Good Luck

Scott (AK)

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Lease Option - Posted by Sean

Posted by Sean on May 12, 1999 at 08:34:07:

First, I don’t think that you should just blurt out that you want to lease option the place. If you are going to just blurt it out I think you should say something more like rent to own.

Secondly, the more time you have talking to/using up a person’s time, the less likely they are to say no. Imagine you go to a used car lot and a sales person spends an hour helping you pick out and test drive a vehicle that’s the right color. Then you start negotiations. He’s thinking, “I would hate to see this deal fail, I’ve already put an hour into it.”

Thirdly, I think when you are asking tough, say-no questions, you should try to lead into them with a 3-yes technique. Something like:

“So, you’ve already bought a new house.”
“Yes.”
“And you want to sell this one because you can’t afford both payments?”
“Yes.”
“So if I bought this house and made you payments for more than your mortgage that would work, wouldn’t it?”

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Re: How do you realy get them to do it? - Posted by JPiper

Posted by JPiper on May 12, 1999 at 03:04:34:

John:

If you stood in a bar and asked each passing female “Would you consider going to bed with me?”??how many would say yes? Chances are after the first few slapped you, the next few called the cops on you?.you’d figure out a different approach.

I’ve rarely seen anyone who wanted to owner finance, lease/option, deed their house into a trust, allow a subject to assumption, do a nothing down deal, etc. This certainly wasn’t their first choice, and in some cases that odds are high that everyone wouldn’t have a clue what you’re talking about when you say the words “option”, “land trust”, “subject to”, etc.

I just took over two loans for closing costs. My initial conversation with both sellers started on the telephone. In NEITHER conversation did I say “Would you consider selling me your house for no money down?”. One conversation started like this: “I see your listing recently expired?..are you still interested in selling your house?” She says “yes”. I say “Could you tell me a little about the house?” She commences to tell me about bedrooms, bathrooms, garages, fences etc. I say “Gee, that sounds nice. Why do you feel it didn’t sell?” She goes into an explanation. I ask “Where are you headed if you’re able to sell?” She wants to move from the neighborhood, buy another house. I ask “What’s wrong with the neighborhood?” She doesn’t want her daughter to grow up there. I ask “What will you do if you’re unable to sell?” The motivation starts to come out. I ask “What type of loan do you have on the property?” “It is current isn’t it?” “How much are the payments?” “What’s the outstanding balance?”

Following this and other questions?the conversation takes an easy 30 minutes?maybe more?.I make an appointment to see the house and meet her. Notice I’ve never mentioned how I would do this deal. I never asked “Will you take no money?” When I finally meet with her I’m armed with information that she gave me, I know what the property is worth, I know about her loan, and I have some ideas about how to do this deal. I walk through the house quickly. Now I sit down. More questions. “What type of house would you like to move to?” “What price range”. I ask questions to qualify her, see if she can do what she thinks she can do. Now I ask “Do you have some money to put down on the new house?”

See where this is going? I’m creeping up on it. I’m spending time with this seller?because the seller said the right things in the beginning?and kept saying the right things. Things that sounded motivated. I’m building a relationship.

Hope this gives you a few ideas. Take a look at the Money Ideas section?there’s a couple of articles about using the telephone. You might also try Joe Kaiser’s course “Targeting Tired Landlords”.

JPiper

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what your really asking is… - Posted by BoB L

Posted by BoB L on May 12, 1999 at 02:58:33:

hi john
What your really asking is, hey, what’s the seceret ? there isn’t any ! tommorow when you make your calls, spend 5 minutes talking to each seller, talk about the property ,and more importantly, there situation and REASON for selling. succsessful investors hone there skill’s. The way to profit in REI is to find sellers that have to get out from under there property,and they will do almost anything to close the deal.When your talking to fsbo’s, your goal is to find out if the conditions exist to apply the L/O techniqe, ie -was the house listed with a realtor for six month’s and didn’t sell, there trying to maintain two house payment’s because of a job transfer.they were renting it out, but there sick of tenants trashing the place. they don’t ever want to pick-up another paint brush, or haul out 10 bags of trash the next time a renter moves, ect ect…you get the idea. So, tommorow try to find out WHY they want to sell, find out what the problem is, only then can you apply a techniqe that will solve that problem, and pay you for expertise.

good luck
BoB L

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Re: How do you realy get them to do it? - Posted by Sheik

Posted by Sheik on May 13, 1999 at 07:33:37:

Thanks Jim:

Your posts speak for themselves. I have question hopefully you won’t find too forward or personal.

I remember reading one of your posts sometime back that
you don’t usually buy on L/Os.

I was wondering if most (if not all) of your deals are purchased ‘subject to’. Also, how do you prospect for your deals? The classified? Expireds (as suggested in the above post)? Ads? Thanks.

Grateful in NY
Sheik

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Good questions to ask - Posted by Alex Gurevich, TX

Posted by Alex Gurevich, TX on May 12, 1999 at 09:33:29:

The one about payments being current is something I need to incorporate in my conversations. Yesterday went to see a 2000 sqft home in nice area, 125K value, 115K balance, reasonable payments. Divorce, wife moved out, husband (has a deed) already bought another home, sounds extremely motivated to do almost anything. I made an appointment only to discover 1) 3 months behind, about $3,300, 2) cracks from minor settlements all over the house (from the looks of it, probably FHA financable after a coat of paint and, hopefully, structural report within allowable limits). Both things the owner didn’t disclose over the phone. A question about condition was answered “the ceiling may need paint”.

The only immediate use is - “as is” rental with 200-250 spread, but I hate to spent $3,500 on a rental home.

Another proof, it’s a good idea to be as specific as possible with your questions and find out about “bad” things over the phone, not during a trip to the house. I thought I already new all this, but I still make silly mistakes, what a pity.

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Re: How do you realy get them to do it? - Posted by John Buwa

Posted by John Buwa on May 12, 1999 at 03:37:28:

So with this technique you NEVER try to find out if this lead is worth the while for specific goals? I understand exactly your technique, i must say it is great! My prob is my primary interest in getting started is l/o, and i call easely 20-30 people from the fsbo daily if i met with each to find out if i could get a l/o out of them, whoa! I want to start this part time as i do have a full time business i run. Is there a set prequal questions i should ask pertaining to potential l/o’s on the phone without bringing up the ? till we meet or what have you?

Thanks - John

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Re: How do you realy get them to do it? - Posted by JPiper

Posted by JPiper on May 13, 1999 at 09:59:23:

I don’t have one particular technique I use for either buying or finding deals.

As far as buying goes I try to structure a situation that fits with the seller and fits with me. I don’t use one technique. I use most of the techniques you read about on the newsgroup, or some combination thereof. I should add that part of what drives the way I buy is what my intent may be for the property. By the way, I have bought lease/option?..however I don’t sandwich myself in the lease/option. When I have bought this way I will normally assign.

As far as locating deals, again I don’t have any magic bullets. Finding deals is the “grunt” part of the business. I’ve tried many, if not most of the techniques I see posted here. My preference is to contact by telephone, as opposed to mailing, although I mail where I don’t have a phone number. I also contact some people in person. I have certain areas that I prefer to do deals in?.so I tend to concentrate geographically. For this reason I don’t run many ads anymore looking for sellers. I have run these in the past, and periodically I still do it?.but it’s not my preferred way. I’d rather try to target a group. Some of the groups I have targeted have been fsbo’s, expired listings, foreclosures, tired landlords, divorces, vacant properties, out-of-state owners, etc. I have also used flyers and other methods targeted into particular areas.

The main rule of thumb I would suggest would be to keep several different lines in the water at all times. I don’t think it matters so much what you do, as it does that you do it over time and do it consistently.

JPiper

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The “Ice breaker” - Posted by John Behle

Posted by John Behle on May 12, 1999 at 13:15:43:

I find the question about the loan being current is usually the ice breaker. They are usually honest and you can tell in their voice when they’re not. The true motivation sometimes comes out and a deal that you might have been thinking can’t be done changes.

There are few - if any - things more important than good phone pre-qualification. You don’t talk deals, techniques or make commitments. You are gathering information and as a PROBLEM SOLVER you are reaching into your toolbox and looking for a way to make a deal happen profitably.

Be open as to the possibilities available. Too many run around with a technique looking for an application. “He who is good with a hammer thinks everything needs a nail”. Don’t run around looking for nails. Look for deals. If your mind is focused on the technique you want to use - you may miss a goldmine. Digging in a pile of gold looking for diamonds.

I saw a graphic example of this when I first started investing. A friend was trying to buy properties “nothing down”. He negotiated over and over on this deal with no success. As an afterthought as he was walking away at the doorstep he asked “what would you take all cash?” The figure that came back ended up being 67% of value. For lack of tools the investor approached me.

Another lesson. He offered me the deal. I should have said thanks and paid him a referal fee. Instead, I showed him how to do it and he made 30k. I made $1,500.

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Re: How do you realy get them to do it? - Posted by David Alexander

Posted by David Alexander on May 12, 1999 at 11:52:02:

John,

do you also realize you have your looking through blinders(not saying this to put you down). If I understand you correctly your saying you want to L/O a house and then Sublease back out with a tenant buyer.

Start looking at other possibilities also, because that is only one tool in your toolbox, and your trying to fit all the prospects with that one scenario. It’s like using a screwdriver to hammer a nail.

You can buy houses with

All Cash
Owner Financing(creating a note)
Get the Deed straight out
L/O
or just Option.

Or a combination of the scenarios. But, first you have to start with finding the motivated seller, what is motivating them and to what level they are motivated.
And then it’s simple, you create a solution to their problem.

David Alexander

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Re: How do you realy get them to do it? - Posted by CarolFL

Posted by CarolFL on May 12, 1999 at 06:20:14:

John,
Reread Jim’s post. He has already answered the question about the question. by the time he is off the phone, the initial prequalification is done.

Depending on how well you know their neighborhood, and therefore the value of the property assuming no major problems of a rehab nature, they are “pre” qualified.

Two things to remember:

  • until it’s on the dotted line, you are not 100% sure about anything and
  • if they already knew they wanted to lease/option, they would have advertised it.

Like anything else which has the potential for being lucrative, this requires skill, practice and knowledge. Many shortcuts are shared here, but no silver bullets.

Good luck, and thanks, Jim, for your “mini-script”!
Carol

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Assigning lease-options - Posted by Jim Beavens

Posted by Jim Beavens on May 13, 1999 at 12:41:54:

Hi Jim,

I was wondering if you could go into a little more detail on how you assign a lease-option. I’m assuming that you will assign this to a retail buyer, or do you target other investors so they can put themselves in a sandwich position?

I ask because I’m wondering how knowledgable your average buyer would be about contract assignments, and how much educating you have to do so they realize they are actually entering into an agreement with your original seller. I’m also wondering how well they grasp the concept of paying you money for the actual contract, instead of a more traditional down payment or option consideration to the actual owner. Do you word things so that the assignment fee is actually an option consideration?

Most of the educational material on lease options deals with getting yourself into a sandwich position; you’re the only person I’ve seen who consistently just assigns his lease-option agreement. Any tips on this method would be welcome.

Jim

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thinking creatively - Posted by Alex Gurevich, TX

Posted by Alex Gurevich, TX on May 12, 1999 at 17:09:03:

John,
Thanks for reminding us that almost all problems have solutions.

In my case, the owner seemed sincere in his desire to reinstate, save himself from bad credit rating foreclosure would entail, but lacked the financial ability to do so. Perhaps, in the case like that, I could offer to front $3,500 reinstatement money and take over the note. The seller may be able to pay me back over a year or so in installments of 200-300/mo., much less than 1050/mo mortgage payment he could not afford in addition to his payment on another home.

My payments on the loan would be contingent upon seller making payments to me. If seller stops making payments I could likely collect 4-5 rental payments before the bank would foreclose and thereby recover my investment. (Time to get back to negotiations.)

It’s weird how the mind works. One day you can come up with a solution for a problem, and next day the variables change a bit, and you don’t see how to put it together. The solution I just described above is in principle very similar to a transaction I just completed, although it did not occur to me yesterday when I was visiting with the seller.

Just 10 days ago I bought another house where seller had 2 loans $38K (28 yrs left) and 29K (14 yrs left) against the house with payments $445 and $293. The house had a major foundation problem ($10K bid from contractor) plus needed minor cosmetics; overall looked kinda scary, but was livable. With after repair value of about $85-88K it did not seem like anything of interest to me.

The seller was out of town, has been making payments on the house for over 7 mo.; the realtor refused to list unless seller completed foundation repairs. The seller was so motivated she litterally begged me into taking over payments on both loans, and she would make $293/mo payments to me until the 2nd loan is paid off. I just leased the house today for $850/mo. “as is”.

Why could not I think of something like that yesterday ?

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Re: How do you realy get them to do it? - Posted by Steve Heller

Posted by Steve Heller on May 12, 1999 at 21:28:03:

David,

It sounds like your saying don’t just concentrate on one aspect of REI but find a problem and solve it with whatever tool works!

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Re: Assigning lease-options - Posted by Carolyn

Posted by Carolyn on May 14, 1999 at 24:19:26:

I would also like some info on the questions that Jim has brought up. I have asked these same questions in some of my other posts. Do you need a different contract in addition to the lease/purchase agreement contracts to assign or are you putting some specific language in the contract to purchase. Please try to address both mine and Jims questions as fully as possible. Thanks everyone! Carolyn

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Re: thinking creatively - Posted by Newbie

Posted by Newbie on May 13, 1999 at 01:09:35:

Can you go a little more into detail and I’m sure this has been gone over before but how can you just take over someone’s payments without triggering “Due On Sale?” I sure would like to know the details of your deal. Thanks!