L/O question - Posted by Vic

Posted by George(OH) on April 08, 2000 at 11:39:58:


L/O question - Posted by Vic

Posted by Vic on April 08, 2000 at 03:52:41:

This question is for those who have experience in dealing with L/O’s. When talking to sellers, do you often encounter sellers who say that they just want to sell it & move on, because they don’t want to take a chance that they’ll get the property back? If so, does anyone have any good ways to overcome this objection?

Re: L/O question - Posted by Jim IL

Posted by Jim IL on April 08, 2000 at 14:28:23:

This is a common objection. Frankly, when a seller says this, they are not totally motivated, or the L/O has not been fully explained to them.
But, sometimes this objection still rears its head even after the motivated seller hears your proposal.
I usually tell sellers that I buy homes two ways. (gotta simplify for most sellers, they are not RE savvy.)
I tell them that I buy homes, by either paying ALL CASH, or “with terms”.
They almost always respond by saying, "Well, mr. investor, I like all cash."
That is my cue to explain that the ALL CASH offers I make are at a SEVERE discount to the price, like 50-60% of FMV.
I then tell them that it is pretty clear that such an offer would not only not be possible, but may be insulting to them.
We then discuss what “Terms” means.
I do much of this over the phone, and take a few minutes to check the motivation level further. There is no point in going to see the home of the seller is not responsive to my solutions to the problems.

After I explain the L/O offer, this is when the sellers say they do not want the property back.
I then tell them that the majority of my profit is on the backend when the home sells. And, for this reason alone I am going to do everything I can to get it to close.
This is also a good way to introduce the idea of a long term agreement.
“After all Mr. Seller, you want me to keep making the payments until it is sold don’t you?”

And, if that fails, then the seller was not motivated and I may or may not call them back in a month or so.
But, at that point, I will not waste another minute talking to them. The answer here is simple…“NEXT!”

Hope this helps a bit,
Jim IL

Re: L/O question - Posted by B.L.Renfrow

Posted by B.L.Renfrow on April 08, 2000 at 11:28:05:

Yes; that is one of the most common objections you will encounter when proposing a L/O.

What I will do is point out to the seller that the worst case scenario is they will get the property back in as good or better condition, their mortgage will have been paid down further, and they are better off then when they entered our agreement.

However, if they are adamant, and if the numbers allow (i.e. if my option price is significantly under FMV) I will then propose a slightly different arrangement: I will lease for three years, but at the same time, I will execute a purchase agreement with 36 months to close. That way, the seller KNOWS they won’t get the property back, and it works great when they either have no equity, or they don’t need it right away.

Of course, I will only do this if I am certain I can sell the property within 36 months. Then, I point out to the seller how by doing this, I am taking a greater risk because, “You see, Mr. Seller, even if I don’t find a buyer, I will need to come up with the cash to close regardless.” Then I point out how that increased risk justifies lowering my purchase price even further. Haven’t had that fail yet!

Brian (NY)

Re: L/O question - Posted by Tom-Pa

Posted by Tom-Pa on April 08, 2000 at 09:28:09:

Check phone script. If they’re not motivated your wasting your time. Good Luck. Tom-Pa