Lonnie deal In a Nut Shell (Long) - Posted by Tony-VA
Posted by Tony-VA on February 11, 2000 at 02:34:31:
Good Question. It is one that I think we all wondered about initially. Once you read Lonnie’s book "Deals on Wheels,"you get a better idea.
Essentially we are working with motivated sellers, who for one reason or another must sell their home. These people are quickly frustrated by potential buyers because all of them need financing but cannot obtain their own financing because of poor credit. These people could only buy the home if the seller would provide the financing. The homeowner needs cash, and has the normal fears of financing bad credit people and worry that they will not get their money. The sellers also typically need cash immediately to solve a current problem (such as back lot rent, judgement, down payment on their new home etc.). The cashflow would not solve their problem. They want cash.
This is where we step in. We first inspect the home using the plan set forth in Lonnie’s book. We explain that we pay all cash for homes and then sell them and hold the financing. We then use the negotiating techniques Lonnie teaches. These techniques work very, very well and the seller names all the numbers. We either get them to talk themselves down to the numbers we want, or we use a “walk-a-way technique”. They will either catch us at the door, or call us in a few days. If we don’t hear from them (we usually do hear from them), they were not yet properly motivated and may take more time to come around. That’s okay. We let lot rent continue to add up and work in our favor. We let the frustrations of buyer’s without cash continue to motivate the cash hungry seller.
When the buyer provides us with his “best, all cash price” and it meets the number we were hoping to hear, we provide a small down payment and the remainder when the home is vacant and we do a walk through inspection.
We then sell the home for a small down payment and hold the financing. We are able to buy the home for $2000 and sell for $8000 because we buy with cash and sell with financing. We often sell to the same people who wanted to buy the home from the original seller but did not have all cash. They are happy because they got the home they wanted. Paid only a small downpayment and got monthly payments that they can afford, and are usually what they were paying just to rent a place to live. They will own this home in 3 or 4 years (in my notes, others go longer).
Hope this helps.