Need help ASAP with LO owner questions!!! - Posted by Dan B.

Posted by rayrick on April 08, 1999 at 14:59:51:

The answer to both of the above questions is primarily this: speed without discount. If the seller needs to make a quick sale, he or she is faced with two alternatives: slash the price, or offer attractive terms. Most sellers aren’t aware the latter choice exists. It’s your job to make them aware of it!

You are offering to cover their payments without exposing them to any of the usual landlording headaches and giving them a good likelihood of selling it for a decent price down the road, with no realtor’s commission. And you can start RIGHT AWAY (okay, you need SOME time to find a tenant/buyer, but not a lot).

Your goal is to convince them that this is better than hacking their asking price, or renting it or leaving it vacant while they wait for a full price offer.

If they are not facing any of these choices, that is, they have the time to wait for a full-price all-cash offer, than you probably don’t have a deal.
Likewise, if they need a hefty chunk of cash from the sale to make a downpayment on their next house, you’re probably not going to convince them to do a L/O either.
You MIGHT be able to persuade them to re-fi to get some cash if they have a lot of equity, but if they’re really in a hurry, they might not want to mess with that.

-Ray

Need help ASAP with LO owner questions!!! - Posted by Dan B.

Posted by Dan B. on April 08, 1999 at 14:23:01:

I’m planning on purchasing LeGrand’s LO workshop, but I’ve got a RETURN call tomorrow with a seller that I believe may be motivated (not REALLY sure yet). We had an initial call where he was asking some questions that I did not have answers to. Luckily, he needed to get off the phone before I could answer them all. Can someone help? The questions basically are: “Why should I let you tie up my property?”
"What benefits can you give me doing a LO, over just listing with a RE agent?"
Any help is appreciated!!!

Re: Need help ASAP with LO owner questions!!! - Posted by Bill K. (AZ)

Posted by Bill K. (AZ) on April 08, 1999 at 15:28:05:

Dan,

Here are some benefits to the seller:

  1. You can pay the seller “top dollar” for his/her property.
  2. The seller can participate in any property appreciation during the lease term (if you write your option this way).
  3. Option consideration received by the seller, which is applied towards the purchase price, is “tax deferred”. No tax is due until the option is exercised or forfeited.
  4. You guarantee lease payments to the seller. If you do not make payments as agreed, you forfeit the option and the seller keeps the option consideration as liquidated damages.
  5. Seller receives tax benefits as the owner of a rental property.
  6. Seller receives immediate relief from mortgage payments.
  7. A lease/option opens the home up to many other potential buyers (those with, and without, perfect credit).
  8. No landlording headaches. You deal with tenant/buyer and minor home repairs.

With respect to listing with a real estate agent:

  1. It can’t hurt to list with an agent; however, many motivated sellers can’t afford the time that it takes for a “traditional” sale to close.
  2. A lease/option saves the seller an agent’s commission (usually 4%-7% of purchase price).
  3. Agents won’t find “tenant/buyers” for the home, effectively reducing the number of potential buyers.

I hope this helps.

Bill K. (AZ)