Re: Remember the Option deal… - Posted by Brent_IL
Posted by Brent_IL on December 01, 2000 at 15:34:23:
This is my .02 based solely on my experience. Others may disagree. My approach to buying and selling RE has changed continuously over 20+ years.
When I fisrt made offers the only thing I had going for me was an understanding of real estate and financing terminology. Because I had no money, poor credit, and low income I felt that the only way to present myself as reputable buyer was to appear knowledgeable and astute.
I never mentioned the sellers or their needs at all. Intellectually, I understood that I should appeal to the seller?s situation, but I was afraid that if I slowed down they would ask me how much money I could put down. I talked so much that they couldn?t say yes if they wanted to. I got nowhere.
Things improved when I realized:
1- Sellers are best informed on a need to know basis.
2- Informative writings, as contrasted to advertising, can only give people enough knowledge to confuse themselves. Real estate is a major part of your life. Not so for most sellers.
3- Sellers do not initially ask questions because they want information. They ask questions to avoid committing themselves because they don?t feel comfortable enough to trust you. They need reassurance that they are doing the RIGHT THING. Only repeated questions need to be answered, and then minimally. All anyone wants to know is, ?What are you going to do for me??
The approach I now use is to put everything I feel could be of any conceivable value to me in the offer to purchase. Now, I don?t have to explain substitution of collateral, 2nd mortgage position, or why the seller should pay my closing costs. It?s all in the contract.
I insist that everyone on title, RE agents (his, maybe mine), and known mavens be present for my offer, which I make in person. I am not very visually oriented so I don?t pick up on a lot of property defects. I have little interest too. I bring along someone who knows about these things. His job is to list defects and the costs to fix. While he walks through the house with the seller, I joke with the RE agents to let them know that I understand that they have earned their money and any offer I make will make sure he or she gets paid. The inspector leaves. Mission accomplished. He gave me time with the agents, and I can always use the info during negotiations.
As we talk, I fill in the contract blanks to reflect whatever terms the seller and I agree upon. It is at this point that your creative skills become important. The only time I give a detailed or technical answer is to intimidate the agents just enough that they stay quiet during my presentation.
Some people grasp things quickly and become bored with minutiae. Others tend to go slower. I?ve practiced my basic sales talk so I can hit the highlights in 35 minutes or extend it to 1.25 hours. Most of the time is spent learning about the seller?s plans after the property sells. We talk about financing as a solution to their problem. Unless you are dealing with a distressed seller, there must be enough cash to pay the RE commissions, closing costs (especially mine), and enough for the seller to take a weekend vacation. The creative part is making sure the cash is not yours.
No seller will ask about your net worth if they feel you are helping them get to where they want to go. In their heart the seller is not thinking about all cash. It is just a pile of paper. No one needs all cash. Everyone needs the things the cash can provide, i.e. income, capital growth, freedom from the fear of running out of money, or providing a down payment on a new home. Use one of the 101 ways to give it to them. Once they know that any potential legal questions can be handled by the attorneys or the title companies (which they understand because you told them so), they will sign.
Most people experience buyer?s remorse after making a major financial commitment. Get out the door before they ask for time to reconsider.
If I cannot reach an agreement, I collect every paper, illustration, and contract and take it with me. I don?t want anyone wondering what something means when I am not there to explain it. I give them my phone number, my ? Things have a way of changing? speech, and go.
This post turned long, but if someone had told these things to me, and if I was humble enough to believe it (fat chance at the time), I could have saved a decade of disappointment and struggle.
Most surveys allow us to appear as though we are doing something. That way we don?t have to talk to sellers that might be rude or condescending toward us. In effect, we can hide without challenging our self-image. In addition, the legal liability could affect you in the future.
If you make offers, some will be accepted. The money must come from somewhere. You need to know the where.
If you want to make offers without making the effort to find motivated sellers, ask a RE agent for a listing of all houses on the market for 6 months or longer. Also, check those where the listing office has changed. Some of these people are now ready to listen. The results will be much better than the survey approach. If they blow you off, who cares? You can talk to the next seller, but they?re still stuck. All expenses and still no buyer.
I?ve learned that when I have to practice I may as well do it in front of a seller. There are many sellers, and one me. I won?t run out.
P.S. Instead of the 1% option, try this. One of the terms of the contract I use is the ?SELLER?S OPTION TO CANCELL.? It is in caps. When I explain it, I tell them that “even if we have a fair deal now, Wal-Mart may decide that your house should be the electronics department of their new store, and offer you $100,000 more than it?s worth. This gives you the right to accept a better offer anytime before closing, simply by reimbursing me for my time and expenses.” This clause also helps out if their lawyer freaks when he reads the contract. If the sellers are wavering, it is cheaper for them to pay me off than to challenge the contract.