Re: What is the polite way to… - Posted by JohnBoy
Posted by JohnBoy on February 25, 2002 at 15:42:55:
I would not agree to over paying for a property just for the purpose of getting the ball rolling to build a relationship with a bank! I’d wait until I got the RIGHT deal to do that with!
What kind of a relationship can you expect from a banker where you are willing to pay 93% of FMV for properties??? By the time you get done with closing costs you’ll be close to FMV on this. Just because the seller may be willing to hold a second doesn’t make it a good deal.
The ONLY way I will ever pay near FMV is when I’m buying on MY terms! Which is, NO new loans in MY name, period!
Now if you want to talk 80% of FMV as total purchase price and that’s on a property needing NO repairs, then we can talk about getting a new loan in MY name! Otherwise, where’s the deal???
Remember, the first 10% of a property’s value is just air! You’re looking at only getting the property at 7% below FMV which is barely enough to cover a realtor’s commission!
Bottom line! You want CASH out of this? Then it’s MY price! You want your price? Then it’s MY terms! No exceptions!!! I’m in business to make a profit! Not to just make any deal doable just because it can be done! ANYONE with decent credit can buy under those terms, but where’s the deal???
If the property is worth $95k and is in EXCELLENT condition needing NOTHING done to it, then the MAXIMUM price I would pay if getting any new loans in my name, would be $76k! If it needs ANY repairs then deduct all repair costs from the $76k to come up with the best price I could pay. And that would be pushing the envelope on price!
Now if the seller is willing to carry the $88k then lets talk some more!
He says you could get a better rate through the bank but yet he would carry a second at the same rate as the bank??? Where’s his argument??? LOL
You want TERMS! So even paying him a higher rate would be better to get your terms! Sure, I could get 6.5% - 7% through the bank! But I’ll pay you 8% rather than having to deal with the bank! Plus we’ll both avoid closing costs since you already stated you’ll pay half!
Mr. Seller, I understand you want TOP dollar for your property. I’d love nothing better but to give you top dollar for it! But the ONLY way I can do that is with you carrying the full amount. Otherwise if I’m going to put new financing in my name then the only way I can do this deal is by paying $XXXX amount!
I can go the $88k, but you’ll have to finance it and I can go as high as 8%. Otherwise if you NEED any cash out of this then I can only pay this amount instead!
If neither of these offers will work for you then here is my card. Call me if you change your mind later!
NEVER, NEVER, NEVER try and force a deal just because you can get the property somehow. Otherwise what you’ll be buying isn’t a DEAL, you’ll just be buying someone elses PROBLEM! That’s NOT what you’re in business to do! You’re in business to make DEALS!
When you go to your banker to build a relationship you want to build that relationship on your ability to buy good DEALS! Not deals where you’re paying 93% of FMV! Those aren’t DEALS! Those are typical everyday real estate transactions that happen between retail sellers and retail buyers. You’re not a retail buyer. You’re a DEAL MAKER! You buy wholesale and sell for retail!
Your purpose of building a relationship with banks is to eventually get credit lines with them. Your credit lines are used to buy for CASH where you can buy for well below market value and sell retail for a nice hefty profit! If you where to use your credit lines to pay retail for property then you won’t be able to replenish your credit lines fast enough and your money will be tied up to long keeping you from being able to buy more deals! Then when a GOOD deal comes along you won’t have the funds available to close on it!
If you pay 93% plus closing costs for properties, then how will you get that money back out to replenish your credit lines?
If you buy for 60% - 80% of FMV which is the total amount invested after any fix up costs, then you can easily refinance those by putting permanent financing on the property and getting the cash back out to replenish your credit lines. If your total invested is below 80% of FMV then you can even pull some additional cash out after covering the amount to replenish your credit line, leaving you with some cash profit off the refi and still have 20% equity left in the property. You can’t do that if you’re paying 93%+ of FMV for your properties!
If you pay 93% of FMV and then add on the closing costs and costs on getting the new financing you’ll be around 95% - 99% of FMV invested into this. What happens if you had to sell in a hurry for some reason? You’ll be taking a big loss! If you had to list with a realtor that will cost you 6% right there! Then chances are you’ll never get a full price offer so you’ll have to take less just to get it sold. Then more closing costs to sell it! By the time you’re done with everything you’ll be walking away a lot less than $88k and after adding in all your closing costs from when you purchased you’ll have to come to closing with over $10k out of pocket just to get the thing sold fast! If it even sells fast! You could be stuck with it for 6 months while waiting to find a buyer willing to buy at FMV or a little below that. See why the first 10% of a property’s value is all air??? That 10% gets eaten up in a heartbeat! Are you still willing to pay above 90% of FMV for this by getting any loans in your name??? Is the risk involved worth it? Not to me!
Now sell it to me on terms and I can justify more risk! If I had to I can sell FAST on terms and get out of it without having to worry about any bank loans remaining in my name! The more risk I take, the LOWER the price I need to justify the risk! The less risk I have to take, the more I can pay on price! It’s that simple! Risk Vs. Rewards is what determines the price and how I buy!
