Seller financing deal for buy and hold or wholetail. Am I nuts?

[Brian Huber]

Hi, I contacted a homeowner on Zillow who was trying to rent out their house. I asked if they'd be willing to sell the house and if so, accept seller financing.

Surprisingly, I got a call back from the homeowner.  He said he's willing to do lease to own or seller financing.  I asked what down payment he wanted. He said $900. I asked about terms, he didn't know so I said we can address that later. Also, there seemed to be a bit of a language barrier. I did my best to be clear in my talk with him.

I noticed he bought the house for $80K in 2013. Now he's selling it for $60K. I asked why that is and he said his son has cancer and just needs to unload:-(

I looked up the county records on the property and it's owned by an LLC. I asked him who I should list as the seller and he said he'd fill it in.

So I filled out the contract, left the seller info blank PDF'ed it and email it to him.  I instructed him to complete his info, sign it and PDF it back to me. I'll then give it to the title company with the deposit to open up escrow.

I guess I'm shocked that he wants to move forward so quickly and for below retail. I have clauses in the agreement to cancel it if inspection isn't favorable or the title isn't free and clear.

Is there anything else I should be watching out for in this?  I guess I'm being extra cautious because this was through Zillow and it's my first potential deal. Do I have my butt covered?

I know @Brian Gibbons and @Michael Quarles so any help would be eternally appreciated:-) Thanks!

[Sonia Roberts]

Sounds awesome if it indeed works out.  I did have a house for sale on Zillow and someone-a scammer, had my house listed for lease and they were asking for a $1500 deposit to be sent to them, but here you are covered from money out of pocket if you open escrow and Title is checked.

Good Luck

[Wayne Brooks]

Are you covered?  We have no idea what kind of deal you offered.

[Brian Huber]

@Wayne Brooks , he agreed to seller financing with a $900 deposit, terms such as interest and amortization TBD. I felt getting it under contract was the priority and after that, establish terms of finance.

 @Sonia Roberts glad you mentioned the escrow.  The seller was completely fine with opening escrow so I took that as positive. I know there'd be a red flag if he asked for money directly.

[Brian Huber]

@Brian Gibbons and @Michael Quarles 

any insight would be fantastic as well. Thank you!

[Wayne Brooks]

Seller financing is vague, land contract or sale with owner carried mortgage? If the terms are "to be negotiated" you don't have a binding contract.

[Brian Gibbons]

Hi @Brian Huber 

He bought it for 80 in 2013, He selling for 60 now?

What's existing financing? Pay off amount, interest rate, fixed or Arm, amount PITI?

The fastest way he's going to his 60 is for you to go option to buy this property for 60 and sell your option for 5k to a REI.

Or if you have your license (as you see to be licensed) just list it for 68.

If I knew the existing financing I could better assist you  on a wrap or subject to or a lease option assignment.

Remember when you're trying to help a seller,  you need to be able to know everything about property, 

- condition, 

- existing financing, 

- why they need to sell, and 

- educate them on selling with an agent versus renting it now when hiring a property manager versus selling on in the state you're in (sub2, wrap, lease 2 own).

He needs cash.  Get him cash.

[Brian Huber]

@Brian Gibbons 

he owns the house free and clear.

[Brian Huber]

Ok, so we signed the purchase agreement yesterday. I sent him the seller financing paperwork today to sign.  However, even though he agreed to use a title company yesterday, he's now saying he wants to receive the deposit directly.

I KNOW this is a red flag. I insisted we use a title company or the transaction can't move forward. He again refused to use a title company and I said we can't do the deal.

So it went sour quick.  Since no paperwork or money was ever submitted to escrow, do I need to take further action?  I have a purchase agreement signed by both of us.  But given that he breached it by not using a title company as outlined in the contract, do I need to take any further action?

[Andy Robison]

@Brian Huber 

Well you could sue him and try and enforce the contract or just move on. Maybe have him sign something to the effect of "purchase agreement for the real property at xxx between "bob" and "tom" is no longer in effect.

[Brian Gibbons]

Brian when I first started I tried to force deals through and when somebody signs in agreement and breaches their contract are used to threaten to sue.

Don't do that.

Refer them to someone and get rid of them.

Seller financing financial planning where you need to stay in the deal for a while either on subject to or wrap.

I think perhaps how you're approaching the seller and I for a possible solutions might need some improvement

You're either trained or untrained in showing the seller what his options are.

There's a primer on what I do negotiation with the seller

I booked the appointment if the property fits the profile, I do not try to sell over the phone and talk about solutions over the phone

Will biggest mistakes rookies May is the book appointments to go see properties without all parties present, whoever is on the Deets on the mortgage you need to see it. Otherwise you have to come back or they're going to talk it over with their partner or wife or husband and you gonna waste your time and you will not be over close on the first appointment. To avoid no-shows or only one party showing up I always call 30 minutes ahead to confirm that everybody's there.

Next to knock on the door and walk around the property and have some questions about where the electrical outlets are where the gas where the water etc.

It's important to ask a lot of questions about the property so they think that you want to buy it

Have a clipboard and look like you know what you're doing

Next to the walk-through with both parties there is only one party there don't do the walk-through simple you need 2 signatures on every offer in person.

On the walk-through make sure you do it really fast you can start you have it and we're down the basement work and then end up at the kitchen table

Where you sit at the kitchen table is important. Make sure you're on one side of the kitchen table and both of them are sitting directly across from you so that you don't have to turn your head very far look at both of them.

If they fight you for encore proves for where they're sitting, say something like hey you know it would really be helpful for me to discuss this if you both sat right there and he said here you have a problem with the could we do that?

A note on being polite and assertive you can do that what you just have to smile and watch your tone and don't be too aggressive.

And if you shy or nervous just get over it and do it anyway

This next step is the Up Front Agreement where you basically getting the sellers to agree that they need to be 100% happy with the solution you're going to talk to them about or you're not going go forward and you don't want them to go forward just call it hey so I can work for us conversely if they are 100% happy then we're gonna get the paperwork done and move forward as we can keep coming back over and over and over again it's a waste of time and money and it's very frustrating on all parties.

Different agreement does not always work but we are using it works most of the time meaning over 80to 90% of the time.

What's your phone agreement has agreed to then we go through the motivation step which is basically try to find out the real motivation and what they're willing to do and how they view agent versus renting it out

Discovering their real motivation does take some time for a 60 minute sometime once you do that step really really well then the next step is really easy

A note about terms deals....doing terms deals you really need to connect with the Sellers as far as your repore

if you don't have good repore you're not they are not gonna trust you enough to move forward

There is a post on bigger pockets about be the doctor when you're talking to the seller , do search the doctor

The last step after you do the motivation stop discussing many possible solutions would be subject to lease-option assignments etc. you want to go through a couple of "What If" steps

Here is a what if step

Mr. and Mrs. Seller, we have been through a lot of different possible solutions, from listing it with an agent, renting it out with the property manager, and seller refinancing in the state of (your state)

I want to throw out a question to you and if you absolutely need it that's fine just tell me know so I can work for me and will just take it off the table okay?

What if and I'm not sure my business partner would agree to this but what if we could pay you a payment over a time period of 24 to 60 months that would be approximately your PITI and then pay off your loan balance whatever that is.

Would that be even a possible solution to even talk about or maybe not?

That what if question sequence avoids a straight out rejection.

Please PM or Colleague me if you want an audio that goes over negotiating with Sellers.

[Brian Gibbons]

Sorry I did the above long post on an Iphone voice to text. :)

[Brian Huber]

@Brian Gibbons 

thanks for the wealth of information.  This was a contact long-distance through Zillow so my options for seeing the house was limited but I definitely get what you're saying. However, this got very scammy very quickly today.  Yesterday, he was overly-agreeable to everything and today once he found out no direct deposit, that was that.

In hindsight, it may have been some kind of bogus rental listing. Sad.

[Kyle H.]

@Brian Huber .  Hi Brian - did you get a real estate attorney involved at any point?  A low cost deal such as this is worth paying a little extra to have an attorney involved and checking things over for you.  Plus, if you did need to sue, you would have already had an attorney lined up.  I am just curious if you did or did not, and if not why?  I think only an attorney can let you know whether or not you have actually "covered your butt".  Thanks in advance for the reply - I am just wondering how you went through the whole process.

[Brian Huber]

@Kyle H. 

No, I didn't have an attorney involved. Once I got the purchase agreement and seller financing addendum signed, I'd send those documents and the deposit on to the Title Company.  If there was any fishy-ness, I figured it would come up in the title search.  I also had contingencies for a clean and clear title and approval home inspection. Between that and using escrow, I believe I'm covered.

[Bill Gulley]

Probably a scam, but I see I wasn't asked that ;)

Next time, get a loan commitment for seller financing along with a sale contract with seller financing as financing can be withdrawn for many reasons prior to settlement, which makes your purchase contract worthless.  :) 

[Christopher Baustert]

Hey Brian, you gave it a shot, now on to the next one. Kuddos to you for not being lazy and trying to make something work. What's your next deal?

[Rick H.]

Sorry, but I'm "Mr Skeptical" as I don't believe the 'My Son's got cancer' story.

As the Property is held in an entity, this is no longer an unsophicated seller dealing with an emotional issue.  Accent? 

I'm happy to be wrong, however my BS meter is deflected in the Orange-Red zone. 

Title insurance company will require officer(s) or director(s) of the entity to ratify the sale, as well as formation docs filed in state it's domicilled in. Let's see if that happens.

You need an old, salty partner to keep you out of trouble. Don't be embarrassed by this situation, however. DO post a follow up here later.

[Brian Huber]

Yup, an accent. However, if the story was true, I'd be the schmuck for questioning it. I figured if it everything went through fine with a title search and escrow, that it'd be fine.

It didn't even get to that point, so chalk it up to a scam.

[Cija Holt]

We've also had an experience like this.  If they are out of state and trying to rent or sale a property with a heavy accent.. R U N ! !    More often than not, it's a total scam.. any true owner would have had all the answers for you instead of a TBD at a later time... and would not have questioned your meeting at the title company.  You win some, you lose some.  Glad you caught it when ya did!