My First Yellow Letter Response.

11 Replies

Good Morning BP! well i received my first response from my yellow letter mailings Sunday night via text i got excited and nervous at the same time the letter stated i want to buy your house for cash and my phone number,he asked me what was my offer i had no idea what to say so i asked if i could go and view the property then i could make an offer he has tenants and did not want to disturb them i was loss again lol so i asked did he have an idea of how much he would accept he sent me the zestimate from zillow 330,000 when i saw that i was like i cant do anything with that when i saw the property  i assumed it was vacant so i responded by asking would he consider seller financing he laughted and said clearly you must be joking then he goes on to say he would finance at 30% apr with a 50,000 prepayment penalty i asked if i could get back with him tomorrow was that his way of telling me to kick rocks??? or should i further pursue and try and find an investor? any words of wisdom would be great thank you guys ohhh and he did say he was an investor also.

Yes, he was telling you to kick rocks. Obviously he's not motivated to sell if he is asking the zestimate price.

Good morning @Jonathan Davis , First, there are scripts available that can provide a rough gauge of the information you should ask. Asking to see the house is always a good next step one way or another. If he wants a price without having you see it then you need to do what he apparently did, pull Zillow, Redfin, Trulia, etc; or pull MLS comps if you have the ability or are connected to a realtor. (https://www.biggerpockets.com/rei/real-estate-comp...).  

If the retail value or ARV (After Remodel Value) is 330k your goal is to ball park a price around 70% of this value.

Second, if you sent a letter saying you would buy his house cash and then asked him to finance it I am sure this deflated your credibility.  Make the deal then worry about getting the money.  But make sure the deal is a good deal or it is worthless.  Don't get the cart before the horse, once you find a deal, there will be people wanting to put up the cash. Either as a JV flip or perhaps you could wholesale it. What was your plan once you found a deal? Flip? Rental? Wholesale?

Third, If he has tenants find out what they pay & how long they have been there.  

What prompted you to contact this homeowner?  If it was driving for dollars and the house looked in disrepair, you can follow up with questions about the upkeep and what things is he aware of that would need to be replaced or updated if he were going to put the house on the market.

Financing at 30% interest with a 50k prepayment penalty is his way of saying no.  If he is an investor also it might be best to let this one go.  Otherwise shoot a ballpark price back to him at 70% percent of ARV.  If he is interested then go to the next step and see the house, if hes not, find number next.  

You don't necessarily need to know everything about each step but you should know what the steps are.  There are ample blogs, podcasts, and books that can help fill in some of these blanks for you.  You can go to the BP Education tab and tools tab for assistance.  If you are a podcast fan I highly recommend the BP podcast (https://www.biggerpockets.com/podcast) and @Danny Johnson has a fantastic podcast (http://flippingjunkie.com/flipping-junkie-podcast/)

Good luck,

Bryan Chuchta

Hi Bryan thanks for responding my plans were to wholesale the property i was gonna advertise on a few websites for investors and i met 2 guys in atlanta who are investors but i did not wanna go to them yet with this until i knew if it was a good deal or not but i dont think it is. well i have been going thru the BP podcast up to 94 now so i have been putting in my research and study time just finally decided to take action i actually was driving for dollars when i came across this property and it looked vacant that was 3 weeks ago so i guess he recently found tenants well just my first response ill get there eventually,thanks again for the insight!

Originally posted by @Dillon Leider :
Yes, he was telling you to kick rocks. Obviously he's not motivated to sell if he is asking the zestimate price.

 Thanks Dillon.

@Jonathan Davis

Bryan gave you excellent advice. Sounds like you went in blind without a checklist or scripts so that you have no idea what to say when a seller calls you. Can send you some scripts or a checklist. 

Also, just because a seller asks for an unreasonable amount right away, doesn't mean the deal is dead if you know how to talk and educate them. The moment you asked for seller-financing you did indeed lose your credibility.

Originally posted by @Ray Lai :

@Jonathan Davis

Bryan gave you excellent advice. Sounds like you went in blind without a checklist or scripts so that you have no idea what to say when a seller calls you. Can send you some scripts or a checklist. 

Also, just because a seller asks for an unreasonable amount right away, doesn't mean the deal is dead if you know how to talk and educate them. The moment you asked for seller-financing you did indeed lose your credibility.

 Thanks Ray and your right i did go in blind and i would appreciate scripts,checklist whatever your willing to share gonna slow it down and get some more knowledge under my belt,thanks again for responding. 

Yes kick rocks. 99% when the first thing people say is what's your offer you are not going to put a deal together. 

99% home sellers have an unrealistic view and you are working to identify 1% which has not surfaced yet.

@Jonathan Davis , 30%APR, means about 30% interest per year... Also 50K prepayment penalty? This guy knows a lot more than you about real estate!

I congratulate you for taking action, and before you start making offers on selling financing, you have to understand very well how financing works. Contact one of the best lenders you can find in your area, that is an investor himself, and then ask him to sit down with you and teach you about financing. Also, read anything you can about financing first, before you go to meeting with him. 

When you buy with owner financing, the terms is what will make the deal, so unless you can offer different scenarios, and make sure they all work for you, there will be no deal for you.

Also, make sure you know sales pricing and rental pricing in your area and you want a few exit strategies.

What is your intention with the property? Buy with seller terms and rent it outright, do a lease with option to buy with the new tenant, sell it for more to someone else, etc? 

Good luck to you!

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