Always Make the Call!

Sometimes it might not seem worth your time to call a buyer or seller… But you should always make the call!

Working in real estate requires making a lot of phone calls. We often talk about the value of getting on the phone, and how the number of phone calls you make will correlate directly to the amount of deals you take under contract.

But sometimes, it might not seem worth your time to make a certain phone call. Maybe the buyer isn’t fully qualified or maybe you already have someone else lined up. Why waste your time on a phone call that isn’t totally necessary?

But on the other hand, what if that phone call could result in a better deal? Or what if it results in something else entirely? You’ll never know unless you make the call—and really, it’s only a few minutes of your time. It’s almost always worth it in the end.

Let’s take a look at one specific deal that never would have happened unless our Associate picked up the phone and made a call that he didn’t want to make.

A low down payment (or so we thought)

The deal we’re looking at involved a seller that wanted to move out of his house to find a better school system for his children, and a potential buyer that had a low down payment.

The house was an expired listing that had been on the market for eight months before our Associate reached out. Our Associate had a contract signed only a week after initial contact, and several potential tenant buyers lined up a week later!

There was one tenant buyer who looked like they might not be a good fit, though. Their down payment was small, and our Associate had a few other options lined up that looked better. He wasn’t going to bother calling this particular tenant buyer—that is, until we stepped in and suggested that he do so.

In situations like this, it’s always worth making a call to check in, ask some questions, and feel the person out. Maybe there’s something they’re not telling you or maybe there’s a workaround. They could be a perfect buyer, but you’ll never know unless you pick up the phone!

This buyer was self-employed and she came up with more than what we needed to prequalify her. The problem was that she only had a few thousand dollars available for a down payment initially. That might seem like a dealbreaker, but there are often ways to work around this—you just need to get on the phone and ask some questions to see what’s possible.

In this case, we urged our Associate to make the call. One of our coaches actually joined the call with him, and they started to ask the buyer some questions. Here’s how it went down…

They explained to the buyer that she would need a larger down payment to make a deal work, and then proceeded to ask how that might be possible. At first, the buyer wasn’t sure. But with some prodding, they realized there were a few things that could make this work.

They asked the buyer if there was a time of the year where she receives a bump in her income.

“What does your tax return usually look like?” “Do you get any bonuses at work?”

As it turned out, she answered yes to all of those questions. (Most of the time, people do—they just don’t realize they can use these moments to add to their down payment and your questions jog their memory and thought process!) We asked her how much she was expecting during those times and how much she would be comfortable putting toward a nonrefundable down payment.

Once we got that number, we asked another question. “Would you be willing to do that again next year? And the year after?”

Her answer was an unequivocal YES!

All 3 Paydays™

Once our Associate sorted out those issues with the down payment, it became clear that this was a great tenant buyer and that they’d be able to quickly structure a deal. Our Associate had agreed to a purchase price of $368,333 on a 36-month term with the seller. He then turned around and settled on a $399,900 sale price with the tenant buyer on a 24-month term.

Confused why there’s a 36-month term and a 24-month term? Let’s check out the Paydays first and then we’ll get into that.

To start off, Payday #1 is the down payment of $36,000. This is scheduled in multiple payments at the time of the tenant buyer’s bonuses and tax returns. That means one upfront payment of $12,000 and two more payments of $12,000 over the next two years in February.

Payday #2 is the monthly spread. In this case, our Associate was able to acquire a great monthly spread. He owes $1,951 to the seller in PITI (Principal, Interest, Taxes, and Insurance) but is getting $2,712 in from the tenant buyer each month. That’s a whopping $761 in monthly spread! Over 24 months, that’s $18,264.

Payday #3 is the premium on the home, plus the principal paydown, and minus the deposit. The premium is $31,567, and there is $475 going toward the principal each month. That’s $11,400 in total over 24 months, meaning the total for Payday #3 comes out to $6,967 when you remove the down payment.

Add up All 3 Paydays™, and this deal comes out to $61,231 in total. Seems like that phone call was well worth his time in the end!

24 or 36 months?

As we mentioned above, there were two different terms in this deal. Our Associate had a 36-month term with the seller and a 24-month term with the tenant buyer. Why would he do that?

Well, it’s simple really. What’s happening is that the tenant buyer has the option to buy the property on or before 24 months. Our Associate has to cash out the seller on or before 36 months. That gives him a year buffer in case anything goes wrong or the tenant buyer wants to extend their term.

Maybe the tenant buyer realizes they won’t be able to purchase the home in 24 months. No problem! He can extend the term to 36 months and get an additional $9,132 from the monthly spread and $5,700 from the principal paydown. In addition to that, it puts our Associate in a position to be back in the drivers’ seat. Do they raise the price? Doubtful, but nice to be in control of the entire deal and have options!

Maybe the tenant buyer needs to back out of the deal for whatever reason. Again, no problem! Our Associate could get a new tenant buyer in the property or even sell the house conventionally. He’d still profit nicely off of Paydays #1 and #2, regardless.

During COVID, we had a woman who had to amicably leave as she could not continue employment. We helped her move, relocate, and sold the home with a Realtor within a month. We were happy and our seller was thrilled. There are many ways to pivot, you just have to know how and when.

The point is that adding a year buffer frees up our Associate to pivot in many different ways. Chances are, everything will work out fine with this deal and the seller will be cashed out in 24 months. But if something does happen, he’s got plenty of time to fix it.

Have you ever used this strategy of having two terms—one for the buyer, and one for the seller? It’s a great tactic that we use frequently. I’d love to hear how it has worked for you.