All Forum Posts by: Brian Gibbons

10 per cent down in owner financing is generally sufficient

I want to talk about trying to discover the sellers true motivation.

the real estate investor has to figure out how the seller feels about certain issues like real estate agents, property managers, things of that nature.

When you ask a question like, 

"what were you hoping I could do for you here today?", 

Really listen to what the seller says. 

The only way can do this is to get the seller to volunteer some of their problems.

I use negative phrasing and I sound a little naïve, I sound like Peter Falk in Colombo, you know that 70s show, 

about that CALIF police Lieut., that dealt with all these rich people in Hollywood accused of homicide. 

I love how he scratched his head, using his hands, and using phrases like 

oh, by the way… 

Can you explain that a little bit better for me because I don't quite get that...

I know that probably makes you sound stupid, but it allows the sellers to be disarmed.

If you said something like,

"You know Mr. seller the good thing is that if you rent this place out you will enjoy working with your tenants collecting the rents and all that, right?"

At 1st look that might sound a little weird, but what you trying to do is to elicit a response from the seller that he hates tenants.

I made you asked them straight ahead, 

"how you feel about tenants? Or 

"Do you hate tenants or what?"

That's not going to be effective.

What is effective is... 

"You know Mr. seller the good thing is that if you rent this place out you will enjoy working with your tenants collecting the rents and all that right?

So if he hates tenants, the sellers going to say something like, 

"I hate dealing with tenants, it's a big hassle, 

my friend has a rental, he hates dealing with his tenants."

By you need to act like Peter Falk here, and exclaim, 

"Oh, a big hassle? (voice rises) I didn't realize that…

So you need to practice phrasing the kind of situations that you want them to say that they're not interested in, but act naïve.

This try another one okay?

"So Mr. seller's probably not a problem if you don't sell right now, at least you can move into your new house, if it takes 6 to 9 months to sell this place at least you won't be a problem to cover both the payments right?"

The most people at 1st look, that sounds like you're being silly, no one wants to pay a house for 6 to 9 months vacant.

But if you get the response like this...

Seller: "no I don't want to do that, it's going be a real financial strain for us to make but those payments."

Timeline - Urgency
You want to figure out the Seller's timeline or urgency. 

A good way to do this is the following:

"Mr. Seller you know I just need to have an understanding of when would you like this particular sale to happen? You want to happen in 6 months or 9 months ideally what would you like to have this property handled?"

I love that same property handled. 

What you want to hear from them if they truly motivated is something like...

"God no. Not 6 months. I need to thing handled like this week or this month"

Now we have a true motivated seller and they're going to be motivated to listen to you the Real Estate Solutions Provider, and to be agreeable to your creative offer.

Logic does not sell, emotion sells.

And remember one other thing:

We buy for emotional reasons, we rationalize and defend our purchases with logical reasons.

Think about buying a car, you don't think about the total payments, you think about how it feels and the status you get.

So keep the motion high when you doing this 3rd step.

Next - Getting the lowest price on wholesaling deals.

The upfront agreement - the second step in negotiating with home sellers

Well the upfront agreement was designed to avoid some things.

What would you want to avoid in a sales presentation?

The classic "thank you but I want to think it over."

Have you ever heard "a confused mind says no?"

When you bring up "selling on terms" I think it's very confusing to most people. 

So I keep it simple and I don't use "lease with option" terminology and "subject to existing financing" and "wraparound mortgage all-inclusive trust deed".

The upfront agreement basically talks about what you are willing to do as a business person, and sets the stage for not coming back ever. I mean ever.

Yes or no, not maybes.

The letter of intent basically says,

Name of owners, 

property name, 

today's date, 

name of prospective purchaser, 

name of purchaser's company, 

intention to purchase on these terms as a principal.

Purchase price

if lease with option, market rent, 12 month term with extensions, exercise price, etc.

If subject to, purchase price, date of possession, date first payment, date of walk through, etc.

If wraparound mortgage AITD, purchase price, note payment, interest rate, etc.

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The upfront agreement

In order for the upfront agreement to work, you need to frame it as a very fair, 2 way business agreement.

Here is a possible exchange...

After the walk through, you're sitting at the kitchen table, looking at both mom and dad the sellers.

I fold my hands and I looked very solemn, I try to give them is kind of an expression is possible, as sincere as possible, I have my legal pad, a pen, and a blank letter of intent in front of me.

I also have a folder of comps and rental information on the subject property.

So here's the upfront agreement...

Investor: "So Bob and Susan thanks for the walk through, I just wanted to talk about how I'd like to see our business relationship work.

My job is to look at the property, look at all the financial information, then make a decision, on the spot.

To keep coming back over and over thinking about possible deals is not what I do. 

What I do is 

if the location is right, 

the condition of the property is right, 

the layout of the property is right, 

the existing financing payments are right, and 

the attitude of the sellers are right, 

 then my job is to put together the deal structure that works for me, 

and I basically give the project the green light.

Not a yellow light or a red light, but green light,

the analogy here is that we go forward and get the paperwork done tonight.

To keep coming back is not a good business plan, takes up too much time and nothing gets done.  We are both concerned about getting to a result, right?

On your end, you want to make sure that you're happy with the terms that I propose, if you're one hundred percent happy with what I'm talking about, I would hope that you give me the "green light" on this proposal, and you feel comfortable that you finally got a solution to your house situation.

I know it's stressful selling your house can be, I know it's confusing at times, but hopefully we can move forward and both give this situation a green light.

Now if there's something that I'm not happy with, I'll tell you about it upfront, I won't worry about offending you, I'll just tell you,

"sorry this is not good work for me."

And then I'll pack up and move on to the next prospective home seller.

I hope you won't be offended if a very honest and straightforward with you. I know you'll be disappointed, but I hope you appreciate the straightforward and direct approach I have.

And lastly, if there's one thing that both of you do not like about my proposed solution, I would hope that you would do the same thing, and tell me,

"Brian, this is good work from some sorry.

That last condition is a deal breaker for us. I'm sorry it's not going to work out."

Now I'm absolutely happy to accept that, and I'll be disappointed, but I understand that you have to have your terms and conditions totally acceptable. 

And just not going to work out for you."

So at the end of our talk today, if we both give "the green light", both say that the terms are acceptable, we'll sign the paperwork and move forward,

on the other hand, if either of us give this talk "a red light", the other party will say "okay, I'm sorry feel that way."

How does that sound, Bob and Susan, is that sound like a good way to do business regarding your house situation?"

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The psychology behind this is that you don't want to keep coming back.

A possible conversation you might have at this time in the negotiation is...

"Well it all sounds good but I want to run it by my attorney."

The attorney objection comes up a lot especially in terms deals. When you're first starting it's so important to not get upset the objection. 

And don't cut down attorney saying that they are all crooks were there just a kill deal, even though they are deal killers.

When I say if they bring up the attorney objection is...

"You know I do hear that now and then and I understand your concern. I want you to have legal advice and be comfortable with this decision about your home.

Now I will tell you, unless your attorney is an expert with a lease with option, subject to existing financing, owner financing, and other legal remedies for your situation, he's probably have a say " don't do it."

Then I reach for my nolo.com article, and go over the different seller financing possibilities.

See

http://www.nolo.com/legal-encyclopedia/seller-financing-home-sales-30164.html

And I walk them through all the situations in the article, from lease purchase to subject to, to installment sale, to wraparound mortgage.

"Bob and Susan, the way I handle this is I write down that you will have 72 hours to have your attorney converse with you about the situation, and if we don't have a written response from your attorney within that time, we will all presume that there are no objections.

I would hate for you to be charged to pay $500 in attorneys fees and have the attorney say "Don't do it" and then have you waste that $500.

So how do you feel if I right into the agreement that you have 72 hours to talk to your attorney about this, and if we don't have a written response within that time, we will presume that there are no objections?"

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So this ends the second step of the upfront agreement, when talking the sellers about selling their home on terms.

The next post is the third step, the motivation negotiation step, finding the real motivation of the sellers.

Now for Negotiating with the sellers....

First step is Building Rapport...

So how you connect with the seller especially if you're shy or introverted?

First look as good as you can. Business Dress.

I think that you don't need to look like a banker but not looking like a slob either is important.

a. Business hair cut
b. pressed button down shirt, white or white or blue
c. Gray slacks nice ones
d. Really good business shoes, wingtips
e. Navy blue blazer

Why bother to look like a business person?

Well if you have no deals, I think the "visual" will give you respect from sellers, and you want to close on the first visit, and you don't want to waste your time, you had better put a lot of effort into how you look.

For women, business suit, white blouse, or red blouse or blue blouse. 

Look like a banker or financial planner.

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TOOLS

a. Have a briefcase for God's sake. 

Look like a professional business person. 

Go to Marshall's a T.J. Maxx and buy a nice one.

b. Stationary: 

have lots of black pens, blue pens, red pens, felt tip markers, yellow pads, presentation folders, business cards, blank letter of intent forms, presentation sales book, etc.

c. A note about your car: 

if you're poor and you have very little money and you have a crappy car, parked it down the street and walked two minutes to the house.

d. Thank you notes: 

there are few business tools more powerful than a simple thank you note with a business card. Stamp, with an ink address stamped on the back for return address, and a note that says something like,

"Thank you so much for investing little bit of time with me, and I'm certain of the ideas we talked about regarding your house situation will definitely help solve the problem you're trying to solve.

Here's an extra business card, and please scotch tape it to the refrigerator so you can find my number easily.

Best wishes,

Brian Gibbons
Innovative Property Solutions LLC"

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Now that we have the "image issue" out of the way we can work on the language.

The language of building rapport

How do you connect with the seller?
How would you feel that there was some "expert investor" coming over to your house?

Talking about financial issues in real estate?

How cautious would you be as a seller?
How guarded would you be as a seller?

So you must take 5 to 10 to 15 minutes to build rapport.

You must establish a connection.

Many people don't know how to do that.

Here's how to do it.

1. Ask the seller questions about himself or herself

You need to build bridges of common ground.

People like people that have things in common with themselves. They're more comfortable with people that have similar interests and similar activities. Think about your activities that you're involved with.

You want to draw the seller out to talk about themselves. 

Dale Carnegie wrote "how to win friends and influence people" wrote about behavior of people. 

People like to do business with people that they like and they trust. People like you and trust you if they have more things in common.

Draw the seller out of their shell. 

Get him or her talking about himself or herself whenever possible.

As an example think of yourself walking into a house.

You - hey of these your kids? (You point to a photo on the end table in the foyer)

Seller - yes those are my kids, John, my oldest. Susie there in the middle. And Luke my youngest.

You - How old are they now?

Seller - John's 24, Susie's 18 and Luke is 15

You - oh I have two children (bring out picture in your wallet) theres David 12 and Kelly 10. (building a bridge, creating commonality.)  So, does it get any easier when the get into their 20s ? (big smile)

Seller - it sure does. You know I always thought it was just really important to remember that we were teenagers wants to.  And we survived it!  But looking back, I'm not sure my parents survived my teen years (notice seller is loosening up to you)

You - I know exactly what you mean. I think I was probably the toughest of the bunch for my parents to raise (building a bridge). What is your oldest doing now?

Seller - he's married with a child on the way. He lives in Boston and works for an engineering company out there.

You - Wow! You're going to have a grandchild! That must be so exciting for you! How much longer until the due date?

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You get the idea, some people might call the "Small talk",

I call it the glue that helps me build rapport, and allows people to like and trust me quickly.

What you say if you're shy or you were brought up in a non-people house, where people didn't chitchat much?

Here are some ideas...

1) Where did you grow up?
2) Do you have any kids?
3) How old are they?
4) What is it that you do for a living?
5) How did you get started in that career?
6) What do you like to do for fun?

WARNING - just spent too much time building rapport, you are there to get a job done and go through all five steps properly.

There comes a point where some new investors find themselves wasting hours of their time making friends with people BUT not closing any sales.

There need to see if it's a fit for you and your company fairly quickly use within 15 minutes. The second step, the upfront agreement is important to get into right after building rapport.

Another mistake is that you think that if step one is completed, you not to do any more about throughout the other four steps. You must build rapport as you go throughout the entire meeting with the seller. 

I really want you to spend 5 to 15 minutes upfront building rapport before you move on to step two, but that doesn't mean you're done building rapport.

Throughout the negotiation you need to gauge your level of connection with the seller, and look for opportunities to deep in this connection. But you need to balance this need to maintain a connection, with your equally important need to move the conversation forward to its conclusion. 

ABC, always be closing.

See

http://search.yahoo.com/search?p=always+be+closing...

Pretty harsh sales training, but I love that scene!
The next post will be about setting up an upfront agreement or as I call it,

How to Avoid the Objection, Let Me Think It Over.

hi @Kevin Str

Here is a list of Master Lease Option articles, I hope you find them useful.

http://bundlr.com/b/mlo-master-lease-option

Some basics:

Need to find a motivted seller throgh marketing

Need to negotiate just with seller.  If there is an agent, need to have a face to face with both of them.

Need to master lease based on low NOI, then sublease. Increase rents and decrease expenses.

Have an option to buy based on low NOI and either sell your option or exercise it.

Need Private Investors for 100 units.

@Kevin Strawser

I would not "bash" @Karl Krentzel

I love this article

https://tenminuteskill.wordpress.com/2014/11/03/ho...

He is a Tim Ferry and Mike Ferry graduate.

Give him a look!

Hi @John Jackson

Writing a book, want me to mail you a printer cartridge in Texas? HP cartridge?

Hi Tim,

See 

http://lonestarlandlaw.com/Lease-Options.html

And Contact @John Jackson

I taught him Lease Options in 2002, he does alot of lease option TX assignments, over 500 I think,

http://leasingtobuy.com/

Hi David,

I'd get your license in LA and go make some offers!

Save your money.

I like Bond For Deed in LA, when buying, avoid banks.

See

http://ackelandassociates.com/bond-for-deed/

http://www.mikeferry.com/main/content/complimentar...

I love Mike and Tim Ferry.

Great trainers.

I hope you find these useful.