I'm Not Gonna Give it Away!

One of my favorite topics to discuss is sales and negotiation.    The seller who says "I'm not gonna give it away" really means, I'm unwilling to consider an offer that low.

Of course I've never asked anyone to give their house away, however, it's an interesting concept.  A gift?  Is that what the seller thinks?  Would that be a taxable event for either party?  (there is an answer to that question, but I digress).





I'm not gonna give it away....  

Without knowing anything else about the context of the offer or the response, this response tells me a few things.  This response means you're out of rapport with the seller.  This means they consider your offer to be out of line.    So what should you do?  Well, one thing would be to anticipate this objection and explain how you approached the offer.

Ultimately I have to laugh when I hear this response.  If I wanted you to give it away, I wouldn't have offered anything at all - I would have just asked you to give me the house.  I've certainly bought houses for the existing debt, and in that way, I have had houses "given" to me, with certain caveats.

Here's the best way to respond to this or any objection:  call them by name, agree, and ask questions.

Something like this:  Well Mr. Seller I agree, I wouldn't want you to give it away.  I think what I hear you saying is you think my offer is too low, is that right?  How low too low is it?

Lease Options (Seller Financing Part 3)

My Favorite Strategy is Lease Options!  

Think of Lease Options as the best of both worlds.  It is a benefit for everyone involved, seller, investor, and end buyer.  They are so versatile and can really be used all over the place.  When both buying and selling. 

What is a Lease Option? 
Ok, think of this in two pieces, and oftentimes there are two different documents or vehicles to effectuate the transaction.  There is a Lease and there is an Option.  Together, they make up the Lease Option.  Often times the Lease document, does not reference the option.  It's just a simple lease, that has payment amount, dates, default terms, and term of the agreement.  

Then, you have the option.  Think of an option like a purchase agreement without any recourse if the buyer doesn't buy.  It's basically an agreement that the seller must sell and the buyer has the opportunity or the "option" to buy the property with terms (within this period of time, and if the buyer follows these terms).  One of those terms could then and often times then, references the Lease.  Hence the Lease-Option.  My other post about Options will go into further details on how to structure Options for both parties.  

Why Do This?  Why would you finance your buyer?  Simple:  to sell it. 
Why does the buyer need this?  Simple:  they can't qualify for a new loan  

It benefits both parties.  From the seller's perspective, they get a house sold fast and oftentimes at a premium.  You may have a property that won't sell for some reason  Seller financing gives you an advantage compared to the house for sale down the street.  Of all the buyers out there, only 35% of them can qualify for a new loan.  That leave 65% of other people who want to buy and want to build equity and realize their American Dream, (buy buying a house), but they can't qualify.  These are good people who maybe have had some life event that caused them to have poor credit.  Or maybe they work for themselves and don't have 2 years of W2s to submit to a lender.  

Speed and higher price.  Those are the two benefits for the seller.   The benefits to the buyer are obvious.

Investing in New Construction

This morning I got a call for an opportunity on land and new construction.   There's one reason I don't like to invest in new construction and that is because I see it as speculative.  Land isn't my favorite either, and the two of them go hand and hand.   

First,  I like to have a very defined end to my investment.  New construction opportunities have a few different variables that are outside the control of the investor, namely the municipality.   I don't like giving the success or failure to a government official.  The permit process can be variable for a new construction project.  Oftentimes, the permit process for rehabs are usually rubber stamped; however, not so much for new construction.  There are code issues, zoning issues, neighborhood politics, and all of that adds time to the project.  

Next, I don't like the length of time for new construction projects.  I believe this adds unnecessary risk to the portfolio.  Short quick in and out projects are the best. 

Lastly, this comes down to personal reasons, I don't feel comfortable taking over the project if needed.  Since I've never built a house I'm not sure how to move the project forward.  Of course I can get a builder involved and get some experts on the team; however, did you know when you foreclose you don't own the architectural plans?  Those are copyrighted and owned by the borrower.  What a nightmare and one that I'm not interested in getting involved with.