First Offer

I am a newbie, am looking at some owner financing deals, problem is I have no money and don’t want to lose out on :flush what I think is a good opportunity. What should I do in this situation? :help :help

It’s time to put together something that demonstrates how reliable and stable you are.

What can you say about yourself that supports this?

Meantime, a LOT of sellers will agree to finance you for several years if you can give them some spending money up front. Or if you can demonstrate that financing you is more profitable than selling outright.

I pm’d you a pdf with several dozen no down techniques from Robert Allen, that may give you some insight on how to negotiate no down deals.

You want either your price, or your terms, but you need one or the other. If the seller won’t give you either one, then you walk away.

Barney Zick offered one of the best pieces of advice on negotiation… He advised to always have a reason for any request you make.

For example (this may sound lame, but the ‘reason’ doesn’t have to be strong), if you were to ask the seller finance you for 30 years at zero interest you might say, 'the reason is that I want to make sure the payments are low enough that you always recieve them on time, in full, every month. You want your payments on time and in full don’t you?"

Of course now the seller (all things being equal) is now focused on giving you the terms that make sure he gets paid in full, and on time, every month. Never mind it’s zero interest for 30 years!!!.

Anyway, you get the gist. Meantime, as an investor, everything is negotiable; down payments, interest rate, terms, balloons, etc.

Anyone out there can send me an example of what should be included in a sub2. Also, can I assign it to another buyer? :banghead :help

There’s actually several things you want to do when taking a property subject-to. You want to make sure this is stated in the purchase agreement and the seller has to initial the fact that his financing is going to stay in place and he’s aware there is a “due on sale clause” in his note.

This is a discussion you will want to have with the sellers. If they have a problem with it better to get it out in the open up front. I have very good materials regarding the entire subject-to process. Feel free to PM me.

I beg to differ. The last thing I’m bringing up is the Due On Sale clause with a seller. I mean, pffft.

If I’m having a discussion about the DOS, my negotiations and deal offer style sucks drain water, and the deal is tantamount to toast at that point.

If a seller has an issue with the DOS clause he’s not an actual seller in the first place. So making it an issue is just a deal killer.

If the seller brings “that” up, he’s gonna have some more issues, too that will be pretty much torpedo the deal.

For example, how are we going to overcome the seller’s objection to his credit rating being on the line after you get his deed, without assuming the loan?

Or what are we going to say that when the nervous DOSC ninny asks how we will guarantee his loan is paid on time?

I know how to deal with this, but it doesn’t include bringing it all up, and throwing it around for a round of discussions. That’s so dumb, it’s breath-taking.

That all said, when we sell, it’s definitely important to spell out, and explain the DOSC with the buyers. Buyers need to know that if they’re “planning” to pay late, they’re jeopardizing their financing, their down payment, and their credit in doing so.

Meantime, there’s a boatload of things we need from the seller to close on a sub2 transaction, that if we fail to get, we will have a very difficult time administrating the loan; monitoring balances; talking with the bank; and getting impounds and insurance paid, etc.

There’s too many things to list here. We need some training, and/or an attorney, to keep from losing control of the financing, or creating an extremely unhappy seller. Just saying.

Grow some courage! I’ve done hundreds of house deals over the years and when I approach a seller with a distressed financial situation, I suggest they cut me a check for taking them out of their bad situation; then I take it ‘subject to’ and get a credit impaired risk in the property and manage that risk…and the buyer cuts me a check too.

Regarding due on sale clauses, I’ve never had that as an issue…if you make the payments, the bank doesn’t call the loan. To safeguard, I like to put the house in a trust prior to the transaction…this is not a red flag for the bank in that placing a property into a trust is a normal/typical financial planning tool. Once in the trust, the trust makes the payments and there is never an issue with ‘due on sale’ clauses.

Hope this helps.

Rob in Atlanta

This pretty much sums up the entire game of REI. That’s some really simple, but really solid advice there.

Knowledge, Courage, Action!

Rob in Atlanta