Presenting the contract

General Real Estate Investing
1

How do you present your contract and offer to the seller?

I have been working strictly in short sales for the last year or so and have had some success.

With short sales, presenting my offer on the homes was easy as the homeowner understood that they would not be receiving any proceeds from the sale.

My question is what is the best way to present a contract to a potential seller. Hand over the contract and say sign? Explain to them the reasons behind the offer amount?

Seasoned investors, how are you doing this?

2

I email them the contract and let them review it. Then we get together and sign it.

3

Maybe, I am a bit overanxious but Id prefer to present my offer in person. It seems to me that an email would make it too easy for the seller to say no. Any resistance the seller has, I would like to kill it immediately.

I could be wrong though. Im going to think it over before I call the seller tomorrow.

4

You have to judge each deal and decide accordingly, but for my business, I could not imagine emailing a contract (unless the price had already been discussed and we were just tying up loose ends).

I present my offers using a sheet that details all of the particulars of the transaction. I show my target sales price when completed, all of my closing costs, carrying costs, and commissions, and even my target profit. Of course, these numbers are all a little padded so that my target profit does not look terribly high.

This then shows them that I am making a realistic offer based on what’s going on in the business. It’s hard for them to ask me to come up on the price when the numbers show right there that I can not offer any more any make a respectable margin. So, either they take my price or they don’t. There is seldom much negotiation, although I will come up a few grand in most cases just so the seller feels like they got something.

For me, though, presenting offers in person is key to my business. After all, although I am the one buying the house, I am really the one doing the sales job…I am selling the buyer on the idea of selling me a house for cheap. I’ve gotten more than a few deals from people just because they trust me and like me, and you can’t build that kind of rapport by email.

My $0.02.

5

Hello Gregg,
I agree with Paul. All my offers get discussed at initial contact. I let them know I am a wholesale buyer. I always tell them what the offer will look like before I put it on paper. If they are out of town sellers I cover all the points over the phone , then commit it to paper. I read the offer to them and cover any questions they have at that moment. I only fax/email when they are ready to sign.I also let them know I am sitting by the fax waiting for the signed copy. Some times I have stayed on the phone while it was faxed,signed,returned. I never give the contract in advance. The worst will always happen and it will sound a little like this when they/you call the next day…“well I’ve been thinking…”. Kiss the deal goodbye at that point. If I can get in front of them I can usually close them. Some times I write the contract with them and have it signed on the spot, and off to the title co I go.
Like Paul says every deal is different.
Darin

6

Thanks fellas–

I met with the homeowners today. I presented them a simple spreadsheet showing the costs that would be incurred by going with a realtor, title fees, etc. I gave them a general idea of the local market in Tucson (over 10000 listings in city of 1 M) and tried to convey the amount of time it would take to sell with a realtor. I then told them the amount that I was offering and emphasized how quickly we would be closing.

I thought that I had a solid presentation and made a good argument for selling to me, but in the end, they said they needed more money for medical bills to pay for the husbands stroke. Thats the way it goes, sometimes. Definitely a good learning experience, though.

Is there anything you think I could have done differently? I think they genuinely needed more money. I offered 65% of market value, but it was evident that they were thinking they could get closer to 85%.

7

This is not directed at you, but reading stuff likes this just makes me want to puke.

There are a dozen knuckleheads in the ER on any given day who are looking for free (often unnecessary) medical treatment with no intention of paying five cents, and then you have these people who are looking to sell their house–their HOME–to pay a bill that they had no fault in creating.

I have seen a number of foreclosures where the owner got behind on mortgage payments because all of the money went to hospital bills. That sickens me. I would never, ever lose my home to satisfy my hospital bills. Never, EVER.

Here’s what you can possibly do, though…

Ask them how much the bills are. Then see how much they will net from the house if they sell it to you for 65% of the value. Obviously this net amount is not enough to pay it in full, but is it enough that hospital might take it as full payment? They routinely charge off MILLIONS of dollars each year for services that they know they will never get paid for.

If the amount would pay, say, half of the debt, offer to negotiate with the hospital to get the bills reduced. Of course, get the contract signed in advance of doing this work.

This is almost like a short sale, but you’re dealing with a hospital instead of a lender. Between the two, I’d rather negotiate with the hospital any day of the week.

If the deal works, everyone wins (sort of). You get your house, and they get their bills paid. Of course, they lose the house, but maybe that’s the direction they are going in any way.

Even if they don’t agree to sell you the house, you might still advise them that they should not sell their home to pay off the hospital. The hospital can NOT take away their home, so why give it up? You could even still offer to negotiate the discount as the “right thing to do.”

Karma, baby.

8

Why didnt I think of that?? Clearly, I need to try to negotiate his hospital bills. What difference does it really make in how he pays the debt? Thank Paul for the idea. I will let you know how it turns out.

9

Not to be heartless here (I like the idea of negotiating the medical bills) but don’t lose sight of the fact that this is business. You are in business to make money, not solve their life problems.

Maybe their medical bills are legit. Maybe they also want a vacation in Mexico.

I know from experience that it’s easy to get caught up in “negotiation” trying to “make the deal work” and end up accepting a deal that’s not a money maker because I was trying to “help them.”

This is business.

10

You are absolutely right, mc. To be honest, I really did get my heart into this deal(more so than others). The husband had a stroke, he was in the Air Force, served at some of the same bases that I had.

I would have worked this for free, if it meant the couple were better off. As it turns out their medical bills were almost insignificant-5 k in hospital bills. The way the wife had explained everything, I assumed medical bills were a lot higher. They were both born shortly after the great depression and I could tell those times and worries still lingered.
The idea of carrying any kind of debt or having to pay interest was just too much for them.

To make a long story short, I got the home into contract tonight, mainly because they liked me. They turned down an offer from homevestors earlier today that was a little higher than mine. I dont know why I told you all of that, but I guess the point is to build a strong, honest relationship with the seller quickly and more often than not, they will be loyal to you.