I am new to this site but I hope to keep coming back. I was hoping to ask about this.
I am about to negotiate with a seller that is owner financing the deal and I want to know what you think about informing the seller of her other options.
-Is this something you would feel obligated to divulge?
-Wouldn't this be in the best interest of myself if I educate and inform a only- semi-real estate-educated investor.
-I brought the deal to her after my original investor backed out. I feel it is an absolute win-win for both of us. She either continues to lose money OR she partners with me and then has the potential to make positive cashflow, without the headache of tenants.
There are alternatives that she has and I wonder if I should be the one to give them to her.
-My reasoning is:
1. If the deal goes bad for some unforeseen reason then I would feel like I have a legal defense because I had informed her of her alternatives and the risks involved with our arrangement.
2. I feel that my proposal is ultimately the best option.
What do you think?
Here are my thoughts. If you have an owner of a property that is offering it owner financing. Then they know what they are doing. Most sellers don’t offer this right off the bat. The real deal is do you really want the deal? You may find out the terms for owner financing is not you you.
It is not your job to educate the seller. Now after I had made my pitch to buy the home and they don’t take any of my offers I will give them some ideas. I will even give them a list of names of other investors that will pay more than I most of the times. Some of them even come to this board.
To take on a partner who consistantly loses money and won’t educate herself is bordering on insanity.
I suggest you not even consider tying an anchor around your own neck, because if she is determined to sink below the waves, she will drag you right down with her.
If she offered owner financing, and you accept, you have no legal issues if you do not offer other options (unless maybe if you are her licenced listing agent).
However, if the seller is a genuine idiot, you had better, by golly, be having a title search done, buy title insurance, and make sure the contract is well written and recorded so there is no way she can place more mortgage on the property or cause more liens.
Just a mild suggestion: when you buy with owner carry, have all payments go through an escrow company. They will figure the interest and keep track of the payments. The service is very cheap and it is a good idea to have a disinterested 3rd party doing the bookkeeping, in case of dispute.
I love these questions… every person who thought they have an ethical question doesn’t mind owning a McDonald if they knew it will generate them $5k+ a month profit and they play by McDonald rules.
I then ask them “so you are OK owning a McDonald knowing they target kids in their advertising… knowing how unhealthy their food is…” you have no ethical problem with it if someone else is doing the advertising as long as it is just not you.
If you saw a house listed for half its price on the MLS, do you argue with the seller and explain to them they can get more for it and that their realtor is an idiot, or do you buy it?
If you have a clothing store, do you tell your shoppers to go to Walmart because it is cheaper?
I don’t think there is any moral dilema here. Any time you are trying to convince someone on a deal, there are always other options. If you want the deal, you shouldn’t be telling them about other solutions to their problem if you want them to choose your solution.
It would be best to propose your deal and if they agree, then you have a deal. The only time you should discuss other options is if she directly asks you about a specific option. If these type of questions come up, you will want to explain why that option is inferior to working with you.
Of course you are trying to make money on the deal. The truth is that she probably could make more money without using you if she had the time to wait to sell the property conventionally without you. The fact that she’s considering your offer means that she is unable to wait for a better deal later, and your deal is the best one for her now.
I understand you wanting to do the right thing. I always want people to get a fair deal when dealing with me also. I don’t think you are doing anything wrong if you only present your deal to her.
Yes, if you are her MOTHER or father you should absolutely tell her of all the potential ways out of her situation (whether you are offering them or not) You would want nothing but the best for her. Yes, use your knowledge to help her. Spend all your time educating her so she won’t have to do it herself, and so SHE gets the best way out. Don’t worry about yourself.
If you are NOT her mother or father, and she is an adult, you need to let her think, research, decide for herself. OR, open a charity.
I applaud your wanting to take care of this person, but this type of thinking will run your business into the ground. You could spend your whole life simply helping people who will gladly take it, but it should be in the form of an organized charity where you do get compensated.
You ALREADY ARE offering her a helpful solution she may have not come up with herself.