Patrick here with a quick and dirty blog post…
Ok, when negotiating a deal, it’s often beneficial for us — in all the deals we’ve done — to ask the seller to take back financing on a portion of the purchase price. If you are working with a motivated seller, all you have to do is hold your mouth right…
See, there are 2 parts to every negotiation: price and terms.
By getting a seller to take back financing, we are working on the terms side of the deal.
Here’s the thing: price and terms are two sides of the same coin when making offers to motivated sellers. It’s important for you to understand that you can craft a really sweet deal with either one or the other — it doesn’t have to be both.
What do I mean?
Well, find out what the seller’s biggest pain point is for selling the property… then make an offer that solves their problem and that gives you a winning price or winning terms.
Yes, you can pay full price for a house if you get the right terms.
Look, a lot of investors think it’s all about getting the lowest price — but so many times I’ve seen deals where smart investors paid more but got incredible terms, making the deal make sense for them and the seller.
As far I’m concerned, price and terms are not being paid attention to by many investors in the way they could/should be. So make sure you do!
But I digress…
Whenever you get to a price that is mutually agreeable, ask: “How much of that will you need at closing?”
Make sure to emphasize the word “need.” It’s not how much they want, but how much they need that we are interested in.
Next, you set up the payment plan.
So, I remember when we bought a house in Sumter, South Carolina. We made an offer where the seller would be receiving $22K for her equity. We asked her how much of that she would need at closing, and she said $5K — because that would pay for her move and new apartment.
So we told her that she would get $5K at closing and $3K a year toward her balance of $17K until the loan was paid in full.
This saved us from bringing an additional $17K to the table when we bought it AND lowered our holding costs. Every payment of the loan goes straight toward principal.
That’s my favorite kind of loan.
Ok, I’m gonna wrap up this blog post with a pretty powerful Pro Tip:
Never use the words “seller financing” or “owner financing” in your negotiations. Most sellers don’t understand those words. Once you put someone in a state of confusion, the answer is usually “No!”
Get to a price that works and say, “How much of that will you need at closing?”
If they want too much at closing, the price is coming down.
BOOM!
Be awesome.