HELP: Closing on motivated seller leads
Investor · Bala Cynwyd, PA · Member since 2014 · 45 posts · 1 vote
Hello everyone,
I have recently been doing some research in the area of buying homes directly from home owners that are motivated to sell their homes for various reasons. I understand the theoretical process well in terms of how to find these potential motivated sellers but I am kind of hung up on the practicalities of how to follow through once an agreement has been made on a selling price. Can someone please walk me through such a process (agreement of sale, title search and what ever else might be necessary to complete this process).
Thanks!
-Nate
Sales Agreement, Purchae and Sale Agreement, PSA, Sales Contract/Agreement for the Sale of Real Estate, Escrow and Deposit Agreement, and a half dozen other titles all typically refer to the sales contract.
If you're experiencing a block do to a lack of understanding then I'm of the opinion and mindset that the only way to cure that block is to go out and experience it in a live experience.
Unfortunately a vast majority of people allow mental blocks from them achieving their goals. They will not take action because they feel the don't know enough or the block freezes them out of taking the initial action needed to get started.
A simple cure for a lack of knowledge is to build a plan. This plan doesn't need to be overly complex. Since you're struggling with closing a seller then build a step by step plan for closing a seller. Example:
1. Find seller motivated seller
2. Determine property value
3. Meet with seller
(a) Have an answer list for most seller objections
(b) know my buying formulas cold so I can shift buying strategy during meeting to meet seller needs or objections.
4. Don't leave until a contract is signed or a reasonable buying price is unreachable.
After creating your simple plan then sit down and read all of the materials you might present to a seller, slide deck, bio, proforma, and sales agreement. Reading through and having a thorough understanding of these documents will give your the confidence to discuss them with any seller.
The Ultimate Beginners Guide to REI
http://www.biggerpockets.com/real-estate-investing
Any of the FREE how to guides...
http://www.biggerpockets.com/real-estate-investing
There are any number of Podcasts. This information is all over the site...forum posts...blog posts...etc. But, I'll break it down really simply...
1...screen the lead and do an initial analysis to determine if there is potential for a deal
2...inspect the property and get a rough estimate of required rehab
3...analyze the property with the rehab costs included to determine a target price and a Maximum Allowable offer price
4...negotiate the deal and get a Purchase Contract signed
5...execute your primary exit strategy
6...if the primary exit strategy won't/isn't work, move to the 2ndary (You should have at least 2 for every deal.)
7...execute the exit strategy
8...deposit your profit
If you don't know what any &/or some of that means, then you're not ready to start tying up people's property with contracts.
Is a purchase agreement the same thing as an agreement of sale?
Is a purchase agreement the same thing as an agreement of sale?
Things rend to be called by different names in different states. It's a contract to purchase a property...not a contract for an option to purchase...an actual Co tract to purchase with a price and a closing date. In Texas, the TREC standard is called a One to Four Residential Purchase Contract. That's what I use. A lot of investors use theor own purchase contract. Call it what you want, it's a contract to purchase a property.
@Nathan Zhivalyuk No legal advice intended but I think that you can call your agreement whatever you like for as long as the message is clear that it's an agreement between you(the buyer) and the seller for the purchase/sale of a real property. Include the address of the property if you do not know how to find the legal description. Also include the price that you are offering to the seller for the house.
Different states and or agencies will have different names or forms for the purchase or sale of real estate. In Oregon for example, when a licensed agent represents us, the Oregon Real Estate Form is used and for residential properties the form is "Residential Real Estate Sale Agreement". If it's a HUD house, the form would say "Sales Contract".
When we buy directly from a seller, we use our own agreement which is "Agreement For the Purchase and Sale of Real Estate".
I would run any agreement that you plan to use by your attorney to make sure that it would be enforceable in your jurisdiction.
Once the seller and you sign the agreement, take it to a title company or closing attorney depending on your state and the closing agent should take it from there through closing.
Thanks for your feedback!
Sales Agreement, Purchae and Sale Agreement, PSA, Sales Contract/Agreement for the Sale of Real Estate, Escrow and Deposit Agreement, and a half dozen other titles all typically refer to the sales contract.
If you're experiencing a block do to a lack of understanding then I'm of the opinion and mindset that the only way to cure that block is to go out and experience it in a live experience.
Unfortunately a vast majority of people allow mental blocks from them achieving their goals. They will not take action because they feel the don't know enough or the block freezes them out of taking the initial action needed to get started.
A simple cure for a lack of knowledge is to build a plan. This plan doesn't need to be overly complex. Since you're struggling with closing a seller then build a step by step plan for closing a seller. Example:
1. Find seller motivated seller
2. Determine property value
3. Meet with seller
(a) Have an answer list for most seller objections
(b) know my buying formulas cold so I can shift buying strategy during meeting to meet seller needs or objections.
4. Don't leave until a contract is signed or a reasonable buying price is unreachable.
After creating your simple plan then sit down and read all of the materials you might present to a seller, slide deck, bio, proforma, and sales agreement. Reading through and having a thorough understanding of these documents will give your the confidence to discuss them with any seller.
Thanks for your feedback. I do feel like I am having somewhat of a mental block. I guess I just have to get out there and give it a try...Can you please elaborate a little about the materials you mentioned in the last paragraph? (slide deck, bio, proforma, and sales agreement.)
If you are nervous about what contract to use, get with a local Realtor or real estate attorney. They will provide you with one that will get the job done. If you can build a relationship with the Realtor and let him know you will use him when selling the properties in the future, he/she will probably let you use them for no cost. If you are doing creative deals you may want to go through a real estate attorney anyway to write contracts specific to your deal type. Once you do a few you will find out better what you need and don't.
Thanks for your feedback. I do feel like I am having somewhat of a mental block. I guess I just have to get out there and give it a try...Can you please elaborate a little about the materials you mentioned in the last paragraph? (slide deck, bio, proforma, and sales agreement.)
The slide deck would be anything you might present to the owner such as information on the property, sales comps, etc. I call it a slide deck because you can create this in Powerpoint and upload it to "Slideshare" now owned by LinkedIn.
The bio is just a simple page about you and your experience, not necessary to include this if you don't have any, where you're from, education and college attended, marital status, etc., basically anything you'd want to communicate to a seller that might propel them to want to do business with you.
A proforma is a spreadsheet you build for your internal use to ensure the property is economically viable as an investment property. If you don't know what that is then search the BP "Analyze" tab and go through the "calculators". You can find a spreadsheet download of some good proformas in the "files" section of the website I think that somewhere in the resources are but you'll have to search that yourself.
I usually build to proforma's one for the seller that shows only what I want them to see, and my original that I use to guide my investment decisions.
The sales agreement, well, its the contract you'll use to get the seller to sign and help you make some money!