Just Ask the Question!

What’s the worst that could happen? They say no?

Every now and then when you’re working on a terms deal, you might run into an obstacle that seems insurmountable. Whether it’s a high monthly payment, not enough down payment from the buyer, or something else entirely, there’s usually a way around it. Even if it seems impossible.

In many cases, all you need to do is ask. Ask your seller what they can do for you! Ask your buyer what they need to make it work for them! Ask for a lower price or ask for a higher price! If you never ask these questions, you’ll never know. And in many cases, asking a simple question can mean the difference between closing the deal and not.

Let’s look at a deal from one of our Associates that seemed impossible… Until he asked one critical question.

High HOA fees, taxes, and more

The property we’re looking at in this deal was a townhouse built in 2015. The seller was the first owner and they had been trying to sell it for over a year. Part of the problem was that it was a condo with high HOA fees and taxes. In fact, the HOA fees were a whopping $700 per month and the taxes were an additional $500!

That alone would scare away most people, so it’s no wonder it sat on the market for a year.

The property had expired and our Associate contacted the seller through a virtual assistant that he uses to call on expireds. Sure enough, the seller was interested in structuring a deal because they were desperate to sell the property.

This was our Associate’s first deal, and there was one nuance that made him a bit nervous going into it. The seller actually worked at an insurance company, specifically handling large contracts. This was a bit worrying for our Associate because he wasn’t sure if he’d be able to answer specific questions she might have about the contracts he was using.

But because he was working with our team at Smart Real Estate Coach, he was able to build credibility with the seller and utilize his coach to answer some of the tougher questions that she had. This is just one of the many reasons why using a coach is so valuable in this industry—they can help you build credibility with the seller and answer tough questions that can only be answered after years of experience.

In the end, the seller and our Associate agreed to an A/O deal, or “Assign Out.” This functions just like a sandwich lease purchase, but our Associate signs the deal over to the seller after the tenant buyer moves in. Essentially, his job is to get a tenant buyer in the property and structure a deal—then, he hands it over to the seller and they manage it for the rest of the term.

In an A/O deal, we take a portion of the down payment, and then the seller gets Paydays #2 and #3. It’s a quick deal that can be well worth your time, as you’ll see in the numbers below.

But there was one problem with this one in particular...

Our Associate found a great buyer that was ready to get into the house. The only problem was that his monthly income was a little bit low considering the high monthly costs. As mentioned above, the HOA fees and taxes alone were $1,200 per month—and that’s before the mortgage and everything else.

So our Associate did something that was incredibly simple, but brilliant. He went to the seller and said: “Hey, I have a great buyer lined up but there’s one sticking point. The monthly costs are just a bit too high. Would you be willing to cover part of the HOA fee so we can get him moved in?”

And just like that, the seller agreed to cover half of the HOA fee. At the end of the day, it was a pretty insignificant amount of money for the seller compared to the total value of the deal, and it meant getting someone in the property right away. The buyer has planned raises to eventually get qualified properly.

So just by asking that simple question, our Associate got the deal under contract and helped out the buyer significantly. It’s amazing what can happen just by asking a question. And what’s the worst that could happen? They say no. Not a big deal.

Payday #1 on an A/O deal

The minimum price guaranteed by the seller (that’s how we calculate our fee on an A/O) on this home was $395,000 and it sold for $419,000 with a 24-month term. It was on the market for only 60 days before finding a buyer, which is quite an improvement from the year that it sat before our Associate got involved! Remember, TERMS deals are attracting an entirely different buyer.

But all of these numbers don’t matter too much for our Associate, because he is really only benefiting from Payday #1. Once the buyer is in the property, he takes his cut and gets out of the deal.

(Although, if the seller decides it’s too much for them to do on their own, they could always restructure it into a sandwich lease purchase and have our Associate come back in to manage the deal! This happens somewhat frequently with A/O deals.)

In this case, the down payment consisted of one up-front payment of $7,000 and then an additional $29,500 over the length of the term. That’s $36,500 in total for the down payment.

Our Associate structured this deal so that he takes 66% of the total down payment, plus the first month’s rent. That’s $24,090 from the down payment and $2,823 from the first month’s rent. So he walked away from this deal with $26,913 in his pocket—just from securing a tenant buyer and structuring the deal.

We structure our A/O deals in a way that removes us of all liability and responsibility after the tenant buyer moves in. The deal is completely transferred over to the seller, and we walk away with a portion of the down payment.

It’s a quick and easy option that allows the seller to make some additional profit on their end by putting in more work and taking on more risk throughout the length of the term. Usually, we get paid for that extra effort and risk—but in the case of an A/O deal, we’re in and out with one quick Payday. This is precisely how I personally launched my TERMS business back in 2013, with 12 out of my first 13 deals being A/O deals, in addition to two sandwich lease deals.

And just remember: this deal never would have happened if he didn’t ask that simple question! Just one question saved the tenant buyer over $200 per month and made this deal happen.

Always ask the question!

Have you ever asked the seller a question like this? How’d it go? Did it make a difference in getting the deal structured?