How to Make a Profit with an Expired Listing with a Persistent Seller

This seller wanted top dollar for their property. Here's how we helped them get it!

We've talked many times about the various motivations that both sellers and buyers might have for entering into a TERMS deal. And in this post, we've got an especially unique case.

In general, we typically find ourselves working with sellers who are either desperate to get a property out of their hands, or who want to get the maximum equity out of their home. And on the flipside, the buyers we work with tend to be unable or unwilling to purchase a home through conventional means at the present time and just need time for saving more, improving credit, loan seasoning and other variables.

So let's take a look at one particular deal that is a great example of how TERMS deals can help both the buyer, seller, and the person doing the deal!

Selling a work of art

The seller in this deal wanted what most sellers want—top dollar for their property! In this case, the seller had listed the house with a realtor and it eventually expired. Although they were getting offers in, they were all below what the seller considered the house to be worth.

And it's worth pointing out that this property was very unique. It was a truly beautiful home in a popular downtown area, and the seller considered the house to be a work of art. As such, they wanted the buyer to treat it as a work of art and pay accordingly. (And there's no denying it—this property was incredible!)

Our Associate got in contact with the seller through a manual phone call soon after the listing expired. We often recommend using an automated calling system like Slybroadcast, but there is still a time and place for reaching out personally. If you have the time, a few manual phone calls can go a long way.

The motivation for this seller was clear: They wanted to get their full equity on the home, and our Associate could provide that for them.

The buyer in this deal ended up being someone who wanted to turn the property into an Airbnb. He owned multiple properties, but didn't want to involve banks on this deal. Therefore, a terms deal was the perfect solution.

The 3 Paydays™

Two weeks after making initial contact with the seller, our Associate had this deal under contract as a sandwich lease purchase. Here's how the numbers worked out…

The seller had $450,000 in underlying debt on the property and agreed to a purchase price of $595,370. That means our Associate owes the seller $145,370 in equity at the end of the term. But because the principal will be paid down over the length of the term, that $450,000 will be much less—which is where we make our money.

This debt and purchase price equation is important. When we do sandwich lease deals, we only use the purchase price to calculate the seller's equity on the property. Outside of that formula, the purchase price doesn't really matter.

This deal was set up with a 60-month term and the final sale price ended up being $610,000. So let's take a look at the Paydays.

Payday #1, the down payment, was $61,000 plus the first month's rent. This is a tactic we use on almost all of our deals—we set it up so that we don't start making payments to the seller until 30 days after the unit is occupied, meaning we capture the first month's rent from the tenant buyer. That means the full Payday #1 came out to $63,953.

One nuance here is that our Associate actually gave $15,00 from Payday #1 immediately to the seller. They asked for some advanced payment to help them out, and our Associate was happy to do that. So Payday #1 was actually $48,953 when this $15,000 is accounted for.

Payday #2 is the monthly spread on the property. Our Associate owed $2,855 to the seller and was getting $2,953 in from the tenant buyer. This is a small spread of $98 per month, or $5,880 over 60 months.

Payday #3 is the markup on the home, plus the principal paydown that has accrued over the length of the term. The markup on this deal was also fairly small, coming in at $14,630. The principal paydown, however, was significant—$710 per month for 60 months, which comes out to $42,600. When you remove the $48,953 down payment, our Associate is left with $8,277 for Payday #3.

While Paydays #2 and #3 may have been on the low end, Payday #1 bumps this deal up to $63,110 in total! This is slightly lower than our average, but still a great deal nonetheless.

Even more importantly, our Associate was able to help this persistent seller get the equity they deserved while also helping the buyer avoid the bank.

Have you ever had to deal with a persistent seller like this? How'd it go? I'd love to hear about your experience in the comments below.