When To Pivot to Profits

When you’re dealing with a tricky seller, you may need to pivot to a different strategy. That’s exactly what we did in this deal.

Today, we’re going to look at a very unique deal. This was a situation where we were dealing with a tricky seller and we needed a very particular type of buyer. We were able to figure out a way to make everyone happy by negotiating a deal that worked for the seller and finding a buyer that was a perfect fit for the home.

Here’s how it happened!

The AO with a finicky seller

The source of this deal was an expired listing. An Associate of ours found it through a VA call (when a virtual assistant makes calls on our behalf), and after the initial phone call, went out to chat with the seller at the property.

As it turned out, this seller had a background in finance and he was fairly particular about what he wanted. He also had some debts that he had to get sorted out before he could move out of the house. We’ll get into that later, but first let’s talk about how we structured this deal.

We were able to pick up this house at a time when the seller was fairly discouraged. He had listed it ten months earlier for $550,000. He then dropped it down to $350,000 because of the condition of the home. And when we found him, he was actually in the process of relisting it!

He didn’t end up relisting it, of course, because we were able to make a deal. Here’s what we did. We ended up tying up the house (putting it under contract) for $380,000 and we put it on the market for $419,000.

We structured an AO deal, which stands for “Assign Out.” What that really means is that it’s a rent-to-own deal where we give up the spread and the back-end profit—what we normally refer to as “Payday 2” and “Payday 3”—and it goes to the seller instead. The seller gets more profit, but they also have to deal with all the risk.

So, with an AO deal, our job is really just to find a buyer. In a typical AO, we find a buyer and then agree to give the seller somewhere between 0% and 33% of the down payment we get from the buyer. Then, the seller gets the remainder of everything else. We then get releases signed by both parties and we move on.

As mentioned above, this seller was a bit finicky. He wanted a $40,000 down payment, above market rent, and the highest possible sale price. He also had a tricky situation where he had to resolve some of his debts before he could move out—he had about $180,000 debt on the house.

Our Associate went to him with a simple offer. She reminded him that her job was simply to find a buyer, and that the minimum she would do it for was $20,000 plus the first month’s rent. He thought about it for a bit, but the upside was pretty clear: he would net almost $50,000 more by working with us compared to working with a realtor.

So he went for it.

And, by the way, if you’re wondering how we’re able to increase the price so much on this house—it’s because we’re offering it on terms! We are setting up this deal so that a buyer can get into this house without a mortgage, qualifying with a bank and all the related hoops to jump through. and with very little money down. That’s why we’re able to price it so high and make such a good margin.

What happened next was pretty interesting…

Finding the PERFECT buyer

Now comes the fun part. We were looking for a very specific type of buyer to fit into this deal, and we ended up finding the perfect buyer for this house.

The buyer we found had a lot of things going for him.

First of all, he was familiar with owner financing and understood how the whole process worked.

Second, he had a family and they wouldn’t be able to qualify for a mortgage any time in the foreseeable future. They had some medical expenses with their children that held them back.

So, here’s what happened… He went to the seller (along with our help) and said, “If you owner finance this to me for ten years, I’ll give you all of your finance charges up front and I’ll pay you top dollar for the house.”

Naturally, the seller accepted. Why wouldn’t he?!

We ended up structuring the deal so that the entire purchase price would be paid for over ten years. The buyer paid a $40,000 down payment—just what the seller was looking for—and then agreed to pay $3,600 per month for ten years to pay for the entire house.

Now, there’s one final piece to this puzzle…

When we structured this deal, we wanted to take care of the buyer. If we had just left the deal as is, the seller could have stopped paying his mortgage a few years in and, for lack of a better word, screw over the buyer!

To prevent this, we set it up to work out of an escrow. That means the buyer pays a third party escrow agent who pays the underlying mortgage and gives the seller the remainder. That way, everyone stays happy and everyone is safe. Plus, it gives us peace of mind knowing that everything is going to end up okay.

So, in the end, this deal ended up working out perfectly and everyone got what they were looking for.

Have you ever had to work with a tricky seller? How did it turn out? Did you make a pivot?