Terms Deals for Highly Motivated Sellers

If a seller wants to get out of a house quickly, there is perhaps no better deal than a terms deal.

Oftentimes in the terms niche we encounter what we like to call “life events.” A life event could be anything from a divorce to a job relocation to helping an elderly family member out. But these life events all share one thing in common—they force people to move or get out of a deal immediately.

When sellers have life events like this, it generally means they need to sell their home immediately. They’re highly motivated, and they want to get this house out of their life so they can move on to whatever comes next. They also don’t want to deal with it themselves because they usually have bigger problems on their hands.

In this case, we’re going to look at a family who had a life event and needed to get out of their home quickly so they could move to a new state. Our Associate—who had helped them structure a deal previously—was able to take care of their house so they could focus on moving on with their life.

But the best part? If they had sold their home with a realtor they would have actually lost money on this deal. By structuring a terms deal, they were able to make a profit and quickly get out of the situation. We have serious win-win-win relationships on so many occasions and it’s affecting generations within families.

An unexpected departure

The life event in this deal is something that happens fairly often. The seller needed to relocate for a job. Although, this situation was a bit unique as he had decided to quit his job on the spot. He walked off and soon got an offer from a similar company a few states over, which he wanted to take immediately.

This was an ideal scenario for the seller because this new job was also located close to family and friends. It was a no-brainer, but they needed to get moving quickly.

But there was one major snag. They had just bought their home and had barely paid down any principal on it! If they listed with a realtor, they would actually lose money on the deal after closing costs and realtors fees. They weren’t interested in doing that, so they came to our Associate to see if they could get out of this situation with a terms deal.

Our Associate was able to quickly find a buyer for this property and structure a sandwich lease purchase deal.

The purchase price was $192,500, the deal was structured with a 48-month term, and they were able to sell it for $219,900. Now, in most cases we talk about sandwich deals in terms of equity—we don’t actually “purchase” it from the seller for the agreed upon price, we simply tell the seller that we will pay their mortgage and give them the agreed upon equity. The purchase price is just used to calculate that remaining equity.

But in this case, because the seller had been living there for such a short amount of time, there was barely any principal paid down. They only had a few thousands dollars of equity in the home. So the “purchase price” was really just the full mortgage amount with a few thousand dollars difference.

That might not sound like a great payday for the seller, but remember—they would have lost money on this deal if they listed with a realtor!

All 3 Paydays™

Payday #1 is, as always, the down payment. In this case, the total down payment was $18,837. That consisted of one upfront payment of $7,000, plus several more payments between $3,000 and $5,000 over the next 18 months. These were scheduled in March (to coincide with tax season) and October.

There are a few reasons why we always opt to maximize the down payment, and why we often split it up over time. The primary reason is that when the buyer increases their nonrefundable deposit, they become more invested in the home and they’re less likely to opt out of the deal. But the other reason is that making a larger down payment helps them get a better loan from the bank at the end of the term. It’s really in their best interest to put as much money down as possible. Keep in mind that we are always setting up our buyers to win.

There are many unique ways you can increase down payments. Remember, they don’t have to all come at once! We often schedule additional payments during tax season, when buyers are receiving their tax returns. We’ve also scheduled payments to coincide with quarterly bonuses and raises. There are a lot of ways you can get creative here.

Payday #2 is the monthly spread on the home. Our Associate was getting $1,561 coming in from the tenant buyer per month and owed $1,335 to the seller. That’s a monthly spread of $225, which comes out to $10,800 over 48 months.

Payday #3 is the final sale of the home plus the principal that has been paid down throughout the length of the term. We already mentioned the sale price of $219,900. That’s a surplus of $27,400.

And out of that $1,335 payment to the seller each month, $210 was going to paying down the principal. That’s $10,080 in principal paydown over 48 months.

Combine those two and remove the initial down payment, and you’re left with $18,643 for Payday #3.

Add up All 3 Paydays™ and the total comes to $48,280!

That is undoubtedly a great Payday for our Associate. But what’s even better is that we were able to help out a family in need. They were able to sell their house at a profit instead of taking a loss, and they were able to move almost immediately. They could rest easy knowing that our Associate was handling the sale of their home while they packed and got ready to move.

This is just one of hundreds of examples showing how terms deals can help both buyers and sellers get out of sticky situations or life events that would otherwise leave them stranded.

Have you ever had a seller that needed to get out immediately? Were you able to satisfy their requests? I’d love to hear about it in the comments below.