Navigating the world of creative financing can be tricky, especially when communicating complex terms to sellers. On Propelio TV, we often discuss unique strategies to close deals but seldom talk about how to explain these to the seller in plain English. Today, we’re joined by Dan Diaz from San Antonio to break down these concepts. Grab a note pin, sit back, and let’s dive in.
Why Simple Language Matters
When discussing creative financing, many people perceive it as complicated. This perception can make the process daunting for both the investor and the seller. The goal is to convey these ideas in simple terms to avoid losing deals.
The Initial Approach with Sellers
When approaching a potential deal, offering clear and straightforward options upfront can make a huge difference.
Offering Two Options:
- Quick Cash Lump Sum Close: A fast solution where the seller receives a lump sum of cash within weeks, solving their problem quickly.
- More Money Over Time: Introducing the possibility of earning more money in the long run without using complicated terms like “seller financing” or “amortization.”
Avoiding Technical Jargon
Using terms like “interest rate,” “down payment,” “promissory note,” and “deed of trust” can confuse the seller. Instead, keep it simple by planting the seed of earning more over time.
Typical Seller Response
Around 80% of sellers show interest when you present the option of earning more money over time. The key is to explain this concept in relatable terms, such as using a 30-year mortgage as an example.
Explaining “More Money Over Time”
Instead of diving into technical details, describe the idea simply:
- Example: “If your home is worth $100,000, I can pay you $100,000 over the next 15 years in equal monthly payments.”
This separates the idea of taking a lump sum versus receiving payments over time.
The “Takeaway” Technique
Use the “takeaway” technique to create a sense of urgency and scarcity. For instance, bring a check to the meeting and let the seller hold it, then take it back if the negotiation stalls. This physical representation creates an emotional connection and can help close the deal.
Determining Decision-Making Styles
Identify if the seller makes decisions emotionally or analytically. Tailor your approach accordingly. For emotional sellers, focus on trust and integrity. For analytical sellers, provide more details and data.
First Creative Deal Experience
Dan’s first creative deal involved an FHA purchase with a wrap mortgage. Although he wasn’t familiar with all the terms initially, the key was understanding the spread – ensuring the monthly income exceeded the payments.
Marketing Your Deals
Market creatively by targeting specific buyer needs. Dan found success advertising in northern states for buyers interested in retiring on a Texas ranch.
Unconventional Structuring
Not knowing standard calculations should not stop you. Focus on creating a profitable spread and be transparent at the closing table.
Handling Price Renegotiations
If a seller tries to renegotiate the price, reinforce the non-monetary benefits of the deal. Compare it to market rates to justify your offer.
Getting the Appointment
Your goal is to get face-to-face. Keep the initial phone call simple: ask about the property, and secure an appointment to see it.
In-Person Negotiations
In person, offer the two solutions again and let the seller describe their terms. This helps you understand their needs and tailor your offer accordingly.
Dealing with Down Payments
If a seller asks for a down payment, clarify the timing and structure. You can consider private money options or negotiate the down payment to be made over several months.
Calling Sellers’ Bluffs
If a seller seems hesitant, call their bluff by suggesting they ask a relative or friend to take over the payments. This often leads them to trust your professional solution.
Homework: Simplifying Complex Terms
Make a list of technical real estate terms and find simple explanations for each. This will prepare you for future negotiations and help you communicate better with sellers.
Using Tangible Representations
Holding a physical check and using terms like “lump sum” can create strong emotional connections and help sellers relate to the deal more easily.
Documenting Deals Properly
Understand the contracts you use. Whether it’s a simple one-page agreement or a detailed legal document, make sure you can explain everything clearly to the seller.
Embracing Creativity in Deal Structuring
Don’t be afraid to get creative with your deals. Focus on creating profitable spreads and seek professional assistance when needed.
Planting Seeds for Future Opportunities
Introducing the concept of “more money over time” can open up unexpected opportunities. Always be ready to pitch this idea to potential sellers.
Overcoming Lack of Seller Education
Many sellers are not well-versed in real estate. Use this as an opportunity to provide simple, effective solutions.
Connecting with Wholesalers
Partnering with local wholesalers can lead to successful cleanup wholesale deals. These can be broken down and listed on the MLS for higher profits.
Leveraging For Sale By Owners
For sale by owners (FSBOs) often lack equity. Pivot to offering to take over their payments, providing them with a solution and creating a win-win situation.
Upcoming Events and Appearances
Join local real estate investor meetings or quarterly events to learn more and network with other professionals.
Engaging with Dan and Others
Connect with Dan Diaz and other professionals on social media or through local events to expand your network and gain insights.
Propelio Services and Offerings
Propelio offers lead generation websites, access to comps, and property data. The Propelio Academy provides free educational resources to help you succeed.
YouTube Engagement Opportunities
Subscribe to our YouTube channel and leave comments for a chance to win prizes and consultations. Share your experiences and insights to engage with the community.
Giveaway Details
Comment on our YouTube video with your experiences and insights for a chance to win books like “Rich Man in Babylon” and a consultation with Dan Diaz.
Final Thoughts
Simplifying complex creative financing terms can make a significant difference in closing deals. Use these strategies to communicate effectively with sellers and create win-win situations. Always be ready to introduce the concept of “more money over time” and embrace creative deal structuring to achieve success.
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