Posted by Lynn Johnson on June 16, 2001 at 09:59:52:
Great Advice! Thanks for responding.
Lynn-newbie
How Do You Handle A Seller Who Wants to Check - Posted by Lynn Johnson
Posted by Lynn Johnson on June 16, 2001 at 09:26:38:
R.E. Investor’s background out to make sure that you are not a con/scam artist and you are legit. Such as the following:
An investor with bad credit wants to put a contract on a house and intends to flip it, but first the seller wants to run a credit check on investor. If an investor has bad credit how do they handle this issue?
Seller ask for references, and investor is a newbie and this would be his/her first deal. How would they handle this issue?
Seller wants to know why investor only has a business card and no license for this type of business. How do you handle this issue?
Thanks for responding!
Keep it simple: Move on… - Posted by Tr
Posted by Tr on June 18, 2001 at 10:49:49:
Lynn, I’ve found people like that are a total waste of time. The truly motivated will not waste time with all of that. They are just happy someone is there showing interest.
Keep it simple and hang up the phone on those types and move on…or you will spin your wheels and end up frustrated.
I wish you great success!!
Re: How Do You Handle A Seller Who Wants to Check - Posted by Ed Garcia
Posted by Ed Garcia on June 16, 2001 at 11:07:27:
Lynn,
I know that you must be a newbie and are creating negative scenarios or objections to over come, just to build your confidence in order for you to go out and look for deals.
I normally let others answer these types of questions, but because I feel that these are good legitimate questions, and that I realize there is a FEAR in many new investors minds, I’ve chosen to answer your questions.
I also just notice that Brian and Carey have both given you excellent answers but thought I might approach your questions with a little different approach. I agree with both men when they emphasize MOTIVATED SELLERS, and CONTROLING your deal. In order to control your deal, you have to have confidence in yourself. In order to do that, you have to have confidence in how you’re going to do your deal.
QUESTION:
An investor with bad credit wants to put a contract on a house and intends to flip it, but first the seller wants to run a credit check on investor. If an investor has bad credit how do they handle this issue?
ANSWER:
Lynn, we both know that this is going to be a concern for an investor with bad credit. So the first thing an investor with bad credit has to do, is to have a game plan as to, HOW are they going to take down their deal? HOW are they going to perform? If they tell the seller that they just want to flip it, we both know that, that won’t fly.
Here are the 9 ways that you can do a deal with bad credit.
(1) PARTNERHIP: Find a 50/50 partner. It don’t have to be 50/50, it can be what ever you can negotiate. The partner don’t even have to have money, just good credit.
(2) FLIP: the best way to flip is to find a potential buyer first and then find a property. You can do this by running an ad on a property to see what kind of action you get. Once you have a potential qualified buyer, you’d be surprised how easy it is to find them a house.
(3) LEASE OPTION: Many times you can buy and sell with a lease option. We call this a “Sandwich Lease Option”. Lynn, I’m not going to go into any great detail, you can find this information all over this forum.
(4) SELLER CARRY BACK: This is one of, if not my favorite ways to buy. Now the best way to utilize this system is to do a second seller carry back in order to give the seller some cash in the deal. If money doesn’t exchange hands, many times the seller doesn’t feel that they consummated a sale.
Example:
I find a house that has a small balance on the first. Lets say the house is worth a $100,000; the balance on the first mortgage is $30,000.
If I wanted to buy this house for lets say $80,000, I could ask the seller to carry back $15,000 and go to a hard money lender to borrow 65% of AMV (appraised market value) of which is $65,000 and the seller carrying $15,000 in second position, would ad up to $80,000. It would also give your seller $35,000 new cash, and $125.00 income on the $15,000 loan that they carried at 10% interest only, for 5 years.
(5) HARD MONEY: Hard money, is an equity loan made at approximately 65% LTV, based on the equity of the property only. Credit is not a consideration.
A hard money lender would have no problem giving you a pre-qualified approval letter at 65% LTV.
(6) HARD MONEY/SELLER CARRY BACK: Again, You can have the seller carry back a second and refinance the first, giving the seller some money. You can do variations of this system.
(7) SUB PRIME FINANCING: Many National lenders will provide financing at 70% with poor credit and won’t verify money down.
(8) SUB PRIME/ SELLER CARRY BACK: Again this combination can provide money to the seller, rather than ask them to carry the whole thing. Also there are local independent portfolio lenders that will lend as well as mortgage co’s and I always recommend seeking them out. National one’s would be Associates Finance, American General, Beneficial etc.
(9) CREAT YOUR OWN MORTGAGE: In our workshop, Terry Vaughan covers this, and shows you how to discount it and market it. On this site you will find an article in the How-To articles written by J.P. Vaughan on this subject.
Lynn, if we have confidence on how were going to take our deal down, we project that confidence to the seller.
QUESTION:
Seller ask for references, and investor is a newbie and this would be his/her first deal. How would they handle this issue?
ANSWER:
If the newbie has good credit, then the newbie doesn’t have to worry about references because their credit reference is all they need to do a deal. Once again, if the newbie has bad credit, were back to answer number one. The seller or sellers agents are asking these questions in order to see if you can perform. Once you’ve convinced them that you can, then everything falls into place.
Lynn, the sellers don’t care if you have good credit or not, they just want to know if you can do the deal. If you have bad credit and all of the cash in the bank to do the deal, the seller would be overjoyed to sell you their property.
OUESTION:
Seller wants to know why investor only has a business card and no license for this type of business. How do you handle this issue?
ANSWER:
I agree with Brian and Carey.
Lynn, what I was seeing here is someone with credit problems who is trying to learn how to become a real-estate investor, I hope I have let you see how it can be done.
Ed Garcia
Re: How Do You Handle A Seller Who Wants to Check - Posted by B.L.Renfrow
Posted by B.L.Renfrow on June 16, 2001 at 09:45:09:
You’ll read here again and again to deal only with MOTIVATED sellers. In my mind, a seller who wants to run a credit check is NOT in that catagory. A truly MOTIVATED seller will pretty much BEG you to take the property, IF you can present a reasonable solution to whatever their problem may be.
That being said, what this seller is asking can be reduced to this: “How do I know you’ll do what you say you’ll do?” If you haven’t done any previous deals, you can find other ways to document your credibility. Do you know an attorney, accountant, mayor, city official, etc. who would be willing to provide a character reference? This need not be elaborate, and doesn’t need to say anything about real estate. Something as simple as a letter on their letterhead saying, “I have known Lynn Johnson for xx years, and in my experience, she (or he) honors her agreements and operates with honesty and integrity.”
If you have discussed your intention with the seller and used the term “flipping” it’s all over the news these days about so-called flipping scams. So don’t use those terms. You are going to resell the property. That’s all the seller needs to know.
The last one’s easy. Why do you have only a business card and no license? Simple: you don’t NEED a license.
Brian (NY)
Re: How Do You Handle A Seller Who Wants to Check - Posted by Carey_PA
Posted by Carey_PA on June 16, 2001 at 09:36:16:
Well, first off you don’t need a license to buy and sell houses. You do however, need a license to LIST houses.
And just from the questions that the potential “seller” would be asking, it sounds as though that seller isn’t too motivated and you should MOVE ON!
You don’t want sellers checking your credit. If you can help solve thier PROBLEMS they could care less about your credit or anything else.
And as far as references go, well they would definitely help your case, but when you’re a newbie as you said, you don’t have any.
I don’t know I might approach this seller this way:
Look Mr. or Mrs. Seller, I’m willing to help you by buying your property. I don’t go around letting sellers check my credit because it’s not pertinent! What is pertinent is that I can help solve your problems!! If you want me to solve your problem and buy your house I can do that, but if it means that you have to check my credit than I can NOT help you and we can just part friends now. However, if you should change your mind in the future, please give me a call. (and then leave them your business card…YOU ARE IN CONTROL, DO NOT LET THEM HAVE CONTROL)
Lynn, I started with mh’s and I’ve made some l/o offers on sfh’s and NO MOTIVATED SELLER HAS EVER ASKED ME FOR REFERENCES OR TO RUN A CREDIT CHECK. (If I wanted someone to run my credit, I’d go to a bank!)
By the way, I have gone to the bank and they did run my credit…but I WOULD NEVER NEVER NEVER let a seller do that!
KEEP SEARCHING FOR THE MOTIVATED SELLER!
good luck,
CAREY
p.s. I’m sure someone else will have another answer for you too!