Posted by Eric C on July 09, 2001 at 24:24:34:
Hi Kevin -
I like large seconds. In fact, a lot of the deals I do involve seconds that represent about 40% or more of the initial purchase price.
My experience (over 20 years)has been that the majority (well over 90%) will pay off in full. Ours are written to balloon in three to five years anyway. No big deal. I can wait.
As credit gets even tighter, we will do more and more of these deals.
Take care,
Eric C
To the Pros: Help Finding Qualified Buyers! - Posted by Harley-CA
Posted by Harley-CA on July 08, 2001 at 01:58:05:
Hello all, it’s been a while. The real estate machine is cranking right along as planned.
I had a question though. In many of the areas where I’m buying real estate around the country, I’m using “rent to own” ads and they’re bringing in a lot of phone calls. The problem is that very few of these people have any money to put down and many of them have horrible credit.
I’m wondering if any of you know of a way to cultivate better qualified buyers for my properties. The system is working perfectly except for this little snag (I know there’s a way around it, I just haven’t found it yet).
Here’s my system:
Rent-to-own ad
Voicemail with address (I get TONS of calls)
Buyer goes by to look at the house.
Buyer calls back to schedule a walk through.
Buyer likes house and I give name to lender.
(this is where the system is breaking down)
I don’t take an agreement of sale (should I?)
The buyers need a lot of "hand holding."
Buyers usually end up not having the cash or documents.
Buyer fades into oblivion.
I’m still sitting on the houses.
How would you remedy or tweak this system to make it work better. As always, thanks in advance for your help.
Harley-CA
Thoughts on buyer quality (long) - Posted by Nate(DC)
Posted by Nate(DC) on July 08, 2001 at 17:03:07:
Harley,
I’ve been thinking about similar things lately and so I’ll try to answer your question as well as share some of my musings on the subject.
The first thing I’m confused about is, why are you advertising “rent to own” and then taking these people to a lender? Are you trying to “rent to own” (in which case you don’t need a lender) or are you trying to sell (in which case there are better ways to word the ad). When I do lease/option or rent to own, I advertise it as such, and then run their credit myself to see if they have a shot of being able to get financed within a year or so. If the only reason you’re calling a lender is to run their credit, you can do this yourself and save a step.
Secondly - If you are advertising rent to own, you probably WILL get people with horrible credit who need a lot of handholding. If they had good credit, or could do the process themself, they would go to a lender, get a loan, and buy a house! In my experience, when dealing with this caliber of buyer, you need to be prepared to do all the hand holding necessary to get the deal done. Don’t count on the buyer to do any of it themself.
As far as buyers with no cash - you CAN screen for that in the ad - “Need $3000 down” or whatever. That is pretty straightforward.
Now this brings me to my last point which is what I’ve been pondering lately. I have a great mortgage broker who is able to get people qualified either for 100% financing or for subprime FHA (97% LTV) even with what I would consider bad credit histories. In fact, she has been able to get people qualified, who I would not consider as L/O candidates, for mortgages. Given that, I am seriously wondering why I should even consider doing a L/O anymore. After all, if my own standards are stricter than the mortgage company’s standards, anyone who would meet my standards could get a mortgage and cash me out immediately with no risk and no waiting to get paid later.
Anyway, hope that gave you some food for thought…
NT
Re: To the Pros: Help Finding Qualified Buyers! - Posted by Ronald * Starr
Posted by Ronald * Starr on July 08, 2001 at 14:46:16:
Harley-CA----------
I agree with other posts. You probably need to make it explicit in your advertising what they need to buy from you. “Need good credit” “good Credit only”. “need income $2,300/mo”. That sort of thing.
Good Investing and Good AdvertisingRon Starr
Re: To the Pros: Help Finding Qualified Buyers! - Posted by Mark-NC
Posted by Mark-NC on July 08, 2001 at 11:18:11:
Hey Harley,
Good to see you have your buying machine cranked up.
Anyway Your problem is common with the type of ad you are running and like the other posts suggest you need to be right up front on the phone and ask these people about their credit before you waste your time with them.
It has been my experiance that maybe 1 out of 10 callers may quailify if you are lucky, running that type of ad.
Another thing you could try to do is attract more qualified buyers by offering some concesions or rewards for buying your property before a certain date. Like a free paid vacation somewhere, or 3 months of mortgage payments paid, a car or a boat.
If you advertised this type of promotion for quailfied buyers only you may get a stronger group of credit buyers and not have to deal with so many junk calls.
The thing is if you are trying to sell fast to qualified buyers it is a little tougher because they have more choices. but by offereing some type of concession you can attract these buyers.
Another advantage is most of them will be able to get all the financing money without you having to hold seconds that you will very rarely get paid on. Instead build the reward into the price of a second you may have had to hold and move it quick.
Good luck!
Mark
Like Dee-Texas - Posted by IB (NJ)
Posted by IB (NJ) on July 08, 2001 at 10:11:01:
I also screen my potential buyers. Only if they say their credit is good OR they’re already preapproved do I show them the house. If I’m not sure about their credit based on the information they give me, I have one of my mortgage brokers/loan officers run their credit. Only if it comes back okay do I show them the house.
Re: To the Pros: Help Finding Qualified Buyers! - Posted by Dee-Texas
Posted by Dee-Texas on July 08, 2001 at 09:31:13:
Hello Harley,
I have the same type of people…But…I never show them the house until I’ve talked to them and prequalified them myself. I ask hard questions…I ASK EVERYONE the same questions…what’s your credit like, good…fair…poor…where do you and other work, how long? How many will be living in the house? How LONG have you been married? (this really is a good question to ask…that’s when you find out if they are living with a new boyfriend or girlfriend…usually not a good sign) HOW MUCH DO YOU HAVE TO PUT DOWN? Most of mine say well how much do you want?..Now…I know that I’ve missed some good ones by trying to get them to name a figure first so what I tell them is.
This all depends on your credit and work history. I try to come up with a win-win situation for both of us. Now…what do you estimate that you have to OWN YOUR OWN HOME…Then after getting questions answered MY way. I will show them the house or might make them fill out an application first (these are for the ones that are marginal…making them jump though a few more hoops weed out the ones that weren’t really going to stay anyway)
Anyway that’s how I work it here, in my little town of 10,000…and let me tell you, I get a lot of totally shot credit. BUT I’ve got some excellent people out of the group and one BAD one. It just goes with the game.
Great Success,
Dee-Texas
PS…I spend probably too much time on the phone with people…and I don’t ask the questions like an interview. It’s just Texas talk ya know? smile Because of this I have people waiting for houses…Now if I could just find more of those good deals!
Re: To the Pros: Help Finding Qualified Buyers! - Posted by Kevin Subbert
Posted by Kevin Subbert on July 08, 2001 at 04:43:54:
I have the same problem, and we arent the only ones. All you can do is change your ads to weed out the absolute worst buyers. My ads usually read something like…
Owner finance 3/2/2 blah blah blah
$100,000 5-10% down.
I find this helps alot. At least the people calling have either the cash or the credit. You can help out by carrying a 2nd if you are comfortable with it. Just consider your profit made from the sale is all you are going to get. Any payments made on the 2nd are a bonus. Dont get too carried away with a large 2nd.
Kevin Subbert
Re: Thoughts on buyer quality (long) - Posted by Ronald * Starr
Posted by Ronald * Starr on July 09, 2001 at 14:46:49:
Nate(DC)------
It sounds to me as though you are on to something. I think you are doing the right thing–thinking about your operation so as to improve it.
I can’t see any downside for you with a switch like that. I guess I might be concerned that the broker will start getting a poor record, with a bunch of foreclosures. In that case, she might get cut off by the lenders or might stop working with you.
About all I could suggest is to try to refer some good borrowers to her so she doesn’t see you as the source of only “losers.” Also, perhaps screen your buyers as well as you can to help her or the lender reduce defaults.
Good Going Guy.
Good Investing and Good PonderingRon Starr
GREAT! Give me the ladies name! (nt) - Posted by Dee-Texas
Posted by Dee-Texas on July 08, 2001 at 20:35:41:
Re: To the Pros: Help Finding Qualified Buyers! - Posted by Michelle(NEB)
Posted by Michelle(NEB) on July 08, 2001 at 10:09:21:
Dee…I, too, am in a small town and am interested to know what type of RE investing you do. If you have time and would like to correspond, please send me an e-mail. Have a great day, and thanks! Michelle