It is my opinion that building rapport and getting your seller to feel comfortable with, dare I say “like” you, is the biggest step toward overcoming any fears or questions that they may have.
Whether sophisticated or not, some sellers ARE going to have questions and you had better be able to answer them in a way that satisfies them. While that may sound scary, remember, no matter how little you know the seller will probably know less.
The biggest edge you can give yourself, after having the seller like you, is being confident about what you are doing and how you do it. I know this will be hard at first but if you make yourself as knowledgeable as you can about sub2 and know the mechanics, you should do fine. You must show confidence in yourself and in your business. Remember, these people are trusting you to help them out of a jam on probably what was the biggest investment of their lives. While the sellers who are months behind or already have credit that is shot might be easy to convince, the ones who have different motivation might not be so easy.
Here are some of the most frequent seller questions we get in the order of their frequency and how we answer them:
Q: How do I know you will make the payments?
A: “This is our business and this is the way we buy most all of our properties. We would never jeopardize our reputation by NOT making the payments as agree. We do not get paid until we cash this loan out so you can bet we are working hard toward that end. If you like, your lender has an 800 number/website that you can check each month to be sure that the payment has been made as agreed. If there were any problem, you would know right away.”
If you have good credit, you may want to take along a copy of your credit report to show your good payment history. Just let them take a look; do not leave a copy with them. You can also take a list of references if you would like. The more professional references you have, the better. Attorneys, doctors, politicians, anyone you know who everyone knows are good to have on your list.
After you have done a few deals, take your reference letters. Former sellers who write glowing letters of recommendation are great ways to put potential seller's minds at ease.
Q: What if we decide to buy another home?
A: “If you decide to buy another home, we will provide you with any documentation your lender requests to help you qualify. Canceled checks, closing statement, whatever you need to satisfy the lender that you are not and will not be responsible for making the payments on this home.”
This is something you should find out during the screening process. If your seller is planning on buying another home soon, you should let them know that it may be difficult to do within a year if their credit or debt to income is less than great. The exception to this is when the seller has already qualified for another house and the sale of the existing one is not a condition of the loan closing.
Most times this will be a non-issue as most of your sellers will have major credit issues like bankruptcy and pending foreclosure. For the ones that do not fall into this category, be sure and tell them about difficulties they may have in qualifying.
Q: When will you sell the house?
A: “We can't give you an exact time frame for that. We may get a buyer within 30 days or the loan may go the full term. While we can't guarantee exactly when it will cash out, what we can guarantee is that the payments will be made on time, every time for as long as we have the property.”
“Remember, we do not get paid until it cashes out, so we are trying constantly to get this completed.”
Never promise your seller a specific time to cash out. This is just something you cannot control unless you are prepared to cash it out yourself. I have had tenants I would have sworn were going to cash me out who flaked on me after 2 years or more in the house. You just never know. Don't let your seller base their future plans on promises that you made that you can't keep.
Q: What if the person you put in the home tears it up or does not pay?
A: “The people we put in the home are folks who want to OWN the home, not rent at. As such, the chance of them tearing it up is much less likely. As we are not going to be actually living there, we can't guarantee that they won't tear it up but if they do we will be responsible for repairing it as in our agreement.”
“We also cannot guarantee that they will pay us every month but we DO guarantee that we will make the payments on this house and that is in writing.”
Q: How do we know you will do as agreed? How can we trust you?
A: “Again, this is our business and how we support our families. We know this business and are confident that we can offer you the best solution RIGHT NOW. Ultimately you have to feel at peace about your decision to sell to us and frankly, if you do not feel at ease with it, we do not want to buy your house. If you cannot sign these papers and sleep well tonight then we need to part friends and wish you the best of luck in selling your house.”
Remember, answer their questions honestly and don't make promises you can't keep. These folks are people just like you who have a financial circumstance that forces them to make some scary decisions. It is possible to both help them out and make a profit.
When your sellers do have questions, and they will, answer them as simply and as honestly as you can, avoiding words or terms that they may not understand like “equitable interest” or “Illinois Land Trust”. Using words and terms unknown to them may result in even more questions or uncertainty.
I always like to use Denzel Washington's line from “Philadelphia”, “Explain it to them like they are 5 years old” but do it without being condescending. Just use easy to understand words and phrases.
Really, this is rarely a problem and I have never had a seller not sign because of fears that could not be relieved by my answers. If you lose a deal because of your failure to answer a question in the proper way, just look at it as a learning experience. I bet the next time it comes up you do fine.