Sandwich Lease Options

Transcription

1 Day 1: Sandwich Lease Options 1 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

2 Cooperative Lease Options vs. Sandwich Lease Options There are basically three types of sellers you will encounter as you try to find your Lease Option deals, no matter whether it is a homeowner or an investor selling, no matter how motivated they are, and no matter where in the country they are located. These three types of sellers are: 1. Sellers who are upside down 2. Sellers who are break even 3. Sellers who have equity in their home Let s take a look at each and see how you might be able to put together a Lease Option deal and how to Protect Yourself in each of these situations. 1. Sellers Who are Upside Down Unfortunately, it seems that there are many sellers in today s market that are upside down. If a seller owes more on their home than it s worth, they are upside down. Their home is not worth what they owe on it. As a Lease Option (or Subject To) real estate investor there is very little you can do for someone who is upside down, or there is little you should do for this type of seller. No matter how moving their story, no matter how desperate their situation and no matter how motivated they are as a seller, this is not a position you will want to be in. The absolute best way to protect yourself is to not do the deal with a lease option or subject to. This situation is ONLY good if you want to do a short-sale with their lender or have the seller pay down their mortgage balance (assuming they can). There may be the very rare occasion when you find a seller that can cover enough equity difference and subsidize monthly payments to actually make the numbers work, but these instances are so rare that I m not going to waste time here chasing pipe dreams. This is a great time to say NEXT if you are looking for little or no money down deals. 2. Sellers Who are Break Even or Have Little Equity Sellers who are break-even have been sellers I have in the past said to walk away from for a Lease Option. Not anymore! Can you do Lease Option deals with these sellers? YES! There is a new strategy I am using and it is growing like wild fire. It is called a Cooperative Lease Option. The average break-even seller is going to be someone you can t help for a Sandwich Lease Option, BUT they might be a perfect candidate for a Cooperative Lease Option. Let s define both of these types of Lease Options. A Sandwich Lease Option - is when you purchase a property from an owner on a lease with an option to buy. You then find a buyer who will buy from you on a lease with an option to buy. You are in the middle, hence why it is called a Sandwich Lease Option. 2 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

3 When are these good? When the seller has equity and will allow you to get part or all of it over time with your lease option terms. This is what I call my Big Money Strategy. A Cooperative Lease Option is when you purchase the property from the owner on a lease with an option to buy. You then find a buyer who will pay you to step in your shoes. This is a wholesale deal. You sell your contract to a buyer. It is called a Cooperative Lease Option (aka Wholesale Lease Option) because both the buyer and the seller are cooperating with you and know exactly what is going on. They know you are selling the contract (deal) to a buyer it is usually for the option fee. How much? Usually around 3% of the purchase price can be negotiated. Example: The price of the home is $100,000 you would get approximately $3,000. When are these good? When your seller doesn t have much equity for you as an investor to get. This is what I call my Small Money Strategy. How many more deals can you do now with a Cooperative Lease Option that you might have walked away from before? Would earning $3,000 - $10,000 per deal excite you? What if you could do most of this from the Internet? One of my students lives in India. He does Cooperative Lease Options in the Chicago area. It is all done on the Internet and he does 5+ deals each month. What would that mean to you and your family? 3. Sellers Who Have Equity Sellers who have equity in their homes are in the best category for putting together your Lease Option deals, however, when you find someone who has equity in their home and is willing to do a Lease Option deal you mustn t throw caution to the wind. You still want to evaluate the deal. When they have more equity though, you are more likely to receive option credits each month. Option credits give you equity each month from the rental payment you are making. If you purchase the home for $200,000 and each month you are paying $1,000 in rental payments to the seller, ask the seller for $1,000 a month credit towards the purchase price. For example: after one month you owe $199,000, after two months you owe $198,000, etc. You are getting the entire monthly rental payment credited towards the purchase price. This works well with sellers who have equity. Make sure you don t get them upside down (with their equity) by doing this. For instance, if they owe $185,000 and you do this deal for 20 months, you would owe $180,000 ($200,000 - $20,000 = $180,000). Be careful, if you get them upside down they might not want to, or might not be able to, close on the property when you are ready. Will all sellers give you 100% credit for your payments? No, of course not, but will some? Yes, some will. If not, negotiate something less than 100% credit. No matter what you negotiate it is part of your profit for later. There are many other things you can negotiate also with a seller when doing a Sandwich Lease Option. How many people own their home free and clear? In the U.S., more than 30% own their homes free and clear. How about the sellers with equity, but not free and clear, plus the ones that are at a break-even point? Add these all together and you will find a very good percentage of home owners are candidates for one of these lease options strategies. 3 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

4 Is it all doom and gloom in the market? Heck NO! I live in Detroit and the deals are everywhere. You just have to know how to find them. Learning when to apply each type of option strategy is the key. Learning when to walk away is another key. 4 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

5 How Real Estate Agents and Investors Can Have an Attorney Firm in Their Tool Belt 2012 by Wendy Patton Pre-Paid Legal is one of the most overlooked, yet beneficial tools for the Real Estate investor. There is no question that investors need quality attorneys that are available to answer unlimited questions on any subject matter, i.e., real estate questions, taxation, interpretations of laws and usury rates, just to name a few. As a full time real estate investor Pre-Paid Legal is not only an outstanding tool, but also a necessity. If you have never needed legal representation for your investing business or for yourself, believe me it is just a matter of time. Buying property in this day and age can most certainly be a liability in every sense of the word. The word Attorney puts a certain feeling of uncertainty and fear into our very being. Not many of us like to call an attorney for advise or help of any sort, as we know upfront, the charges we incur can be astronomical. This puts many of us in a quandary of whether we should spend the money for attorney fees or to take the risk of not having council, by doing without the cost or expense and unfortunately without the professional assistance that we might need or require. Many of you have heard of Pre-Paid Legal but really know very little about how it can help you in your business. In many states throughout the country Pre-Paid Legal offers a plan that is called "The Home Based Business Rider". This Rider attaches to the "Expanded Family Plan" and in combination enables the investor and his family to have the benefits that I have listed below: 1. Unlimited questions answered for business or personal matters. 2. Three letters drafted per month on behalf of your business. Unlimited calls or letters made for you and your family. * One per subject matter. 3. Up to three initial debt collection letters written per month on your behalf for your business. 4. You can have three contracts or documents up to fifteen pages in length, per month, reviewed by your provider law firm. 5. Also included with your Business Rider is unlimited small business consulting service through GoSmallBiz.com 6. Included in your coverage with the Expanded Family Plan is pre-paid trial protection that is included as part of your membership. This benefit grows each year you stay a member with Pre-Paid Legal totaling up to 335 hours by your fifth year. 7. Automobile representation for you and your family no matter where you had the accident or the ticket occurred. 5 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

6 8. Have your Last Will and testament and your Living Will created as part of your family plan benefits. If you already have these important documents in place then they can be updated free of charge with your membership. 9. As part of the business rider you will have consultation service for your small business. This service is provided free as part of your membership through There are many more benefits for members of Pre-Paid Legal Services. What I have listed above encompasses some of the more significant benefits for the real estate investor. For only $40.50 per month is there any question why an investor would not want or need this type of coverage and representation? If you are interested in hearing more about how Pre-Paid Legal can save you and your family money and grief, then feel free to call Michael Gott at If you like what you are reading and you want to get signed up now then go to, I wish each of you all the best. I am confident that you will find a tremendous asset and tool for your business in Pre-Paid Legal Services. Wendy Patton 6 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

7 Buying on an Option: Check List Property Address: Contact: Phone: Projected Take over Date: Create Owner Folder for this home Order pre-title work Check if taxes are paid Check if mortgage is up to date Draft all documents: Proposal, Rental Agreement, Offer to Purchase/Sales Contract, Option Agreement, Memorandum of Option, Affidavit of Liens Sign all documents! Get a key or access Set up utilities Water reading (if city water) Water softener (if it is on a well is it a rented system?) Get insurance (Liability) Review title work Get seller to fill out a Lead Based Paint and Seller s Disclosure Advertise the home Record Memorandum of Option Set up auto-payments if paying mortgage payment Maintenance/Work to be completed: 7 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

8 to Seller Not Reached Hi, my name is Wendy. I am looking for a home for a local family on a rent to own. Are you open to selling your home? If so do let me know. I am a Realtor, but I get paid from the buyer, so you will not have to pay me to sell your home. Please let me know if I can provide you with more information, Also if you are interested will you please send me your name and phone number and any additional pictures you have of your home. Thanks, Wendy (Phone) XXX-XXX-XXXX 8 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

9 Script: Working with FSBOs The For Rent Ads FSBOs (For Sale By Owners) are individuals that are selling their home without the assistance of a realtor. Many investors work with FSBOs in buying deals. In lease options I find that most sellers need or want their cash out. The best way to find a seller for a lease option is not the FSBO section of the newspaper, but the for rent section of the newspaper. What you will want to do is to turn the landlord into a seller. Here is how to buy homes on options from owners: Call the ads in the paper in the for rent section, not the for sale section. The reason I do this is that 90%+ of sellers must get their cash out and a large portion of the other 10% won t consider something creative. It is not because they don t want to consider something creative, it is just that they would prefer to cash out and be done with the property and also something unique will scare most sellers. Call the ads that are for rent, because the #1 and #2 objections for selling on an option have been resolved. The owner does not need to sell or to cash out of the home AND they are willing to lease the home. This is a script you can use to contact an owner of a rental home. The words in bold are what is said to the owner. Hi, my name is I was calling about your home for rent. Giving your name sounds warmer and will help put the owner at ease with you. Can you tell me if it is still available? If yes, continue. When is it available? Can you tell me a little about the home? Let them answer some information about the home or expand some questions from the ad. You are building rapport with the owner. Talk and let them talk. People warm up when they are the ones talking. Listen and sound interested. When was the home built? This question gives you insight to any decorating problems you might be running into. It will tell you if it might need to be updated. If older, ask next question, if not skip. Has the kitchen and bath(s) been updated since it was built? If it was built in the 70 s, I might ask if the baths or kitchens are yellow/green/brown or if they have been updated since it was built. I am primarily building rapport and leading up the main question. 9 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

10 Does it have a garage or basement? Don t ask questions that are answered in the ad or from their description above. Ask questions applicable to your area of the country, such as, is it in a flood area, does it have central air, has it ever had termites? Whatever might be of interest to you and to find out more about the home. Is the yard fenced? I really don t care. I am just building rapport. This may prompt them to ask the question on whether or not you have pets. At this point they still think you are the one that will be living there. I don t change that direction of thought until enough rapport and trust have been developed. They may ask questions as to how many will be living in the home. These are questions I don t want to lie about, but don t want to be totally direct on either. If I said, I don t know, I am going to rent it to someone else, you can be sure they will not show you the home. That would kill the trust and rapport immediately. It is hard to say how to handle those questions exactly. Each time these questions come up, you will be answering them differently based on the owner. Here are some ways you could consider handling them. 1) Answer them as if you really were going to live there. Always answer truthfully just not always completely or early on in the negotiation process. 2) Try to change the subject or slightly avoid the question. 3) Try to answer to your best guess of who might be renting from you later. Deception is not what I am recommending, however, it may sound like that. I am very honest and straightforward with my sellers, but only after they meet me or when I feel that they are open to discussion about the entire situation via phone. Everything is in writing too. They will know that you are not living there before they sign the documents. It is also in the rental agreement with the seller that you will not be occupying the home. If the home sounds like something you would like to own, then pop The Question. Wow, this home sounds really nice, would you considering selling it? If they say no then say, Thanks, but I am really looking for something I can buy. Leave them your name and number to contact you later if they change their mind about selling. If they say maybe or yes: Do you know how much you would want for the home? Start to feel out the owner for the type of terms they would consider. When could I come and look at the home to see if I would be interested in it? 10 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

11 Script: Buyers Calling Listing Agents Re: Property w/rent to Own Possibilities This script is for rent-to-own buyers to call the listing agents of properties they are interested in to determine if the seller might consider rent-to-own or to see if the real estate agent has any other listings where the seller would consider rent-to-own. Hi Sally, my name is and I was calling about the home you have for sale at (the address). Is it still available? After they say Yes, it is. I would say, Can you tell me more about the home? How much is it and how large it is? Listen to see if it is something you would be interested in. If so follow up with I noticed it has been for sale awhile... Wait and see what they say without saying anything else. They might say, Yes then I would go on to the next question. Or they might start to talk more which is what I am hoping they will do. I want them to start to talk and tell me more. Maybe they will tell me why it has been listed a long time or what the status is. You would be amazed at what others will tell you when you zip it and listen. The next question is, Well, I wondered if they would be open to something creative? Again, I leave it at that and say nothing more. Sometimes they will run away with a long explanation of what the seller will or will not do, sometimes they say, Like what? Well, something like a rent-to-own, lease option, lease purchase, or owner financing with your commission paid in full. I am a rent-to-own buyer looking for a home in that area. Would your seller be open to something like that? Don t say anything until they respond. You ll get one of five responses. 1. Yes, they have mentioned that to me. If you get a positive response the next question to ask is: Great, do you know what kind of terms they are looking for or are they looking for an offer? If they are looking for terms that work for you or they are looking for an offer make an appointment with Sally to look at the home. Note: Sally will try to become your Realtor. This might not be bad if Sally is creative and willing to read this book along with you, but otherwise 11 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

12 don t sign anything to commit you to Sally except for this home. If Sally is really good, you might want her to be your agent. If the terms are not within your scope then ask the following: Do you have any other listings where your seller might have said to you, Sally, if you don t sell my home soon I might have to rent it? Sally (remember use their real name ), can you think of any of your listings like this that might work for me? Sally may also respond to the rent-to-own question like this: 2. No, they need to sell now and wouldn t be interested in that. If this is the case jump right to the question where you ask if she has any other listings that might work. You will need to know your price range and what you can afford as she will probably ask you about this (we covered this in chapter 3). 3. I m not sure I would have to check with them. If this is the response encourage the agent to talk with her clients. Reminder her that you are looking for a rent-to-own home in that area and her commission would be paid in full. 4. What are you talking about? Not every agent knows what rent-to-own is, you may have to give them a brief explanation. 5. Why do you need a rent-to-own? Most likely it s because you can t get a mortgage right now or because you don t want to get a mortgage right now. Your best answer is to simply tell her that a mortgage won t work for you now but you do want to get into a home now and ask her if that home or another listing of hers might be a candidate for rent-to-own. Keep your answer brief and then ask her the question to keep her talking. 12 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

13 Profitability Worksheet Option 1 Current Value $80,000 Purchase Price $75,000 Lease Option Premium $ 4,000 5% Usually 5-10 % Current Appreciation/Depreciation $ 1,500 2% per year Months in Buyer's Lease 18 months Subtotal $ 5,500 Sale Price $85,500 = Current Value + Subtotal Sale - Purchase $10,500 $ 795 Rent you charge buyer $ 600 Rent you pay seller $ 195 Monthly Cash Flow Cash Flow $ 3,510 Total Cash Flow Option Credits- Seller $ 500 Monthly Credit You GET $ 9,000 Your Credits Option Credits Buyer $ 100 Monthly Credit You GIVE $ 1,800 Buyers Credits Total Profit of Deal $21,210 Option Fee from Buyer $ 2,200 Option Fee to Realtor $ 750 1% % of Purchase Price Difference $ 1,450 Your Upfront Money Total Months in Seller's Lease 36 months for all months in Money Paid to Seller $21,600 contract 13 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

14 Sandwich Lease Option Prospect Appt Time/Date: House Address: Contact Name: Phone: Home Details: # Beds: Year Built: # Baths: Have the kitchen or baths been updated: YES / NO Is there anything needing repair: YES / NO If yes (what): Other Unique Features: Are you currently working with a Realtor: YES / NO If yes (who): Financial Info: How much worth: Rent Amount: How much owed: Are you current with payments? YES / NO What is the minimum amount you would sell for: 14 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

15 Your Company. Name Proposal Property Address Innovative approaches to Leasing/Selling 15 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

16 Your Company. Name has 2 programs to offer you Please review the following options that we can offer you as a Seller and consider which would serve you best! Lease with an Option to Buy to Your Company Name offer #1 Your company name can pay you a monthly fee of $ , for a lease term of 3 years. We would then have the right to purchase of your home within the 3 year term at a price of $126, $XXX will be applied each month towards the purchase price. Lease with an Option to Buy to Your Company Name offer #2 Your company name can pay you a monthly fee of $ , for a lease term of 5 years. We would then have the right to purchase of your home within the 5 year term at a price of $130, $XXX will be applied each month towards the purchase price. In both of these options we would pay the rental amount whether or not the home is vacant or rented. You would still need to carry your homeowner s insurance and pay your property taxes until the home is closed. We would be responsible for everything from the date this agreement starts, including all maintenance (minor and major, except for the first 60 days) of course change this if you want something different for example they pay anything above $500. We would like to have all the appliances left with the home. At closing, you would pay the seller s title insurance, transfer fees/taxes (if any) and any other fees paid by a seller at closing. We also cover all utilities from our contract start date. We will start our rental payments to you when we find someone to place into your home, however, during this time frame you may also market your home for sale. If you sell it before we place someone, then this agreement can be voided by you. Thank you for considering Your Company Name! Your Company Name Your Company Address Your Phone number/fax/ etc. 16 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

17 . Your Company Name Proposal Property Address Innovative approaches to Leasing/Selling 17 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

18 Your Company. Name has 2 programs to offer you Please review the following options that we can offer you as a Seller and consider which would serve you best! Lease with an Option to Buy to Your Company Name #1 Your company name can pay you a monthly fee of $ for a lease term of 3 years. We would then have the right to purchase of your home within the 3 year term at a price of $126, Lease with an Option to Buy to Your Company Name #2 Your company name can pay you a monthly fee of $ (of which $400 will be applied towards the purchase price each month) for a lease term of 5 years. We would then have the right to purchase of your home within the 5 year term at a price of $130, In both of these options 1 & 2 you would still need to carry your home owner s insurance and pay your property taxes until the home is closed. We would be responsible for everything from the date this agreement starts, including all maintenance (minor and major). (except the first 60 days) of course change this if you want something different for example they pay anything above $500. We would like to have all the appliances left with the home. You would only pay the seller s title insurance, transfer fees and any other fees paid by the seller at closing. We also cover all utilities from our contract start date. Our down payment will be 1% to The Real Estate Company you are paying when this contract starts. The remainder will be paid as follows (ideas for you:1% in 12 or 18months The remainder at closing, etc.) (If you are licensed make sure you disclose that in the offer and that your company will get the selling agent portion of the commission remove this sentence before printing!!) The payment to The Real Estate Company you are paying will be applied towards the purchase price when the purchaser closes on the home. We will start our rental payments to you when we find someone to place into your home, however, during this time frame you may also market your home for sale. If you sell it before we place someone, then this agreement can be voided by you. Thank you for considering Your Company Name! 18 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

19 Ads to Find Buyers You can put ads for finding buyers or sellers in either the For Rent or For Sale section. Try them both and see what works best in your area. Use a website if you have one. When you get more than one home you might want to invest in a site. They are reasonable and many internet provides offer them as part of their packages. Advertising is one of the most expensive parts of real estate investing. Advertise wisely! Be creative on where and when you advertise. Use FREE websites when you can like Craigslist TIRED OF RENTING?? Interested in renting with an option to buy? We have a beautiful 3 bedroom home in xxxxx town, for $900/month and $4000 option fee. (123) Land Contract wanted? We have a home available on terms call for a unique way to buy a home. 3 bedroom home in xxxxx town, for $900/month. (123) Rent to Own: 3 Bedroom home with basement and garage. $750/month with $2000 option fee. Call today. Credit issues ok. (123) Lease Option: 4 Bedroom home, fenced yard, pool, garage, and much more. $1750/month with $8000 option fee. Call today. (123) STOP RENTING BUY TODAY! We have several homes in the xyz area available on a rent with option to buy. Ranging from $ per month. Start Building your future now. (123) Recent Foreclosure or Bankruptcy? We have homes to help you get started over. Lease Option and seller financing available. Credit repair required after you move in. Start Building your future now. (123) W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

20 Selling on an Option Check List ADDRESS: MOVE IN DATE: Seller Name: Phone: Advertise Home Get Application Fee Get Application Get Non-Refundable Deposit if acceptable (with signed deposit form) Create Tenant Folder for this home (Red folder) Confirm Applicant Meets Criteria If Not send rejection letter Draft Rental Agreement/Option/Offer to Purchase Video Tape Home (with tenant if possible) or get pictures Get Check-in/out List to Tenant Cancel Advertising Sign Rental Agreement, Option, Pet Agreement & Offer to Purchase Sign Lead Based Paint & Sellers Disclosure Confirm that they transferred utilities to their name Gas, Electric, garbage, water, water softener, etc Confirm Their Check-in/out sheet is returned Confirm they have renters Insurance Remove Sign(s) and any lockbox Make a copy of tenants personal check put in their folder (every month) 20 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

21 Script: Buyers Calling Listing Agents This script is for rent-to-own buyers to call the listing agents of properties they are interested in to determine if the seller might consider rent-to-own or to see if the real estate agent has any other listings where the seller would consider rent-to-own. Hi Sally, my name is and I was calling about the home you have listed at (the address). Is it still available? After they say Yes, it is. I would say, Can you tell me more about the home? How much is it and how large it is? Listen to see if it is something you would be interested in. If so follow up with I noticed it has been listed awhile... Wait and see what they say without saying anything else. They might say, Yes then I would go on to the next question. Or they might start to talk more which is what I am hoping they will do. I want them to start to talk and tell me more. Maybe they will tell me why it has been listed a long time or what the status is. You would be amazed at what others will tell you when you zip it and listen. The next question is, Well, I wondered if they would be open to something creative? Again, I leave it at that and say nothing more. Sometimes they will runaway with a long explanation of what the seller will or will not do, sometimes they say, Like what? Well, something like a rent-to-own or a lease option with your commission paid in full. I am a rent-to-own buyer looking for a home in that area. Would your seller be open to something like that? Don t say anything until they respond. You ll get one of five responses. 6. Yes, they have mentioned that to me. If you get a positive response the next question to ask is: Great, do you know what kind of terms they are looking for or are they looking for an offer? If they are looking for terms that work for you or they are looking for an offer make an appointment with Sally to look at the home. Note: Sally will try to become your Realtor. This might not be bad if Sally is creative and willing to read this book along with you, but otherwise don t sign anything to commit you to Sally except for this home. If Sally is really good, you might want her to be your agent. If the terms are not within your scope then ask the following: 21 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

22 Do you have any other listings where your seller might have said to you, Sally, if you don t sell my home soon I might have to rent it? Sally (remember use their real name ), can you think of any of your listings like this that might work for me? Sally may also respond to the rent-to-own question like this: 7. No, they need to sell now and wouldn t be interested in that. If this is the case jump right to the question where you ask if she has any other listings that might work. You will need to know your price range and what you can afford as she will probably ask you about this (we covered this in chapter 3). 8. I m not sure I would have to check with them. If this is the response encourage the agent to talk with her clients. Reminder her that you are looking for a rent-to-own home in that area and her commission would be paid in full. 9. What are you talking about? Not every agent knows what rent-to-own is, you may have to give them a brief explanation. 10. Why do you need a rent-to-own? Most likely it s because you can t get a mortgage right now or because you don t want to get a mortgage right now. Your best answer is to simply tell her that a mortgage won t work for you now but you do want to get into a home now and ask her if that home or another listing of hers might be a candidate for rent-to-own. Keep your answer brief and then ask her the question to keep her talking. 22 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

23 Script to Qualify Buyers How did you hear about us? Find out where your leads are coming from. Great. Where are you living now? And how long have you lived there? You called on the lease option property, right? Ok great, what price range did you want to keep your rent in? Let them answer and then multiple their answer by 3 to 4 times for example if they say $1000 then it is $ $4000 they should earn so I ask Ok great, so with that rental range, I assume you make between $ $4000 minimum, is that right? If they don t then you might should advise them of what they really can afford we don t want them in a bad situation nor the seller. Why do you want to move from your current location? You called on this rent to own/lease option home, I assume that means you have some credit issues you might need to address, is that right? Maybe a bankruptcy or a foreclosure? Let them answer this. Sometimes they will explain more than you imagined. Also find out the exact dates of the bankruptcy discharge and the foreclosure sale or the date there was a short sale. These dates affect the time they need to get a mortgage. If they have been through foreclosure find out why? Bankruptcy why? If so, what has changed in their situation to make it better now? Snoop a bit, usually they will share with you why but asking questions gives you many answers. How about your upfront payment money to move in what range did you want to keep that in? Ok. What s your timeframe for finding a new place? If qualified: Great.what type of property are you looking for? (home, how many bedrooms) OK let me tell you about some of our properties that fit what you re looking for and then we can schedule an appointment to see them. If not qualified: I am sorry I am not able to help you right now, you will need to have at least $xx to move into one of our lease option homes. Is there any chance you can borrow this from someone? or ask Do you know when you might be able to save $xx? 23 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

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42 Day 2 & 3: Cooperative Lease Options 42 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

43 Wholesaling Options Check List ADDRESS: OWNER: PHONE #: Create Folder for this home Draft All Documents, Sales Contract, Option Agreement, Memorandum of Option, Affidavit of Liens, and Agreement with Seller for cooperative option. Also get the loan authorization signed so you can confirm payments now and in the future. Order Pre-Title Work or Confirm Title is Clear (seller to pay) Check if Taxes are Paid Check if Mortgage is Up to Date Maintenance/Work to Be Completed Get a Key or Access Water Reading (if City H20) for new buyer Review Title Work Sign All Documents except Rental agreement (to be signed by end buyer later) Get Seller to fill out a Lead Based Paint and Seller s Disclosure sign Advertise the home Get buyer to sign all documents and rental agreement with seller. They need to sign the assignment agreement and rental agreement and initial all other contracts and disclosures (initial lower right corner) Pet agreement needed? Get a mortgage authorization for the buyer (signed by seller). Get option fee from buyer at time of signing documents. Tenant Buyer to get renters insurance? Buyer to do an inspection? Buyer set up for credit repair make this a must if needed. Buyer working with a lender? 43 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

44 Record Memorandum of Option when buyer is found and deal is finalized (Ok to leave your name on there) Checkups o One Month o Three Months o Six Months o Twelve Months hopefully closing soon 44 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

45 Ads for Finding Sellers Use for response to rent ads in Craigslist: Hi, I saw your home on Craigslist and it sounds like what I might be looking for. I am looking to buy a home with a rent to own or lease option to buy. Are you open to selling your home too? If so, please let me know and maybe your home will be perfect for me. Also if there are more pictures or anything else you can share with me about it, that would be great. My number is xxx-xxx-xxxx. Wendy Hi, I saw your home on Craigslist and it sounds like what I might be looking for. Are you trying to sell your home too? I can help. I work with many buyers in the Metro Detroit area to find a home they can rent now and buy later. It will not cost you a dime. Please let me know if you are interested. My number is xxx-xxx-xxxx. Wendy As a real estate agent: Are you trying to sell your home, too? I can help. I work with many buyers in the Metro Detroit area to find a home they can rent now and buy later. It will not cost you a dime. Please let me know if you are interested. I my name is Wendy and I am a real estate agent with Keller Williams Realty. I get paid by the buyer. My number is xxx-xxx-xxxx. Wendy To a real estate agent or rental company: Hi, I saw the home you have listed on Craigslist and it looks like what I might be looking for. Is the owner of this home willing to sell it also? If so can you send me more information on the home? I am looking for a home on a lease to own or rent with option to buy. Will that be a possibility for your seller? Any pictures or additional information would be great. Of course I would make sure you get your full commission if a seller was to sell their home to me. My number is xxx-xxx-xxxx. Thanks, Wendy 45 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

46 to Seller Not Reached Hi, my name is Wendy. I am looking for a home for a local family on a rent to own. Are you open to selling your home? If so do let me know. I am a Realtor, but I get paid from the buyer, so you will not have to pay me to sell your home. Please let me know if I can provide you with more information, Also if you are interested will you please send me your name and phone number and any additional pictures you have of your home. Thanks, Wendy (Phone) XXX-XXX-XXXX 46 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

47 CraigsList Rent Script (Wendy) Hi, my name is Megan. I am calling about your home for rent on Craigslist. Is it still available? My manager asked me to give you a call he (she) really liked your home and he (she) loves the Clarkston area. Can you tell me a little about your house? (Beds, Baths, year built, been updated, other unique features) WOW your home sounds really nice would you consider selling it? (shut-up wait for them to respond) We have a program where we will help to sell your home and it does not cost you anything the buyer pays would that interest you? Are you familiar with Lease Option or Rent with Option to Buy? Would you be open to learning more about how this approach could help you and it will not cost you a dime? (If YES) my manager has an opening in his schedule and could call you at 2:00 on Monday or 6:00 on Tuesday, which works better for you? I need to gather a little more information from you so that my manager can be fully prepared to discuss our program with you. How much is your house worth? (how do you know) How much do you still owe on your house? Are you current with your payments? Does the house need any repair (if so, what)? I see that the rent amount in Craig s list is $900 is that correct? Are you currently working with a Realtor? (who) What is the lowest sale price that you could accept? (If NO) Are you aware that with our program and Lease Options we are: Able to get you top dollar for your home You do not pay any real estate commission The Tenant Buyer pays for our services We currently have a list of tenant buyers looking for nice homes in the Clarkston area and we would probably be able to fill your house in less than four weeks. I would like to remind you once again that our services cost you nothing. Would you be able to talk with my manager at 2:00 on Monday or 6:00 on Tuesday to learn more which one works better for you? 47 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

48 Sample Seller Scripts (Joe) Note: This is not a hard and fast script. Make it personal make it yours! ~~~~~~~~~~~~~~~ "Hi, [name of seller]. This is Joe with XYZ Company. You visited our website (or called our voice mail) regarding selling your home on [street name]. Is the house still for available?" "Please tell me a little but about the house." Would it be available for Rent to Own / Lease Purchase? "Are you familiar with what Lease Rent to Own / Lease Purchase is?" "A Lease Purchase is simply leasing a home to a qualified tenant-buyer who will buy it in 1-2 years after we help them rebuild their credit." In fact, we already have several tenant-buyers that we are working with right now who are looking for properties in your neighborhood. "There are a lot of advantages to selling your house on a Lease Purchase: (Note: I highlight the words in yellow to help me when I am talking to sellers on the phone. You should memorize these benefits!) Debt relief. Someone else is making your mortgage payments. "How long can you make payments on this house (how long can you hold out?)" We have several tenant-buyers already who are interested in your property. We have over 2,700 tenant-buyers right now in our database actively looking for a home like yours. In fact, we have more tenant-buyers than we do houses. Most of our tenant-buyers typically get a mortgage in 6-12 months It usually takes us 1-4 weeks to fill a property. You get top market value for your home without having to pay any Realtor commissions. Our services will cost nothing out of your pocket. We collect our money from the tenant-buyer. No obligation. We will aggressively market your home until we find a tenantbuyer. You can even still try to sell the home yourself. And if you find a buyer before we do, our contract terminates & you won't owe us anything. Our tenant-buyers will pay slightly higher than market rent, and will almost always pay their rent on time due to our generous rent credit program. We help you do a complete background check on all our applicants. We check their credit history, emplyment history, rental history, etc... We call all their references. 48 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

49 We require all our tenant-buyers to work with our mortgage broker and go through their credit restoration program You will get a tenant-buyer that is going to take better care of the property than a regular tenant would. This is because they will have a larger ownership interest in the property, and tend to show more of a pride in home ownership. Your tenant-buyer will be responsible for all day-to-day maintenance and repairs. You won't get any calls in the middle of the night to fix a leaky toilet. "The tenant-buyers that we work may have marginal credit issues. They may be self-employed, have a second house that won't sell, gone through a recent divorce, had some unexpected medical expenses, lost a job at one time, etc. But we put them all through a credit restoration program with our local mortgage broker. All of the tenant-buyers have had to apply for our program are pre-screened by our mortgage broker. They should all be able to buy your home in 1-2 years." "Does this sound like something that might interest you?" Can I you some more information? Great, I will send you an today & call you tomorrow. Is that okay? Something a little different: I am an investor and I am possibly looking to do a rent to own on your property. Is that something that you would be interested in? Well, what if I could Lease your property from you for a period of time and then buy the property at the end of that time? Would that be a good fit for you? If I or one of my Buyers could help cover your payments, guarantee your rents on the first, take care of all the day-2-day maintenance, and buy the property at the end of that time without you paying a Real Estate commission, what would you want to do then? I don t know if we could make the numbers work, but if we could come together on the numbers, could we put a deal together today? Some Good Questions To Ask: Mr Seller, I am going to ask you a few questions to make sure that a Lease Purchase can really meet your needs. While I hope we can do business today, I want you to be comfortable enough to also tell me that you are not interested, if this is not what you are looking for. Is that okay with you? OK, where should we go from here? What do I need to do to get your commitment today? 49 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

50 Let me quickly get to the bottom line Suppose I could get you full price for your home without you paying any Realtor commissions. Suppose I could find a great tenant-buyer to lease purchase your home in 2 weeks and it won t cost you a penny. Is there any reason why we couldn t do business today? 50 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

51 Cooperative Lease Options Process Search Craigslist o For Rent Specify city, exclude keywords use Searchtempest.com o Add FSBO and Expired at later date Review Ads from Craigslist o Nice homes, nice areas o Avoid ones that appear to have property management in place or working with Realtors Call select ads o Hi, my name is Megan. I am calling about your home for rent on Craigslist. Is it still available? My manager asked me to give you a call he really liked your home and he loves the Clarkston area. Can you tell me a little about your house? (Beds, Baths, year built, been updated, other unique features) WOW your home sounds really nice would you consider selling it? (shut-up wait for them to respond) We have a program where we will help to sell your home and it does not cost you anything the buyer pays would that interest you? Are you familiar with Lease Option or Rent with Option to Buy? Would you be open to learning more about how this approach could help you and it will not cost you a dime? If yes my manager has an opening in his schedule and could call you at 2:00 on Monday or 6:00 on Tuesday, which works better for you? I need to gather a little more information from you so that my manager can be fully prepared to discuss our program with you. How much is your house worth? (how do you know) How much do you still owe on your house? Are you current with your payments? Does the house need any repair (if so, what)? I see that the rent amount in Craig s list is $900 is that correct? Are you currently working with a Realtor? (who) What is the lowest sale price that you could accept? 51 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

52 If no Are you aware that with our program and Lease Options we are: Able to get you top dollar for your home You do not pay any real estate commission The Tenant Buyer pays for our services We currently have a list of tenant buyers looking for nice homes in the Clarkston area and we would probably be able to fill your house in less than four weeks. I would like to remind you once again that our services cost you nothing. Would you be able to talk with my manager at 2:00 on Monday or 6:00 on Tuesday to learn more which one works better for you? Manager calls prospects that are open to Lease Option o Discuss terms regarding the house (min purchase amount, rent amount) o Get address of those that are open Send with Paperwork o Get signed Option paperwork back Advertise specific house on Craigslist o Post twice per day Accept applications Approve applicant, review with seller and close 52 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k

53 Cooperative Option Prospect Appt Time/Date: House Address: Contact Name: Phone: Home Details: # Beds: Year Built: # Baths: Have the kitchen or baths been updated: YES / NO Is there anything needing repair: YES / NO If yes (what): Other Unique Features: Are you currently working with a Realtor: YES / NO If yes (who): Financial Info: How much worth: Rent Amount: How much owed: Are you current with payments? YES / NO What is the minimum amount you would sell for: 53 W e n d y P a t t o n s L e a s e O p t i o n B o o t C a m p W o r k b o o k