I think Ricky Ricardo once told Lucy to “speak splain English.” As an investor, you should listen to Ricky’s words of wisdom. It’s often too easy for us to switch from speaking English to the other language we speak- legalese.
By definition, legalese is the formal and technical language of legal documents that is often hard to understand. It’s the language we speak when dealing with other real estate professionals like agents and attorneys, and it’s full of words that aren’t in the common vernacular.
Terms we use on a daily basis, like warranty deed, security deed, subject-to deal, owner financing, note and option, are often not understood by the people we are trying to serve.
In order to be successful, you need to not only understand these concepts but be able to explain them in a way that makes sense to your sellers.
We just did a really cool deal where we bought a house and the owners carried back the financing for us. We accomplished this deal because we asked simple strategic questions, actively listened to seller’s responses and explained the ins and outs of the deal without using legalese.
Let me explain:
I bumped into the sellers at a local home improvement store. After introductions, the wife said they had a house they’d really like to sell that needed work. I told her I’d love to buy it and didn’t mind that it needed work. I asked when we could see it.
To which she responded, “What are you doing right now”.
Off we went. (Note: when sellers are in a hurry to show you their house, go! Great things often happen)
The husband and wife showed me around the property. They explained the house was inherited and that they were too old to be working on it.
I asked them what they planned to do with the money from the sale; invest it?
They intended to give it to their kids.
I asked how soon they needed the money, and they said they didn’t really need the money since they planned to pass it on to their kids.
When you hear things like “we don’t need the money,” your ears should perk up. Sellers like this are prime candidates to purchase from with owner carry-back financing. Upon further investigation, I found the children would need the money in a year. That threw longer-term-financing out the window, but the situation would still be great for a flip.
The sellers were firm on their price, so, I explained we had four projects going and that it would really help me if I could just pay them after the house was fixed up and sold.
They were agreeable to that but had some questions about how things would work- mostly, how they’d be protected.
I explained that when they signed the house over to us, we would sign something saying we’d pay them all their money when we sold the property. We’d make sure these documents got recorded at the court house so that when the home sold, the closing attorney would see we had to pay the sellers off before our new buyers could get a clean title.
The couple asked, “Like what a bank does?”
I said, “Exactly.”
They asked, “When can we do it.”
Notice I didn’t say words like note, security deed, warrant deed, owner finance, interest rate, or term. The most technical term I used was clear title.
But what did we do? We explained owner finance in a way that made the sellers comfortable enough to do the deal. Consequently, that got us a one year term with zero interest and zero payments. BOOM!
To make creative deals like this happen, you have to use easy to understand words. If the seller is looking at you like, “Lucy, you got some ‘splainin’ to do,” you need to reword your offer.
Joe and Ashley English invest in real estate in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com