Stop Thinking Like a Buyer & Start Thinking Like a Seller

I've acquired many of my mobile homes with seller financing, or as my students know I don't use that phrase!  

My friend Adam Johnson shared this which he wrote up about the mindset of talking with sellers about seller financing.  He said I could share it as long a you use it to actually solve problems for sellers and yourself. 

By the way in my course The Ultimate Mobile Home Blueprint I cover how it applies specifically to mobile homes and Inside Lifestyle REI we talk freely about this.

Enjoy....

Mindset for seller financing by Adam Johnson

Learn to shift your thinking and you will begin closing more deals and increasing your cash flow while solving problems.

The MINDSET OF OWNER FINANCING

The first, and often hardest step in finding deals that are seller financed is to change how you view the deal. There is a complete shift in dynamic when buying with seller carry financing versus buying with all cash. When purchasing for all cash, the seller, for the most part, does not care where the money comes from, what kind of person you are, how much rapport you build with them, or how much trust is built. So long as you’ve left them with the belief that you’ll follow through with bringing them a check. In these scenarios, you’re the buyer, they’re the seller.

However, when negotiating deals with seller financing, there is a complete role reversal. The person or persons trying to unload the property may not realize it, and it may never have even crossed your mind. When you are negotiating terms rather than price, you are actually selling. The person unloading the house is buying in on the idea that you will follow through with the terms of the agreement. You have to completely disregard the thought that you are borrowing money. The sellers are not the bank. They do not, in most cases, give you money. You are selling them a promise, and they are buying into the idea that you will keep that promise.

Essentially, you are selling yourself. Although in a legal way. Because it is necessary to build more rapport in these situations, it often takes longer than a cash deal. To your average homeowner, this is a completely new concept. And it’s human nature to back away from things that are new to us, or that we do not have a good understanding of. Their trust in you is the ONLY thing that will help you overcome their fear of stepping off into uncharted territory. If they do not trust you, you could offer them the deal of a lifetime and they will not accept it. Without trust, your deal is over before it ever takes flight.

NEGOTIATING THE DEAL

Negotiating seller carry financing is somewhat different than negotiating a cash deal. Your main goal throughout this process is to gain their trust. This should be the foremost thought on your mind every time you step into a negotiation. Unless there is an urgent time frame in which the deal has to be completed, go slow. Spend time getting to know the person, or people, that are unloading the home. Let them get to know you. Find relatable topics to discuss. Are they the same age as you? Do you have kids the same age? Do you share any hobbies or areas of interest? Do you work in a similar field? Do you know some of the same people? (this one is crucial – if they know people that know you well, use them as a reference. Say, “Oh yeah, you know so-and-so, ask them about me.”)

Many times you will have times you simply visit with them, and the house or deal never come up. That’s ok. Seller financing has its own process that it goes through. When you go to a traditional lender for traditional financing, isn’t there a pretty standard process you go through. Although, some banks may vary slightly in the way they go about things, the process is generally the same. Seller financing is no different. There is a process you must go through. Some deals may vary slightly in the minor details, but at the end of the day the process is generally the same.

Have you ever gotten a traditional bank loan? Did they have certain steps you had to go through? If you had skipped one of those steps, would the bank have just given you the loan anyway? Or would they have stopped the process until all the steps were completed? You have to look at negotiating seller financing the same way. Skip a step, and your deal will, most likely, come to a halt.

Let’s briefly run through the process of a seller financed deal.

1. Keep in mind that you are actually selling a promise, not buying a house.

2. Have you ever done sales before? As a salesperson, what’s one of the most important first steps in getting started in sales? Identifying your ideal customer, right? There are certain factors that make people more willing to provide seller financing: older folks, owns the house free & clear, had the property for a long time, house needs a little work, inherited to property, lives out of town, etc.

3. Now that you’ve identified an ideal prospect, it’s time to start the process of building a relationship of trust. For those of you that have worked in sales before, tell me this – How often have you approached a prospective customer, and that person bought what you were selling on the first visit? Right, almost never. This is the same way. The likelihood of any sale rarely reaches a descent percentage until the 6-7th visit, and, even then, it’s not that great. So take your time, slow down the process to speed up the sale.

4. F.O.R.M. up your prospect.

Family

Occupation

Recreation

Motivation

The first three are designed to help you build rapport. The last, motivation, is designed to get the information needed to structure a deal that works for them. Are they simply tired of the upkeep on their large house, and want to downsize? Are they having trouble making the payments? Is the house owned free and clear, but they’re tired of the headache? Was it a rental that they’ve had a bad experience with? Is it a property they inherited? Is it vacant, and they’re worried about it just sitting empty? Is there too much work needed for them to handle? Those are the things you need to find out about the house situation, but you also need to find out about their situation. What are the tax implications if they sell for cash? Have they used it for a rental and depreciated their basis way down? What do they intend to do with the money? Do they want to take some family vacations? Do they have a child that needs money for college? Are they trying to supplement their retirement or social security income? Once you have an idea, don’t be afraid to dive in deep – get specifics. Here’s why you need to know – assume that the house is vacant, and that it was recently inherited by the current owners. They have a child that is about to graduate high school, and will be starting college in the fall. During this discovery process, you learn that her tuition is $3,400 per semester. It may be that you make them an offer of a payment to them in the amount of $4,000 every August and $4,000 every January for the next so many years. You have just solved a big problem for them. Let’s say that someone is trying to supplement their retirement income. You learn that an extra $400 per month would go a long way with regard to their budget. That’s a perfect opportunity for terms with a monthly payment. Or let’s assume that the seller really needs a new vehicle. You could either give them cash for it, or find a vehicle that works you could sign over to them. You can remind them that, not only will they not have a car payment, but your monthly payment should cover the cost of their car insurance. Paint a picture of what the money is going to do for them. SELL IT!!! Don’t be scared to get creative, just find a solution that is a good fit for the problem they’re trying to solve.

5. It’s time to present the deal. If at all possible, always present the deal face-to-face. Make it simple, often writing it out on a piece of notebook paper after you sit down together. The easier it is for them to understand, the easier it is for them to say yes. You don’t have to bring up interest either, and, quite often, you don’t even have to bring up an actual purchase price. You say, “Now as I understand it, you’re wanting to sell the house to take care of XYZ (whatever their motivation is), and I think I’ve found a way to do it.” Occasionally, the person may ask you for all the details, and may even be caught up on a particular area of the deal. That’s ok. It may be that the monthly payment amount is the leading factor for them. It may be that they’re stuck on the overall purchase price. In rare cases, they may be hung up on the interest rate their receiving. Any one of these figures can be manipulated with a financial calculator to comply with a reasonable request by them, all while maintaining a good deal for you.

Adam Johnson


Adrian's Takeaway
👉 You must understand from the Seller's shoes when offering seller financing.