In our last article, I dealt with locating prospects by using a Virtual Assistant to call FSBO ads. I said that’s pretty much all we do here and can’t keep up with the leads they generate. In this article, we’ll discuss how to determine if it’s a suspect or a prospect and quickly determine which need called and which need trashed.
It all begins with my property information sheet, which you can find here:
It’s also located in my courses and on your Gold Club website under Resources. This form is the heart of the Pretty House business. It’s as important to an investor as food is to a restaurant.
There are several things you must know before you can prescreen a prospect. Until you get these facts, you can’t tell if it’s a deal or a dud. Many try and wonder why they are confused. You’ll always be confused without the critical facts.
Here are the critical facts:
• What is the asking price?
• What does the seller think it’s worth?
• What’s it really worth?
• What’s owed on it?
• What’s the payment, is it current and if not how far behind?
• When does the seller want to move?
Fortunately all but one are simply questions you or your VA ask the seller. The “your comps” line on the lead sheet is where you go to sites like Zillow.com and see what you think the house is worth by looking at comparable sales (comps).
Of course, I’d want the rest of the blanks filled in, but the stars are the critical questions which will lead me to the deal breaker questions in the script center page. The real separator between deal and dud are the “yes” or “no” questions in the middle.
YES means Deal
NO means Dud
The goal is to get a few yeses every week which lead to a few calls you make and one or two appointments to get a contract signed by the seller.
So, let’s look at the script in the middle of the lead property information sheet. On the left it says, “Will you sell for what you owe?” If the answer is yes, you can either take over the existing debt with no money if the seller is willing (and most are), or you can lease-option it for the loan balance with no money. It’s usually your choice, which you do is a discussion for my Quick Start Real Estate School, not a newsletter.
Note, it says only ask this question if the loan balance and asking aren’t too far apart. It’d be foolish to ask if they are and will probably kill your relationship with the seller before it even gets started.
If the ARV (After Repaired Value) is $200,000, the loan is $120,000 and the seller is asking $190,000, would you really ask if they’d sell for what they owe? NO!
The center section asks if they’d consider a lease-purchase if the house has a mortgage. Sixty-six percent do! Thirty-four percent are free and clear!
Sometimes the house is overleveraged which is easy to see if the loan is more than the value. When you get a yes to the lease-option question here, and most will be, you have a potential ACTS deal. Your goal is to lease-option it for the loan balance for ten years and then assign your lease to a tenant-buyer and collect $5,000 to $25,000 as an assignment fee.
All you need to see if it’s a prospect is if the seller will agree to lease-option, is the payment reasonable and is it in a good area and descent condition. All of these questions are on the form.
If you get a yes here and there’s some equity, you may want to do a sandwich lease and stay in the deal. You lease-option from seller and sublease it to buyer at higher price and payment. You collect rent, pay the seller and keep the difference.
The simple math tells you if it’s an ACTS or sandwich lease-option. The seller’s yes answer tells you it’s a prospect. A call to them confirms it.
On the right side, you’ll see an owner finance question for free and clear houses. If you get a yes to the first question, you have a seller willing to take monthly payments. Our goal here is two-fold. One, see if we can create a killer deal with sweet terms we can stay in and make a lot of money for years to come. That will occur when the seller will take little or no down payment and a low monthly payment.
We can then buy it and resell with owner financing or lease-purchase it to collect a big down from the buyer and a big monthly spread.
Buy with Owner Financing Sell with Owner Financing
$5,000 down $25,000 down
$700 per month $1,500 per month
That’s $20,000 easy profit and $800 a month income for years with a quick in and out with no costly entanglements. These are my favorite deals. One a month could quickly put you out of a job.
FYI, if you’re worried about the $5,000 down, don’t. You close the purchase and the sale on the same day so the buyer’s $25,000 covers the $5,000.
Sometimes, the seller will owner finance but wants retail price, a higher payment than you want to make and a down payment so large you wouldn’t write the check.
Seller Wants $175,000 (house worth $175,000)
$1,500 per month
You wouldn’t close on this yourself in the past because it’s at retail price and there’s no monthly spread. Well, you won’t close on it now either, but you can ACTS it. Simply put it under contract for what the seller asks with the understanding you’ll find a buyer the seller approves and keep what you get above the $15,000.
That means the buyer will pay the $175,000 at $1,500 a month and the $15,000 down plus your $10,000 assignment fee, and you’re out.
If you’re wondering if any sellers say yes to owner financing, the answer is absolutely!
Remember, even sellers with free and clear houses have trouble selling for all cash. They have the same issues to overcome as any house with a mortgage. What’s owed doesn’t matter to a conventional buyer getting a new loan.
Some sellers will gladly take payments to move the house for numerous reasons. You only need a few yeses a month to build a substantial cash flow.
So here we are, looking at our property information sheets and scanning for yeses. They all are free and clear or have a mortgage. They are in good condition or not and current or in arrears.
As long as you can see how to profit, prescreening has become easy using my sheet. The sellers prescreen themselves with yes or no answers. Once you’ve called the yeses, I’d call the nos. Some of them will turn into yeses. If you call them and still get a no, the best place for the sheet is in a trash can. It’s worthless to you. You can’t make unmotivated sellers motivated.
You can’t make chicken salad out of chicken shit!
Deal with those who want to deal with you and whack the rest at lightning speed. If you get 10–15 leads a week, you should get 2-5 yeses. If not, it’s likely your VA needs more work or you need more training.
If you need a VA, call 800-567-6128 or visit RonsVA.com to get more information. Global Publishing will find and train one for you, pay them and replace if needed. Don’t hire a VA to call FSBOs until you’ve been trained on how to follow up with the leads.
There are four steps to learning:
Once you past the first one, we can take you the rest of the way. Fortunately, implementation and automation will be done simultaneously with the help of VAs.
Man, you guys got it easy today! I used to actually work at this business. Most of the work has been removed today.
Our next article is on constructing and presenting the offer, so stay tuned!
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