I absolutely love hearing about real estate investors who want to buy their next off-market property with Seller Financing! In fact, I wish more investors would have this goal, because buying with Seller Financing can be a real game-changer that unlocks an investor’s ability to scale their portfolios at the rate THEY want to grow…not the rate at which the banks or the market will let them.
There’s one major mistake I see enthusiastic new investors make when trying to get their first off-market Seller Financing deals, and I wanted to take a moment to help correct this understandable error.
The mistake is this: Prematurely offering Seller Financing.
Let’s break it down.
Question: What do I mean by “prematurely offering Seller Financing?”
Answer: I mean that many investors bring up Seller Financing way too early in the conversation with the Seller. They either broach the subject of Seller Financing too early, or the even go so far as to offer it to the Seller far too early.
Question: What is “too early?” When is the right time?
Answer: Too early is not a matter of “time,” per se. It’s not about waiting two days, or logging 45 minutes of negotiation first. It’s about waiting to bring up the topic of Seller Financing until the Seller has provided clues that Seller Financing might be a relevant solution for them.
Question: Why is it important to wait for the Seller to provide clues?
Answer: Ahh, now we’re getting to the heart of it. It’s not just “important,” it’s critical. If we bring up Seller Financing too early, it becomes clear that Seller Financing is what WE want. Once the Seller realizes that, they a) gain more leverage in the negotiation and b) begin to wonder why we want it (“Can this buyer not qualify for a mortgage?”). The FAR better situation is one in which we discover that Seller Financing might be the solution that gets the Seller what THEY want.
Here’s the key distinction: The unintentional mistake is bringing up Seller Financing proactively; the pro move is bringing up Seller Financing REACTIVELY to what the Seller tells you.
Question: What are the clues we are waiting for the Seller to provide?
Answer: While it’s possible and happens a small percentage of the time, it’s rare the Seller will literally say “I want to do Seller Financing.” So instead, we need to think of Seller Financing as a “medicine,” and then we must listen for the Seller to mention clues of the “symptoms” that matter to them—that way, we can responsively “prescribe” Seller Financing as a way to address their symptoms.
Several common symptoms Sellers may express are:
—“I want to sell my rental property, but I need the income to live off of.”
—“I want to sell my property, but I don’t want to pay capital gains.”
—“I could sell my property, but I don’t know what I’d do with the money.”
—“If I sell my property, I’ll have to buy another one…and everything is so expensive these days.”
Summing It Up
I would love nothing more than to see you buy more properties off-market with Seller Financing! But in order to do so, you must learn this skill: Bite your tongue, and open your ears. Resist the excited temptation to bring up Seller Financing too early; wait until the Seller gives the right clues, and then say, “You know, after listening to what you’re saying, have you considered having me make payments to you over time? I think that could make sense based on what you were just saying, because…..”
Now go get those deals!