How to Qualify for a Seller Financing Loan

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When it comes to getting Seller Financing loans, how exactly do we quality as borrowers? Is there an application to complete with the Seller? How do they decide if we are safe to loan money to? In this episode, Jeff discusses the secret to qualifying for Seller Financing loans, which is to demonstrate who we are to Sellers, rather than telling them. Jeff provides several tactical and specific examples of things you can do to show the Seller who you are, and ultimately to qualify for the Seller Financing loan.

Episode Transcript

People who are new to seller financing need and want to know some of the details just like how does this thing come together? You know, how do you get the seller financing loan? How do you negotiate it? Yeah, but how do you even qualify for it? Do you have to apply for it? Why is the seller going to just trust you and let you make payments to them? Well, in this episode, I want to talk with you about answering the question, how do you qualify for a seller financing loan? And the answer might be a little bit different than you think. And in some ways, though, it’s even easier and better. So let’s cue up the theme song. I want to jump right into this super important topic.

Welcome to Racking Up Rentals, a show about how regular people, those of us without huge war chest of capital or insider connections, can build lasting wealth acquiring a portfolio of buy and hold real estate. But we don’t just go mainstream looking at what’s on the market and asking banks for loans, nor are we posting We Buy Houses signs are just looking for “motivated sellers” to make lowball offers to. You see, we are people-oriented deal makers, we sit down directly with sellers to work out win-win deals without agents or any other obstacles, and buy properties nobody else even knows are for sale. I’m Jeff from the Thoughtful Real Estate Entrepreneur. If you’re the kind of real estate investor who wants long term wealth, not get rich quick gimmicks or pictures of yourself holding fat checks on social media, this show is for you. Join me and quietly become the wealthiest person on your block. Now let’s go rack up a rental portfolio.

Hey, thank you for joining me for another episode of Racking Up Rentals. This is episode 170. That means show notes can be found at thoughtfulre.com/e170. Please do us a big favor by hitting the subscribe or the follow button in your podcast app; it really helps other fellow thoughtful real estate entrepreneurs to find this show. Onward with today’s episode.

So we’re gonna talk about how you qualify for a seller financing loan. What are the forms?, you might be wondering, what’s the paperwork like? What is the process like? Okay, let’s put a pin in that exact question. And I want to come at this from a slightly different angle. And I want to step back. And I want to give you two examples of other things that pop up in my own life that helped illustrate the real point of our podcast episode here today.

Example situation number one completely different contexts. I’ve been an entrepreneur for 20 years now. And that means I have hired several people over the years and I got a good piece of advice one time from a coach early on in my entrepreneurial career when I was hiring for an assistant. Now, if I wanted an assistant, I would probably want that person to be detail oriented, right? And if I wanted to find out if they were detail oriented, I could simply ask them in an interview, “Are you detail oriented?” Well, what do you think I’m going to hear as a result or an answer to that question, or response to that question. Most of the time, I ask are you detail oriented, chances are I’m going to hear “Yeah, of course. Yes. I’m absolutely detail oriented.”

Now, does that mean it’s true, though? Well, no, not necessarily. Because that’s sort of an easy question to understand probably what the desired answer is. And so people tell maybe the employer what they want to hear. So what is better than asking them if they’re detail oriented? Well, I would say testing for detail orientation.

So here’s one of the things we do when I post an ad for a position that requires detail orientation, let’s say posted on Craigslist, which is pretty common and typical for me, I say in the ad, especially down at the bottom of the ad. So here’s how to apply, I want you to send an email to this particular address with this particular subject line. And I want you to attach your resume as a PDF, I want you to write a paragraph of a cover letter in the body of your email. Okay. Now, just based on that alone, I can see who has a certain level of detail orientation, because you know, what a lot of people do, they just hit reply on the Craigslist ad and they respond back to the post itself instead of following the instructions, because the chances are, they didn’t even get to the instructions at the bottom. And if they did get to them, they didn’t take the time to read them or have the energy to do what was asked. So I get an email back to the wrong address with the wrong subject line, which is just the name of the post. And maybe sometimes their resume is attached as a doc file instead of a PDF. I have just seen from them if they have detail orientation, rather than asking them that question. Take that thought. Put a pin in that.

Let’s talk about one other different but very similar example and then we’re going to come back to talk about the seller financing qualification process. As you know, I host and coach a group of real estate entrepreneurs in something called The DEALS Workshop. To apply for The DEALS Workshop, you go to a certain page, thedealsworkshop.com, there’s a big red button that says apply to join DEALS, there are several pages that you have to go through, you have to read a list of like attributes of who the program is a good fit for who it’s not a good program for. There’s a couple of videos kind of explaining the philosophy and the methodology, and you have to answer a couple questions here and there. And then ultimately, you can fill out just a couple fields that say, you know, here’s my name, here’s my email address, here’s my phone number, etc. answer a couple questions to submit an application.

Well, in the process of doing that, at the very end of that process, we give some hints about kind of what the pricing of the workshop is, is like, it doesn’t say that early in the process. And so a lot of times, and by a lot of times, I mean, maybe 10% of people, they click on the first link, and then they kind of right back in, they’re like Well, yeah, but just how much does it cost. And then we have to respectfully say, Well, this is an application process. And in order to find out all of those details, we need to make sure you’re a fit for it and we’re a fit for you. And so once we have feel good about that through this application process, which is designed to do just that, then we get to discuss the details. And a lot of times people simply push back and just say I want to know the price.

So now what is the point of that? Am I just complaining about people who don’t want to follow the process? No, this is a strategic element of the whole application concept for us. It is a strategy because we want people to not tell us if they feel like they’re a good fit for this workshop or not tell us if they feel like it’s a good fit for them. We want them to show us if they are a good fit for it. Because guess what, if a person is not up for following the instructions for the process for applying for The DEALS Workshop, are they likely to be extremely coachable once they get in the workshop? I would say no.

If they just want to know upfront on their terms, what the pricing is before they even look into it, we know right up front that’s not our kind of person, they’re not going to be successful in the way that we do things as it relates to the workshop as it relates to the way that we recommend they work with sellers. Because if a person needs to what’s the price of the workshop before I’ll ever think about it, they’re also likely the kind of person who’s going to meet a seller and in five seconds, start talking about price of a property, which is the opposite of what we coach in The DEALS Workshop.

So again, what are we doing, we are getting them to not tell us who they are, we’re getting them to show us who they are in demonstration of their behaviors. There’s an expression that we all learned when we were kids, you know, probably five years old, when you first heard your mom or somebody say, actions speak louder than words. And it was as true when we were five as it is now and will always be true. There is an expression I wish I knew who to attribute it to. But it says something to the effect of people will show you who they are, believe them. And that is such an important principle that we need to remember in the context of applying and qualifying for a seller financing loan.

So let’s bring it back to where we started. How do you qualify for a seller financing loan? How do you “apply”? And how do you get “approved”? Well, seller financing loans are granted to those who demonstrate that they would be good borrowers. Our seller financing loan application is us demonstrating who we are. The conversation is the application, the way that we behave is itself the application. So what does that mean for us as real estate entrepreneurs who want to buy properties with seller financing? It means that we need to be very thoughtful, but very strategic in showing the sellers who we are as we get to know them and as we start to interact with them, and when we strategically show them who we are and we make them comfortable with that. Then we have successfully applied for the loan.

Let’s just break this down into some really tactical types of things. If you send a batch of letters to some sellers and the seller calls you back and leaves you a message, if you call the seller back from that voicemail within a very reasonable short amount of time, that is a little tiny clue, a little tiny demonstration of who you are. When you set the seller meeting for 10am at their house, and you show up at 10am, not 9:55, not 10:15, at 10am on the dot, you’re showing them who you are. When you are dressed in a way that reflects how you want them to see you, it doesn’t mean you need to show up in a suit, that actually might be a little weird in one direction, but you’re also not just showing up in shorts and flip flops and a tank top. When you are dressed in a way that reflects who you believe they would be comfortable loaning money to, you are showing them who you are when they open the door, and they invite you in and you say, Hey, would you like me to take off my shoes, you are showing them who you are doesn’t matter if they want you to take off your shoes, it matters that you asked if they want you to take off your shoes, because that shows them who you are when you put a proposal in front of them that actually reflects what they have told you they want and need to accomplish. That shows them who you are.

Now, all of those things add up to formulating this seller’s perspective of you. And they naturally have a sense of whether they trust you or they don’t trust you, they naturally have a sense of if they believe in you. Or if they don’t believe in you, they naturally have a sense of if they like you, or they don’t like you. And those things matter tremendously.

Now, you might also go so far as to preempt the questions you know that they might ask you, as you kind of get down to brass tacks with getting this deal put together and the possibility of seller financing. You know, one really powerful, simple little tip that you can use is that you could say to the seller, before they ever even have a chance to say anything about this to you. You could say you know, seller, or I want to talk with you about the idea of me making payments to you. But before I will even let you say yes, I really want to give you the names and phone numbers of a few other people who know me well. A few other people I’ve worked with in a similar capacity so that you can make a few calls to the degree that you want to because I want you to know who you’re dealing with here. If you say that to them, before they can even realize they’re supposed to ask you for it. That is an extremely powerful thing to do that continues to shape their perception of you. or financial information.

I will tell you a story here. This is 100% literally what happened, I sat down at the table, the kitchen table of a family who I was making a proposal for seller financing to. And I had put together a binder that had copies of my last couple years of tax returns printout of like the front page of my credit report and a couple other things. There was just sort of a little financial kit. And I put it on the table and I said, Hey, I just wanted to let you know, I brought some financial information about myself so that you can look through it before we sign anything today. I just want you to feel good about you know what you’re doing. They hadn’t asked me for this, but that’s what I did. And the woman looked at me and she said and I quote, “That’s okay, I don’t need to look at this because obviously, if you had something to hide, you would not have given us this binder.”

What does that mean? It means that the sheer act of me offering that information to her proactively was all of the credibility boost that I needed. She didn’t even care what was in the tax returns. The fact that I would provide those to her before she could even ask was itself the qualification for the seller financing loan and we got that deal done and I’ve since bought three or four other properties from them with exactly the same seller financing deal structure.

So my friends, how do you qualify for a seller financing loan? You qualify by being very thoughtful and strategic about how you show the seller who you are through every tiny step of the process in every little way, no matter how seemingly insignificant it is. If you’ve been drinking a cup of coffee sitting on their couch and you get up to leave, ask them where they would like you to put the empty coffee cup don’t just leave it sitting on the coffee table because that will demonstrate to them who you are when you are considerate enough to ask “Where would you like me to put this? Should I just put it right in the dishwasher.”

And that concludes another episode of Racking Up Rentals. So again, show notes can be found at thoughtfulre.com/e170. Please do us a big favor by hitting that subscribe or the Follow button in your podcast app and rating and reviewing the show. Did you know also that we have a Facebook group for Thoughtful Real Estate Entrepreneurs? It’s true. It’s called the Rental Portfolio Wealth Builders. We’d love to have you over there. The easiest way to get there is just go to group.thoughtfulre.com and the magic of the internet will take you right there. Thank you for listening to another episode here of the show. I’ll see you in the next episode. Until then, this is Jeff from the Thoughtful Real Estate Entrepreneur signing off.

Thanks for listening to Racking Up Rentals where we build long term wealth by being win-win dealmakers. Remember: solve the person to unlock the deal and solve the financing to unlock the profits.

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