09 Mar How do you explain a lease purchase to a seller?
One of the most common questions we get from people who are either interested in what we're doing or just getting started in the terms niche is…
“How do you explain a lease-purchase to a seller?”
It's a good question because most people aren't aware of rent-to-own deals or how they work; especially if you don't have a real estate background, it can be difficult to understand how these deals work — let alone explain them in detail to someone else and answer all of their questions.
But once you break it down into the most essential parts, it's really not that complicated. Today, I'm going to show you the simplest way to explain a lease purchase to a seller. This is a great method for anyone that is new to the terms industry as everything is explained in the most simple language possible.
There are more advanced ways of explaining this to a seller, but that's for another time. Here's how this method works: Let's pretend you're speaking with a seller. You go ahead and say, “Hey Mr. or Mrs. Seller, if we could agree upon a price, would you be open to selling your property on a lease purchase or with some other terms?”
The seller then asks, “What's a lease purchase?”
Here's the explanation:
“Well, it's very simple. It means that you and I agree upon a price today, locking in your equity, and I will then take over 100% of the responsibilities of the property for a period of time. If you have a mortgage, I'll make that payment on your behalf along with taxes, insurance, any and all future repairs, and any other responsibilities including maintenance. Then, we'll agree upon a definitive end date in the future. On or before that date, I will cash out your mortgage plus any equity we agree you have as of today. It's nothing more than a delayed cash sale.”
This explanation is direct, to the point, and accurate. For anyone getting into the terms niche, I would highly recommend putting this into your own words and committing it to memory. It will make your conversations with sellers a breeze! Not only will they fully understand what a lease-purchase is, but you'll come off as an expert who knows their stuff.
The most important thing that you must convey to the seller is that you will be able to take the property off their hands, and that you'll give them a guaranteed cash out in the future. I hope this simple explanation helps you on your calls with sellers.
If you are ready for the advanced version — keep reading.
Explaining this stuff in simple terms is great, but there are a few benefits to this advanced method that I'm about to show you. Not only does it better explain how a lease-purchase works, it also gives you the opportunity to find out some valuable information about your seller and their property. So, we're going to start with the same question from the first example. The seller asks you, “What's a lease purchase?”
You then go ahead and say:
“Let me ask you a couple of questions first. Then, I'll use your property and your numbers as an example so you can fully understand the process… So, what are you looking for in terms of purchase price?”
“I'm looking for around $400,000.”
“Can I assume there's a mortgage on this property?”
“Yes.”
“What is the mortgage balance?”
“$250,000.”
“And how much is your monthly payment?”
“$1,500.”
“Does that include taxes and insurance?”
“Yes.”
“Perfect! Using your numbers, a lease purchase would look like this. Let's just say we agree on a $400,000 purchase price, locking in your equity of $150,000. I will then take over any and all responsibilities for the property, which is the $1,500/month payment plus anything that shows up as far as maintenance until you are cashed out.”
I highly recommend that you begin roleplaying this script. We role play with our Associates on a daily basis until the script is embedded in your subconscious mind and it feels natural coming out. If you are unable to role play, then read the script, saying it out-loud over and over again. Then, pick up the phone and call sellers.