“Straight sale or no deal.” (Charlotte Realtor when presented with a rent-to-own offer)
“There’s nothing like playing with house money.” (Las Vegas Credo)
Oh, it has been difficult finding Realtors who want to deal with rent-to-own prospects for their listings for sale. Some won’t call you back. Others will take offers and then not respond to them. Some will tell you that their clients are not interested. Then others will ask for the world: 10% down, first and last month’s rent, and a rent premium of 20%, and the closing within 6 months (if they had this, would immediate financing be an issue?).
But, as Tupac said, “I ain’t mad at cha. Got nuttin but love for ya.” I view the reluctance of Realtors to enter into rent-to-own deals as more of an issue that needs to be corrected from my side of altar. If I was presenting rent-to-own better, Realtors on the other side of the transaction would be eagerly calling me back. I honestly believe that almost all Realtors want to do the best thing for their clients. However, my presentations are not addressing the lingering uneasiness they have. More specifically, I am not showing them the:
1. Value of rent-to-own for their clients (they only see the risk)
2. Incentives- more on this in next week’s article (they don’t see how they can get paid)
First of all, let’s address the value objection. In the book, “Negotiation Genius” by Deepak Malhotra and Max Bazerman, they have a 5-step framework for a successful negotiation. The first step is “Assess Your BATNA.” OK- done. Next step is…
Wait! What the heck is a BATNA? BATNA is the acronym for Best Alternative To Negotiated Agreement. Or in layman’s terms, if this deal doesn’t work out, what am I going to do instead? Everyone does this mentally to a certain degree in their head without thinking about it.
Example: OK, Mark just asked you out. Do you say “yes” and go out with him this week? He’s average looking and needs to trim his nose hair, but he seems sort of funny. If you say “yes”, you’ve got a date (and a free meal) on Friday night. If you say “no”, you might be sitting at home alone (again) this weekend watching TV and listening to your friend, Molly, complain about her awful life for an hour over the phone. Oh geez, it could get worse; Molly might feel inclined to stop by if she knows you’ll be home…
So either you can go out with Mark and complete the negotiation with an agreement (a date), or turn him down. Your BATNA would be to stay home, watch TV, and try to dodge Molly.
But this is life! It could get even more complicated- who knows? Mark’s friend, Hot Dan, might call (improbable as it may be…) and ask you out. If you go out with Mark, that would destroy your chances with Hot Dan. But is he really going to call? You heard he likes Suggestive Suzy. Decisions, decisions, decisions…
This is the same exact scenario for a rent-to-own offer. Right now, your client has a vacant house on the market; they are losing money as they have to pay two mortgages (vacant home and where they live now). For this example, let’s say the payment on their vacant home is $2K/month. The hope is, of course, that the wait is worth it and they sell their vacant home in the near future. Let’s analyze the negotiation:
Offer: Rent-to-own tenant offers $4K option fee down, $2K/month, and wants to buy the home at the market price within two years.
Seller BATNA: Continue to pay $2K month and wait for a coveted buyer who will be bringing a below market offer.
Rent-To-Own Buyer BATNA: Look for another suitable home out of the 10,000+ homes on the market that are vacant.
However, what about if there is an agreement reached?
Agreement: Seller stops having to make a $2K payment every month and realizes a potential NET GAIN of $96K!! Instead of paying $2K a month, they are receiving $2K a month. ($2K + $2K = $4K X 24 month lease = $96K!). Don’t forget the $4K option fee payable to the owner which ups the net amount to a cool $100K! Rent-to-own buyers get an opportunity to build their credit, accrue a down payment, and begin building a life in a home that will be theirs. Everyone wins.
Before you say it (“But rent-to-own tenants never buy!”), let’s say that they don’t and move out at the conclusion of their lease. It’s now spring of 2012 and the market looks a whole lot better, doesn’t it? Maybe you can list the house for a lot more in a much better sales market?
Know your client’s BATNA and act accordingly! Maybe on second thought, you may want to take that date with Mark (to avoid Molly) and forget the roving-eyed Hot Dan who never seems like he’ll settle down. Mark’s lonely, you’re lonely, why not get together?
Next week’s article will cover how to build incentives into a rent-to-own transaction for your favorite person- you!
Brett Furniss is the President & Owner of BDF Realty, “Charlotte’s Most Innovative Property Management & Investment Company”specializing in rent-to-own (lease options) and rent-to-sell homes. You can follow his Twitter thoughts on the Charlotte real estate market by clicking on http://Twitter.com/BDFRealty. He is the author of the FREE E-Manual entitled “How to Rent-To-Sell Your Own Home” (http://www.RentToSell.com/RTS-Book.html) which details how to get the most potential buyers to your home in this challenging real estate market.
“There’s nothing like playing with house money.” (Las Vegas Credo)
Oh, it has been difficult finding Realtors who want to deal with rent-to-own prospects for their listings for sale. Some won’t call you back. Others will take offers and then not respond to them. Some will tell you that their clients are not interested. Then others will ask for the world: 10% down, first and last month’s rent, and a rent premium of 20%, and the closing within 6 months (if they had this, would immediate financing be an issue?).
But, as Tupac said, “I ain’t mad at cha. Got nuttin but love for ya.” I view the reluctance of Realtors to enter into rent-to-own deals as more of an issue that needs to be corrected from my side of altar. If I was presenting rent-to-own better, Realtors on the other side of the transaction would be eagerly calling me back. I honestly believe that almost all Realtors want to do the best thing for their clients. However, my presentations are not addressing the lingering uneasiness they have. More specifically, I am not showing them the:
1. Value of rent-to-own for their clients (they only see the risk)
2. Incentives- more on this in next week’s article (they don’t see how they can get paid)
First of all, let’s address the value objection. In the book, “Negotiation Genius” by Deepak Malhotra and Max Bazerman, they have a 5-step framework for a successful negotiation. The first step is “Assess Your BATNA.” OK- done. Next step is…
Wait! What the heck is a BATNA? BATNA is the acronym for Best Alternative To Negotiated Agreement. Or in layman’s terms, if this deal doesn’t work out, what am I going to do instead? Everyone does this mentally to a certain degree in their head without thinking about it.
Example: OK, Mark just asked you out. Do you say “yes” and go out with him this week? He’s average looking and needs to trim his nose hair, but he seems sort of funny. If you say “yes”, you’ve got a date (and a free meal) on Friday night. If you say “no”, you might be sitting at home alone (again) this weekend watching TV and listening to your friend, Molly, complain about her awful life for an hour over the phone. Oh geez, it could get worse; Molly might feel inclined to stop by if she knows you’ll be home…
So either you can go out with Mark and complete the negotiation with an agreement (a date), or turn him down. Your BATNA would be to stay home, watch TV, and try to dodge Molly.
But this is life! It could get even more complicated- who knows? Mark’s friend, Hot Dan, might call (improbable as it may be…) and ask you out. If you go out with Mark, that would destroy your chances with Hot Dan. But is he really going to call? You heard he likes Suggestive Suzy. Decisions, decisions, decisions…
This is the same exact scenario for a rent-to-own offer. Right now, your client has a vacant house on the market; they are losing money as they have to pay two mortgages (vacant home and where they live now). For this example, let’s say the payment on their vacant home is $2K/month. The hope is, of course, that the wait is worth it and they sell their vacant home in the near future. Let’s analyze the negotiation:
Offer: Rent-to-own tenant offers $4K option fee down, $2K/month, and wants to buy the home at the market price within two years.
Seller BATNA: Continue to pay $2K month and wait for a coveted buyer who will be bringing a below market offer.
Rent-To-Own Buyer BATNA: Look for another suitable home out of the 10,000+ homes on the market that are vacant.
However, what about if there is an agreement reached?
Agreement: Seller stops having to make a $2K payment every month and realizes a potential NET GAIN of $96K!! Instead of paying $2K a month, they are receiving $2K a month. ($2K + $2K = $4K X 24 month lease = $96K!). Don’t forget the $4K option fee payable to the owner which ups the net amount to a cool $100K! Rent-to-own buyers get an opportunity to build their credit, accrue a down payment, and begin building a life in a home that will be theirs. Everyone wins.
Before you say it (“But rent-to-own tenants never buy!”), let’s say that they don’t and move out at the conclusion of their lease. It’s now spring of 2012 and the market looks a whole lot better, doesn’t it? Maybe you can list the house for a lot more in a much better sales market?
Know your client’s BATNA and act accordingly! Maybe on second thought, you may want to take that date with Mark (to avoid Molly) and forget the roving-eyed Hot Dan who never seems like he’ll settle down. Mark’s lonely, you’re lonely, why not get together?
Next week’s article will cover how to build incentives into a rent-to-own transaction for your favorite person- you!
Brett Furniss is the President & Owner of BDF Realty, “Charlotte’s Most Innovative Property Management & Investment Company”specializing in rent-to-own (lease options) and rent-to-sell homes. You can follow his Twitter thoughts on the Charlotte real estate market by clicking on http://Twitter.com/BDFRealty. He is the author of the FREE E-Manual entitled “How to Rent-To-Sell Your Own Home” (http://www.RentToSell.com/RTS-Book.html) which details how to get the most potential buyers to your home in this challenging real estate market.
Posts
No comments:
Post a Comment