Speaking with Motivated Sellers
To improve the odds for success, rent to own candidates need to expand search options for rent to own homes and presenting both themselves and the lease option concept in a positive light. This means buyers need to make contact with property owners to break the ice and start a warm conversation that leads both buyer and seller to the rent to own arrangement.
This will require spending a few minutes on the phone with the owners. While this is an intimidating thought for some buyers, it should not a cause for concern. Remember, the owner has the property on the market and is looking for a tenant-buyer. So your call expressing interest in the property is just what they are hoping for.
It is possible to make an initial introduction by sending a short email note to the seller. A simple note mentioning "I'm interested in your listed home. Is it still available?" is a approach to initial contact. However, to discuss details and move talks toward an rent to own agreement will require some time over the phone initially. Doing this well requires some practice, but once buyers start making phone calls and having conversations, it is easy to do over and again.
Buyers should not be discouraged by a number of property owners saying no to a lease option. Some situations will not suit a seller to consider a rent to own listing (such as a home in default or a home that must be liquidated quickly for cash). Finding the right, unlisted rent to own home prospect will require phone calls to a number of sellers and could also require some lead time and follow up conversations, as sellers warm up to the concept. Always remember there are more homes available than buyers. If one does not work out right away, there are many others waiting to be explored.
For all types of listings, it is very important for buyers to start their call on a positive note which builds rapport with the seller. This means the buyer establishes a warm initial impression and communicates in a way that begins to build a postitive connection with the property owner. Building rapport over the phone is not difficult, but requires the caller use a proper tone of voice, a friendly presentation of themselves, promotes a genuine interest in the property and acts as a good listener when the seller speaks. There is more to this, and each scenario will discuss more details, but overall these are the keys to building rapport.
To get started, it is important for the buyer to use a phone script. Doing so helps to organize the initial discussion and encourage a dialogue that is favorable to the buyer. The script does not necessarily need to be read word-for-word. In fact, it is better to be used as a detailed outline and for the buyer to allow the words to flow naturally during the conversation.
Rent to own scripts will have some common elements and also some customized topics for discussion depending on the type of seller being contacted. Remember the key on an initial call is to build rapport. Rent to own buyers are going to ask the property owner to to offer their home for little money down plus a right to purchase it. Sellers will be more willing to work with buyers if they like and trust them. Buyers need to start off by being friendly.
a. Call Script: For Sale By Owner. When contacting For Sale By Owner (FSBO) listings, start with a self introduction and display your interest in the property's availability.
"Hi, my name is ____________ and I'm calling about the home you have for sale. Can you tell me if it's still available?" (Note: introducing yourself with your name is a warm opening and puts the owner at ease. Asking about availability demonstrates your earnest interest up front and captures the seller's attention)
If yes, continue: "Can you tell me some more about the home?" (Note: this encourages the owner to start sharing information and builds rapport. Encouraging the other party to talk continues to warm them up. Be sure to be a good listener and jot down any interesting details you hear. Give feedback to support your interest with phrases like "I see" and "That's good to know", but do not interrupt the owner. Be sure to keep your back and forth conversation natural)Start asking more specific detailed questions to qualify the home for your needs, such as: "What year was the home built?" (Note: this can give you an idea of renovations or updates that might be needed). If the home is older, ask: "Have the kitchen and bathrooms been updated?" "What types of flooring are inside, carpet, tile, wood?" These questions both help build a picture for the buyer, and discussing them allows the buyer to continue to build up to the final question about rent-to-own.
Ask "Does it have a garage?" and explore any other features that might not be listed, such as "Does the yard have a fence?" "Does it have central air conditioning?" "Is there a fireplace?" and other features the buyer might be particularly interested in.
Once the buyer feels the home is a good prospect to own or want to tour in person, ask the main question about rent-to-own:
"This home sounds like what I'm looking for. Would you consider a creative purchase like a lease-option or rent-to-own sale?" (Note: wait for their response and be prepared to reply)
If owner says, "Yes, I've thought about a lease option and it could work", reply, "That's great. Do you have some terms in mind already, or are you looking for an offer?" If they have specific terms in mind that fit your budget, or if they are willing to hear an offer, make an appointment to tour the home. If their terms are clearly outside the buyer's budget, simply say, "That is outside my range at this time. Thank you for your time, but I'll need to move on to another home." If they agree, simply say good-bye. If they ask what the buyer's budget is, give it and see if they are still interested. If so, schedule a time tour the home at the earliest convenience.
If the owner says, "No", just thank them for their time and mark them down to follow up in the future in case the home is still unsold next month. If the owner says, "What is Rent-to-Own", give them a brief explanation like, "It is an agreement where I would occupy the home under a lease for a set period of time, then buy the home at the end of the lease period. We can come up with a lease and purchase that makes sense for both of us. Can we explore this further after I take a look at the home?" Then set your time to see the home and consider how you would set up your lease, option and purchase agreements.
b. Call Script: Homes-for-Rent. Calls made to explore Homes-for-Rent listings can follow a similar approach as the For-Sale-By-Owner script. Buyers should open the call with the same rapport building conversation and ask questions about the specifics of the home.
After the buyer qualifies the home and it sounds attractive, the final question made by the buyer should flow, "Well, this home sounds just great. Would you consider selling it?".If they say "No", you can still explore by saying, "OK. Thanks for the information and your time, but I'm very interested in finding something I can rent-to-own, you know, with a lease with an option to buy later. Are you sure you can't consider a rent-to-own?" It never hurts to ask once more in this way. Buyers should then ask the owner to take down their name and number so the owner can call back if they change their mind about the rent to own concept. And, the buyer should note the listing as a follow up for each month in the future. If the home is unsold for a number of months, the owner could change their motivation and find rent to own more appealing.
If the owner says, "Yes" or "Maybe", ask for an appointment to see the home. Buyers should also ask if the home was previously listed for sale. If yes, it is possible the home was made for rent only after the seller had no buyers the first time. These situations can be great prospects for a rent-to-own agreement. If the home was previously listed for sale, buyers should ask "What was your asking price?" and "How long was it previously listed for-sale?" If the previous list price is within your budget, and the previous for-sale listing was over 120 days, the buyer will be in an excellent position to negotiate an affordable deal and possible a good market value at the same time.
c. Call Script for Home Builders. New home builders face challenges to sell their standing inventory. Completed and unsold new homes are the last thing home builders want to hold on to. Some turn to listing their finished, new homes for rent. Others maintain a for-sale listing, but as time goes on, they face the same troubles as other sellers who want to liquidate the home. So, new home builders should definitely be on the list of prospective motivated sellers.
Buyers should again follow the same theme used when calling other home owners:
"Hello, my name is ____________ and I'm calling about the home you have for sale at (street address). Is it still available?" After exploring more about the home features, and the buyer confirms it is an interesting home, the next follow up question should be,
"I wonder if the builder would be willing to something more creative." If the owner or builder rep asks, "What do you mean?" then, mention something like, "I am a prepared rent-to-own buyer looking for a new home. I'm exploring homes under rent-to-own or lease-option in the area. Would the builder be interested in something like this?"
If yes, move ahead to ask what terms might already be decided, such as a target monthly rent rate. If the rent is within budget, the buyer should move ahead to plan an in person visit of the home to confirm its suitability and start agreement terms negotiations.
If the answer is no, ask the representative if there are other homes in the area available from this builder where rent-to-own would be of interest and move ahead accordingly.
d. Advertising Rent-to-Own Interests. Because not all sellers are tuned in to the benefits of rent to own home sales, it makes sense for buyers to broadcast their interest and availability. This can be accomplished at little or no cost, thanks to online classified advertising. In the real estate section of classified advertising sites, such as craigslist, buyers can place ads worded like: "Tried to sell your home? Thinking of renting it? Do both! I am a looking for a rent-to-own home. I want to buy, but can't get a mortgage just now. A rent-to-sell arrangement is right for both of us. I'm ready to find a new home and you can get regular rental cash flow. Call me at 555-987-6543."
When the sellers start calling, buyers can drive the conversation in the same way as the outbound calls. Build rapport and ask questions about the home involved. Once the basic qualification is done, the buyer needs to ask,"Mr. Seller, how much were you looking for in monthly rent? How does that compare with other rentals in the area?" Asking these questions helps the buyer both determine if the rental rate is in their immediate budget, and if the seller can make a reasonable deal. If for instance, the seller has multiple loans against the home, he may need to cover his mortgage payments with a rent that is well above the market rate. These situations are not favorable for the buyer of a rent to own home. On the other hand, if a seller has a lower mortgage balance or significant equity in the home, there may be room to negotiate a lower rent payment and still allow a significant portion of the monthly payment to go to the Option Credit. This can be very advantageous for the rent to own home buyer.
A good way to set the next steps is to say, "Mr. Seller, this home is interesting for me. What I'm looking for is an opportunity to rent it out from you for a set period of time and at the end of the lease, I would buy the home. During the lease, I would work on improving my credit/qualifying for a mortgage. Can we set up a time for me to see the house and then we can talk more about this?"
e. Dealing with Real Estate Agents. Working out a rent to own home sale through a real estate agent is possible, but not necessarily easy. Agents representing homes for sale on the MLS have a strong desire to sell quickly. They do not get paid until the home sale closes. So, they may not be as open to discussing a 1 to 3 year lease option term with the home seller. However, it doesn't hurt to explore rent to own homes with agents who are listing homes in the price range that makes sense for the buyer. Homes that have been listed on the market for over 120 days make good targets. These homes are at risk of being de listed and agents removed anyway, so a call from an interested rent to own buyer might spur some motivation for both the agent and seller to respond favorably. The approach here is similar to that used for the FSBO sellers. Buyers should be prepared for higher than average rejection of their rent to own idea from agents. And a longer period of time for communications may be necessary since the agent is acting as a third party and must correspond with the seller for answers and terms.