Working with Sellers and Price vs Terms

I've noticed lately on this site that new investors are forcing numbers to get deals and/or giving away the farm to get a deal under their belt. Forcing numbers and/or giving away your profits is a quick way to disaster and getting yourself in trouble. Here are some things to think about:

1. The seller got themselves into this trouble, so don't feel bad if you are getting a good deal. You are solving their problem.

2. The seller either gets his/her price or terms, but not both. That means if you are going to over pay and give them their price then you get to call terms. Period!

Example: A family trust owned a free and clear duplex. They wanted $125k. The market only dicatates $40k for a duplex. So, the investor told them I will give you your price, but I get to call terms. I will give you nothing down and you carry a note at 3.5% for the first 5 years. On the 6th year the loan accelerates and goes up 1 point a year up to 10 years. The loan must be cashed out on the 10th year. The investor is making approximately $500 a month on cashflow and he didn't use one penny of his own money. Did he get a good deal? Absolutely. It doesn't matter that he paid overprice. By the time 10 years rolls around he will have equity and the market will dictate higher prices. Did he feel bad that he didn't give them any money up front? No! The seller got their asking price.

3. Think before you jump. What does the seller want and then fix it. Don't give them extras unless they ask. Offering up extra money a month and/or paying more is just bad business. Be smart.