To provide a structured approach for presenting effective seller financing proposals that align with the seller’s needs and ensure successful off-market deal negotiations. This SOP will guide you through the four steps of making a seller financing proposal that gets accepted by building rapport, understanding the seller’s goals, and presenting a thoughtful, empathetic proposal.
Key Principles of Rhino Communities Seller Financing Approach
- Proposals Are Presented In-Person or Over the Phone:
- Rhino Communities focuses on personal, relationship-driven negotiations. Seller financing proposals should always be presented in person or over the phone. Avoid sending proposals via email, as this diminishes the personal touch and the likelihood of acceptance.
- Proposals vs. Offers:
- We don’t make “offers” like most others in the Mobile Home Park (MHP) space. Instead, we present proposals. The difference? Offers say, “Here’s what works for me—take it or leave it,” while proposals say, “I’ve listened to your needs, and here’s a solution we can work on together.”
- Proposals Are Not Purchase Agreements:
- Proposals are meant to be simple, clear, and verbal, accompanied by a short bullet-point list. These are not formal purchase agreements that come with legal documentation right away. Only after a verbal agreement is reached do we move to draft a formal purchase agreement.
Four-Step Framework for Presenting Seller Financing Proposals
Step 1: Recap the Seller’s Goals
- Objective: Restate your understanding of the seller’s goals, needs, and concerns.
- Why: This confirms you’ve been listening to the seller, making them feel heard and understood—crucial for building trust.
- How:
- Recap their goals: “From what we’ve discussed, it seems your main priorities are [list their goals]. Is that correct?”
- Ask for confirmation: “Did I miss anything or is there anything you’d like to add?”
- Get their agreement: By getting the seller to agree with your understanding, you build rapport and ensure they are more receptive to the proposal.
Step 2: Share Your Rationale
- Objective: Before presenting the proposal, explain your reasoning and how you arrived at the proposal.
- Why: By sharing your thought process, you bring transparency to the negotiation and make the seller feel part of the decision-making process.
- How:
- Walk them through your methodology: “Here’s how we approached this proposal… we looked at [specific factors like market conditions, seller’s needs, etc.].”
- Confirm understanding: “Does this approach make sense to you?”
- If they agree with your thought process, you’ve built further trust. If they disagree, use this moment to address any concerns before presenting the proposal.
Step 3: Share the Key Elements of the Proposal
- Objective: Present the essential parts of the proposal in a simple, verbal manner, supported by a short written list.
- Why: The seller is more likely to accept the proposal when it’s communicated clearly and tied back to their goals.
- How:
- Share the key elements: Purchase price, down payment, monthly payments, interest rate, loan term length, collateral/security, and any contingencies.
- Example of key elements you might share:
- Purchase Price: $1.2 million
- Down Payment: 20% upfront
- Monthly Payment: $5,000
- Interest Rate: 4.5%
- Term Length: 10 years
- Collateral: The property itself
- Verbally connect each element to the seller’s goals: “You mentioned wanting a steady income stream, so this structure provides you with monthly passive income.”
Step 4: Ask for Feedback
- Objective: Elicit the seller’s reaction and open the floor for any adjustments to fine-tune the deal.
- Why: Asking for feedback shows the seller you value their opinion and are open to collaboration, which further strengthens rapport.
- How:
- Ask directly: “How does this sound to you? Does this align with what you were hoping for?”
- If they have concerns, address them collaboratively: “I see what you’re saying—let’s adjust this part of the proposal to better suit your needs.”
Benefits of Seller Financing for the Seller
When presenting your proposal, highlight these benefits of seller financing to the seller:
- Defers Capital Gains Taxes: Spreads out tax liabilities over time, reducing the seller’s immediate tax burden.
- Guaranteed Interest Payments: Provides regular income using the property as collateral.
- Mortgage Interest Deductions: Tax benefits through mortgage interest payments.
- Zero Management Responsibilities: No need for day-to-day park management while still collecting passive income.
- Simpler Closing Process: Fewer documents and a smoother close compared to traditional bank financing.
- Higher Interest Rates: The seller can earn more through seller financing than through CDs or money markets.
- Flexible Terms: Can be structured to meet the seller’s needs, offering greater control over the deal.
Example Seller Financing Proposal (Verbal)
Here’s a simple example of how a seller financing proposal might sound during your conversation:
- “Hi [Seller’s Name], after hearing your goals about wanting to avoid a large tax bill and generate steady monthly income, I believe seller financing is a great option. Here’s what I’m thinking for the deal:
- Purchase Price: $1.2 million
- Down Payment: 20% upfront
- Monthly Payment: $5,000
- Interest Rate: 4.5%
- Term Length: 10 years
- Collateral: The property itself”
- “With this proposal, you can defer some of your capital gains taxes and have a guaranteed income stream without worrying about managing the property. What are your thoughts on this approach?”
Next Steps:
- Schedule a Follow-Up:
- Once the seller shows interest or needs time to think, set a follow-up time. Make sure to remind them about the benefits of the proposal.
- Confirm All Details:
- When the seller agrees in principle, confirm all proposal details verbally and plan to draft a formal purchase agreement.
By following this framework, you’ll increase the likelihood of getting your seller financing proposals accepted. This approach is based on empathy, understanding, and collaboration, ensuring the seller feels comfortable and respected throughout the process. Let’s make deals happen—Rhino style.
