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What to do When the Seller Says No to Seller Financing Up Front

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What happens when you get a new Seller lead, and the Seller says “no” to Seller Financing early in the conversation? Is the lead a dead end? Is there a way to revive the Seller Financing possibilities?

In this episode, Jeff explains why you should never be hearing “no” from a Seller at the beginning. He also explains that if you do somehow find yourself in that situation, there’s a four-step process for bringing Seller Financing back into the conversation and negotiation in a thoughtful and respectful way.

Episode Transcript

What happens when you’re talking to your seller? And pretty immediately early in the conversation, they say no to seller financing, and you were hoping so much for seller financing. As a matter of fact, your marketing even led you to this moment. And here they are early in the conversation saying no. What do you do? Is it a dead end? Is it a lead worth pursuing just in a different way? Is the seller financing now off the table? Well, we’re going to talk about that, and exactly how to handle that in this episode. So let’s cue up the theme song and we’ll dive right into talking about that.

Welcome to Racking Up Rentals, a show about how regular people those of us without huge war chest of capital or insider connections, can build lasting wealth acquiring a portfolio of buy and hold real estate. But we don’t just go mainstream looking at what’s on the market and asking banks for loans nor are we posting We Buy Houses signs are just looking for “motivated sellers” to make lowball offers to. You see, we are people-oriented dealmakers, we sit down directly with sellers to work out win-win deals without agents or any other obstacles, and buy properties nobody else even knows are for sale. I’m Jeff from the Thoughtful Real Estate Entrepreneur. If you’re the kind of real estate investor who wants long term wealth, not get rich quick gimmicks or pictures of yourself holding fat checks on social media, this show is for you. Join me and quietly become the wealthiest person on your block. Now let’s go rack up a rental portfolio.

Hey, thanks so much for joining me for another episode of Racking Up Rentals. Show notes for this episode are at thoughtfulre.com/e81. Please do us a big favor by hitting that subscribe button and your podcast app just takes a second. And it really does help send a message out to the platforms that they should be telling other people looking for real estate investing education about our show onward with today’s episode.

Now, I asked you a question in the intro about what happens if the seller says no to seller financing early in the conversation? And I need to confess it’s a little bit of a trick question because and this is actually the first lesson here in our episode today is you shouldn’t be hearing that from them. Because you shouldn’t be bringing that up early in the conversation. Now it is possible that you meet somebody and they call and they say Hey, I got your letter. I’d be willing to talk to you about selling my property and no seller financing. But in my experience, that doesn’t happen too often. Usually the conversation is a little bit more organic than that. But if that was the case, I guess then you’d have an excuse. But if you have been the one to bring up seller financing early in the conversation, which then created the opportunity for them to say no to that, then that’s our first problem. We never ever want to ask the seller if they want to do seller financing. There are a few reasons for this.

First of all, if you say do you want to do seller financing, it’s sort of like looking at the seller and saying “Hey, do you want to do this big, complex, scary thing that you don’t understand” with somebody you just met? That’s not going to go well, right? That’s not a good proposition. And in fact, we never want to ask them if they want to do seller financing at all, no matter how early in the conversation, because that makes the question seem very self-serving, it makes it sound like “Well, this is what we want to happen. Would you be open to what we want to happen?” Bringing it up proactively is premature, and it seems very premeditated. It’ll make the seller feel like “You know, you reached out to them specifically hoping that that would be the case now between you and me”, you probably did reach out to them specifically hoping that would be the case, and that’s fine. But we don’t want them to feel that way. We want them to feel like we’re open to a broader conversation about finding something that works for both parties. So the first lesson is don’t ever offer seller financing. Ever, or especially at the beginning, bring it up. We’re never going to offer seller financing at all. We’re going to propose seller financing, and we’re only going to propose seller financing after they’ve given us clues that it would make sense for them. Stated differently a seller financing proposal is a response to what they have told us.

Now there are, I would say, three main things that we can listen for that are really important, and often dead giveaway clues about why a seller financing proposal might be appropriate and relevant. So here’s three things that you are listening for your sellers to bring up. Number one, they’re bringing up their concern about paying capital gains tax. Now, this is in most cases only relevant to people who are non-owner occupants, which is definitely why that’s a big part of our marketing strategy. But if they bring something up and they say well cash I’d like to sell this property, but the capital gains would kill me. And I really don’t know what to do about that. That’s one clue that we can now listen for we can bring up later, in order to respond to what they told us with a seller financing proposal. The second one is income. They might say “Yeah, you know, I’d like to sell this property, but it produces a lot of income, and I like income, or I need income. And so if I sell the property, then I’m getting rid of the income.” And that part doesn’t sound so good. So that’s the second important clue. And the third important clue is they might say something about how they wouldn’t know what to do with the money if they were to sell the property. That’s the situation of a lot of people believe it or not, might not be your situation, or might not be my situation. But there are a lot of sellers who say “Well, I just don’t know what I would do with all this cash. You know, I don’t love the stock market. I don’t love gold. I don’t love Bitcoin, whatever it might be, I just don’t really know what I would do with it, I don’t necessarily need it. I just don’t know what I would do with it to kind of keep it safe.” That too, is a huge clue that opens up the door later for us to respond in kind to their comments with a seller financing proposal.

So that’s lesson number one for this episode is don’t ever offer seller financing, we’re going to propose it. And we’re only going to propose it as a response, a thoughtful response to what they tell us. But let’s say that it happens, let’s say somehow, in whatever circumstance, your seller early in the conversation says “No, I don’t want to do seller financing.” So my question to you is, is it off the table now? And I would say the answer is no, not necessarily. Now, we have to be thoughtful all the time as thoughtful real estate entrepreneurs. But this is going to require an extra bit of thoughtfulness. So I’m going to give you four steps that we’re going to go through here that will enable you to potentially bring seller financing backup, as a responsive and thoughtful proposal later.

So step number one is finding out why they said, what they said about seller financing. What is it that they don’t really like about that idea? When they tell you when they give you some clues about, what is it they don’t love about that plan? Don’t respond to those just gather those insights, learn from them, but don’t respond, don’t react, and don’t judge. Just take them in and say “Okay, great. I understand now”, Because understanding why is very important to being able to solve the puzzle for how we might bring this up again later. So step one is find out why they don’t like that idea.

Number two is we have to just go back and do what we do all the time as thoughtful real estate entrepreneurs, which is part of the Y.E.S.S.E.S framework is keep solving the person. Now if you haven’t heard the series of episodes, from a few months ago about the Y.E.S.S.E.S framework, I strongly encourage you to familiarize yourself with the Y.E.S.S.E.S framework for getting off market sellers to accept your proposals. But what we do in the Y.E.S.S.E.S framework is we always focus on the person before we focus on the deal. We call it solve the person before you can solve the deal. So step two is we’re just going to go back to solving the person the same way we would, anytime any case, whether they’ve told us I like seller financing or don’t like seller financing, we’re going to keep solving the person. And this is the area where we’re going to listen for those clues that I mentioned just a couple of minutes, we’re going to listen for them to give us clues around their perspective on capital gains, deferral and continuing to have income and not being sure what they might do with their money if they were to sell the property.

So first, we’re going to find out why they didn’t like really the idea of seller financing to we’re going to keep solving the person and gathering as many insights about the person as we possibly can. Once we feel like we have solved the person, we’re going to move on to step number three, which is to solve the deal. But in this case, we’re going to solve the deal with two different solutions, we’re going to come up with one solution that exactly matches what they say that they want, which is not going to involve seller financing. But secondly, we are also going to come up with an additional solution that does involve seller financing. Now you might be saying but they’ve already told us they don’t want to do that. That’s fine. We’re in brainstorming mode here. We’re going to brainstorm a solution that you would propose to them if they hadn’t said that they didn’t want to do seller financing. And as we look at our two solutions, the one that matches what they said they want and the seller financing one, we’re going to try to find a way to make the seller financing one a little bit sweeter. Now sweeter is in the eye of the beholder. Maybe that’s mixing metaphors, which is kind of my favorite thing to say, to do. Better is relative to a person a sweeter proposal relative to that seller. So if you understand the seller well, which presumably you do from your step to a solving the person? How could you make that version of the offer of the proposal just a little bit more enticing, maybe it’s a higher purchase price, maybe it’s a faster closing timeline. It just depends on what matters to that person. So if you don’t know what matters, that person you need to back up and make sure you understand that, first and foremost.

And then lastly, now we’ve got our two different solutions that we have brainstormed. And lastly, we’re going to present our proposals to the seller. Again, this is straight out of the Y.E.S.S.E.S framework. But in this case, we’re going to present both proposals to them as two different options. And we’re going to position the second option the seller financing one that even though they said that’s not what they wanted to do, we’re going to position our additional proposal as a bonus value add to that. So here’s how that might sound. Mr. Seller, I know that when we talked before, you mentioned that seller financing was not something that really matched your goals. And so that’s completely fine. I absolutely respect that. I found myself doing a bunch of brainstorming, and I came up with a couple ideas. And I thought, Gosh, it’s going to take me about 30 seconds more to type up these bullet points. Why don’t I just share this one seller financing idea with you, as free food for thought, feel free to say no, I know, you mentioned this wasn’t going to be the thing that worked best for you. But I thought oh, what the heck, we’re having this conversation, I’ll share that idea as well. Now, if you have the conversation, kind of like that you’ve positioned this as non-threatening to them. As you were acknowledging that, you know, they already said no, and you are almost expecting them to say no, to this version, as well. But you are being a thorough, you know, problem solver and you are coming up with different ideas. And as an additional value to them. Food for Thought is free. Why not nibble on it for two seconds, if you don’t like it, spit it out. And we’ll just keep talking about the other proposal. So this shows that you are listening, that you are thoughtful and respectful to their wishes, but also just being an open brainstormers. They will appreciate that thoughtfulness.

So that’s how you do it. If they say no, early on, hopefully that shouldn’t happen. But if they do somehow, here’s your four steps. First of all, you find out why to the best of your ability. They didn’t like that seller financing concept. Number two, you keep solving the person and learning as much about that person, what matters to them, their perspectives and everything as much as you can. Once you’ve solved the person, you move on to solving the deal. But you’re going to solve the deal now in two ways. One that involves seller financing, and one that does not. And then lastly, you’re going to present both proposals and respectfully say, Hey, I know this, this other one here with seller financing is what you said you didn’t want. But I thought what the heck, I’m already doing the work, take five seconds extra to go over here, just free food for thought for you to chew on. Now, let me give you a couple example, situations of how you might be able to actually kind of change the sellers mind. And really, I probably should say that a little bit differently, because the goal isn’t to change the sellers mind. But the goal is to simply unpack information with them in a conversation that might lead them to perceiving what their options are slightly differently and more in a way that might be more favorable, actually, to seller financing.

So let me give you two kind of example situations, both of which I’ve personally experienced. The first one is that they assume that they need to do a 1031 exchange. So if they come into the conversation with you, with this frame of mind that says I’m not going to pay capital gains, I’m going to sell this property and I’m going to buy another one. Thus, seller financing won’t work because I need all my money to put into the replacement property. Well, this seller actually might not understand I mean, there’s a really good chance they might not be aware of or understand that a well-structured seller financing proposal could actually help them accomplish a very, very similar outcome. And without the need to go replace this property for another one. There are a lot of people who are looking to get out of the business of being landlords and they want to sell this property but they feel kind of like they have no choice but to trade it into another property with a 1031 exchange. But deep down they’re thinking I’m really just trading one responsibility for another. So those people if you can help them see that the alternative to a 1031 exchange is a well-structured seller financing proposal, they very well may change their mind on that. And the second scenario that I’ve certainly experienced myself is that sometimes the seller just assumes other stuff about the term. So when you say, seller financing, what they hear is low down payment, bad credit borrower, super low interest rates, short term, they hear all these things that might not be relevant. And you didn’t say any of those things. But it’s like a trigger word, they hear the word seller financing, and all these assumptions are queued up in their mind. But some of those assumptions very well may not be true at all. And so here, you come along, and you say, Hey, you know what, I’ve just got this extra idea. I know, you already said no. And so I fully respect if you want to say no to this too, but it’s just free food for thought, you come along with that. And that proposal you put down in front of them actually involves perhaps a higher purchase price. And it involves a higher interest rate, maybe then what they might expect. And it might involve a longer term, and it might be a more holistic solution overall, and all of a sudden, some of their assumptions about like, oh, gosh, I thought seller financing was going to mean all of these other bad things. Now you have shown them that some of those assumptions were not true. Now, they might be perceiving the whole proposition of seller financing completely differently.

So to sum it up, my friends, you should never be asking somebody if they want to do seller financing at all, because your seller financing proposal should be a responsive proposal based on what they tell you. But even if you find yourself in a situation where they did tell you early, that they don’t want to do it. Don’t give up just keep solving the person keep listening for the clues, and then respectfully make a proposal in addition to the proposal they’re asking you for make an additional seller financing proposal that you say and you acknowledge Hey, I know that this isn’t what you said you want, but I was doing the brainstorming. Anyway, I only took a few more seconds to type up a few bullet points. I thought I’d just share this with you just free food for thought.

That is it for today’s episode of Racking Up Rentals. Again, show notes for this episode are going to be at thoughtfulre.com/e81. Please do us a big favor by hitting that subscribe button in the podcast app and take just a second to rate and review the show that is super important to me and I am so grateful when you do that.

Did you know that we have a Facebook group also for us trees start for real estate entrepreneurs? It’s called Rental Portfolio Wealth Builders. You can type those words into the Facebook search box or you could just go to group.thoughtfulre.com and you could join the group that way.

If you liked this episode, and I sure hope you did, please take a second to just take a screenshot of it. post that screenshot to Instagram and tag us, we are @thoughtful real estate. Hey, I’ll see in the next episode.

Until then this is Jeff from the thoughtful real estate entrepreneur signing off. Thanks for listening to racking up rentals where we build long term wealth by being a win-win deal makers. Remember solve the person to unlock the deal and solve the financing to unlock the profits.

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