Quick Start – Part 6

The upfront agreement – the second step in negotiating with home sellers

Well the upfront agreement was designed to avoid some things.

What would you want to avoid in a sales presentation?

The classic “thank you but I want to think it over.”

Have you ever heard “a confused mind says no?”

When you bring up “selling on terms” I think it’s very confusing to most people.

So I keep it simple and I don’t use “lease with option” terminology and “subject to existing financing” and “wraparound mortgage all-inclusive trust deed”.

The upfront agreement basically talks about what you are willing to do as a business person, and sets the stage for not coming back ever. I mean ever.

Yes or no, not maybes.

The letter of intent basically says,

Name of owners,

property name,

today’s date,

name of prospective purchaser,

name of purchaser’s company,

intention to purchase on these terms as a principal.

Purchase price

if lease with option, market rent, 12 month term with extensions, exercise price, etc.

If subject to, purchase price, date of possession, date first payment, date of walk through, etc.

If wraparound mortgage AITD, purchase price, note payment, interest rate, etc.


The upfront agreement

In order for the upfront agreement to work, you need to frame it as a very fair, 2 way business agreement.

Here is a possible exchange…

After the walk through, you’re sitting at the kitchen table, looking at both mom and dad the sellers.

I fold my hands and I looked very solemn, I try to give them is kind of an expression is possible, as sincere as possible, I have my legal pad, a pen, and a blank letter of intent in front of me.

I also have a folder of comps and rental information on the subject property.

So here’s the upfront agreement…

Investor: “So Bob and Susan thanks for the walk through, I just wanted to talk about how I’d like to see our business relationship work.

My job is to look at the property, look at all the financial information, then make a decision, on the spot.

To keep coming back over and over thinking about possible deals is not what I do.

What I do is

if the location is right,

the condition of the property is right,

the layout of the property is right,

the existing financing payments are right, and

the attitude of the sellers are right,

then my job is to put together the deal structure that works for me,

and I basically give the project the green light.

Not a yellow light or a red light, but green light,

the analogy here is that we go forward and get the paperwork done tonight.

To keep coming back is not a good business plan, takes up too much time and nothing gets done.  We are both concerned about getting to a result, right?

On your end, you want to make sure that you’re happy with the terms that I propose, if you’re one hundred percent happy with what I’m talking about, I would hope that you give me the “green light” on this proposal, and you feel comfortable that you finally got a solution to your house situation.

I know it’s stressful selling your house can be, I know it’s confusing at times, but hopefully we can move forward and both give this situation a green light.

Now if there’s something that I’m not happy with, I’ll tell you about it upfront, I won’t worry about offending you, I’ll just tell you,

“sorry this is not good work for me.”

And then I’ll pack up and move on to the next prospective home seller.

I hope you won’t be offended if a very honest and straightforward with you. I know you’ll be disappointed, but I hope you appreciate the straightforward and direct approach I have.

And lastly, if there’s one thing that both of you do not like about my proposed solution, I would hope that you would do the same thing, and tell me,

“Brian, this is good work from some sorry.

That last condition is a deal breaker for us. I’m sorry it’s not going to work out.”

Now I’m absolutely happy to accept that, and I’ll be disappointed, but I understand that you have to have your terms and conditions totally acceptable.

And just not going to work out for you.”

So at the end of our talk today, if we both give “the green light”, both say that the terms are acceptable, we’ll sign the paperwork and move forward,

on the other hand, if either of us give this talk “a red light”, the other party will say “okay, I’m sorry feel that way.”

How does that sound, Bob and Susan, is that sound like a good way to do business regarding your house situation?”


The psychology behind this is that you don’t want to keep coming back.

A possible conversation you might have at this time in the negotiation is…

“Well it all sounds good but I want to run it by my attorney.”

The attorney objection comes up a lot especially in terms deals. When you’re first starting it’s so important to not get upset the objection.

And don’t cut down attorney saying that they are all crooks were there just a kill deal, even though they are deal killers.

When I say if they bring up the attorney objection is…

“You know I do hear that now and then and I understand your concern. I want you to have legal advice and be comfortable with this decision about your home.

Now I will tell you, unless your attorney is an expert with a lease with option, subject to existing financing, owner financing, and other legal remedies for your situation, he’s probably have a say ” don’t do it.”

Then I reach for my nolo.com article, and go over the different seller financing possibilities.



And I walk them through all the situations in the article, from lease purchase to subject to, to installment sale, to wraparound mortgage.

“Bob and Susan, the way I handle this is I write down that you will have 72 hours to have your attorney converse with you about the situation, and if we don’t have a written response from your attorney within that time, we will all presume that there are no objections.

I would hate for you to be charged to pay $500 in attorneys fees and have the attorney say “Don’t do it” and then have you waste that $500.

So how do you feel if I right into the agreement that you have 72 hours to talk to your attorney about this, and if we don’t have a written response within that time, we will presume that there are no objections?”


So this ends the second step of the upfront agreement, when talking the sellers about selling their home on terms.

The next post is the third step, the motivation negotiation step, finding the real motivation of the sellers.