We’ve had a rental house sitting longer than usual, mainly because the applications we’ve received have been subpar, and most didn’t meet our minimum criteria.
Since it’s been sitting for a while, we decided to see if we could make a good case to be flexible on our criteria this time.
We had one applicant who made enough money but hadn’t been on the job for an entire year. This was the reason we hadn’t pursued them before. But now that tax season was upon us, the applicant was willing to use some of their tax return money to pay us and enter our rent-to-own program.
With that in mind, we set up an in-home interview and went to go meet them.
The in-home went great. The house was kept nicely, and the family interacted with one another very well. During the interview they asked me lots of questions about how rent-to-own worked. I explained that they were going to use their tax return money to purchase the right to buy the house from us sometime in the future. I told them that type of money is called option consideration.
We would also agree on a sales price and a length of time for when they should complete the sale. I let them know this arrangement is called an option.
At the time of the sale, which is called “exercising the option,” they would either need to have improved their credit so they could apply for and get a mortgage, or we could offer them owner financing if things went well.
They seemed excited and ready for the next step.
To make a long story short, their tax money was not going to be arriving as soon as they thought, which meant they didn’t have the funds they needed for their option consideration. They wanted to know if they could just rent. This was not going to be possible since they didn’t meet our minimum criteria for a tenant.
A couple of weeks passed and we still hadn’t filled the place. So, I reached back out to the applicant to see how things were going. They were even more discouraged than before. They had been to someone to talk about the possibility of getting a loan and had gotten unfavorable news.
I reminded them that we had the possibility to convert this deal into owner financing. While we talked about this option, I heard two unspoken things. The first was excitement about the possibility of owning their own home. The second was some sort of hesitance.
I want you to remember something. A confused mind says no. And the way that you combat that situation is to find what a person is confused about and then educate them.
In this case, our applicant had been given some bad information from people they trusted. The first piece had to do with the value of the home. They saw on the tax card how much we had paid for the property. They assumed that the current value should be about that much. It was not. We bought it for less than half of the after-repair value because of the rehab that it needed.
Next, they got discouraged from doing a rent-to-own program. They told me that two different lenders had advised not to do it, citing that they would probably lose their option consideration if they did. That was a new one on me. I even asked one of the brokers we recommend, Joy Douglas with Certainty Home Loans, if she had ever heard of a lender giving that kind of advice. She said she had never heard of something like that.
I was able to overcome those two objections with some education for the applicant. I believe I could’ve pushed a little bit more and gotten the deal done to get a vacancy filled, and we would’ve received a good option consideration in the process. But I stopped. I could tell things were already tainted in their minds. And that would not make for a good long-term relationship.
The moral here is if you find yourself pushing to make a deal happen, stop. Pushing like that rarely makes for win-win scenarios and won’t make for good long-term clients.