Is This A Good Tax Season, Or Not?


#1

Friends -

Has this been a good tax season or not? I haven’t been able to close a single Lonnie Deal! (Plenty of renters, though.)

I advertise in the local papers, have bandit signs up, and post on CraigsList (we have no Penny-Saver type paper in this part of Oklahoma). People do come by and look at my houses and like them (~1998-2001 16x80 3/2s), but all choke on my $3,000 down-payment requirement. Most say $1,000 would be the maximum they could cobble together.

Am I doing something wrong? Or is this a bad tax season?

Any thoughts?

-Jefferson-


#2

Jefferson I think it is more a matter of your lack of negotiation that is hurting you. We all loved getting $3k tax returns as down payments but the reality for most of us is that this was the exception and not the norm.

I suggest you negotiate a little more and get as much as they can reasonably afford. Stick with Lonnie’s dialogue closely. “How much can you afford to put down” and “If it’s reasonable, I think I can work with you” type responses.

Here is on technique I learned from a mobile home retail dealer.

When a buyer really kept at him about how much the down payment was he would finally respond with something like:

“Well the last buyer put down $6,000…would that work for you?”

They would always so no, but they often said, “the most I can afford is $3k.” Truth be told the dealer would have been quite happy with $2k.

Don’t post your down payment requirement if it is not working. If you are overwhelmed with repsonses the post it.

Tweak the dealer’s response to fit you as needed. Perhaps, “well some buyers have used their entire tax return” or “some buyers have put down $6k” (use this if for example you may not have had a buyer do so but many here have so you are using what I call “salesman truth” which is somewhat akin to political truth I guess.

Work it however you need to put you back into the calls and back into the driver’s seat when it comes to negotiation.

Don’t lock yourself out of a market by writing fixed terms into a Lonnie deal. That is the entire premise of Lonnie deals.

Tony


#3

I agree with what Tony said. A discussion I had with another investor a time back involved his dissatisfaction with the low level of dp’s - what you have to do is re-examine the purpose of a dp. Is it to put money in your pocket? Or is it to demonstrate a level of your buyer’s commitment? (its the second one)

By following the advice given, you can uncover what their level of commitment is. A guy working as a delivery truck driver with three kids and a wife at home may only be able to pony up 1K, and that hurts. Another guy may have a 3K tax return, but needs half of it to pay off a credit card - I’d take his 1500 and be proud of taking on a buyer who pays his debts.

Downpayments are not about the investor’s wants, its’s about the buyer’s sacrifice.


#4

I had 1 tax refund related sale. $1000 down deal- 13,900 sale price. Here is the peculliar things that have happened in the past 4 months since I have begun to advertise “Will Finance” ads: 1 cash sale $15000 820 FICO; 1 $8500 down 810 FICO score- $16500 sale price; 1 $6000 down $27000 sale price - 580 FICO; 1 $1000 down $16,400 sale price 610 FICO; 1 $1000 down 13,900 sale price 810 FICO. I had been advertising homes for sale in the park without the “Will Finance” heading for the past 7 years and have never got 3/5th 800+ FICO score customers, I have no idea why the Will Finance appeals to these folks - but I’m extremely grateful for the business!


#5

Jefferson,

Our market just does not have $3,000 down buyers. In fact, our market is so much different than others that post it is almost like being in a different game! Our buyers do NOT want to know just payment and absolutely WILL NOT tell us what they can afford. We went through a lot of trial to find that out, believe me!

We therefore structure all our deals specifically telling the buyer what the total price is of the unit (we even get phone calls asking that only), what the MINIMUM is we will take down ($1,000 on newer singlewides, obviously more on doublewides, but the most we have ever gotten is $3,000) as well as a “suggested” monthly payment, which includes lot rent, home rent/payment and insurance. We have some flexibility with our monthly payment, but also know we are hitting the right price for our particular market.

Last year, our first tax season, we did not sell anything until March. This year, we have already sold three and had two of our good buyers move from singlewides to doublewides - of course giving us more down money at the same time. We have also had a couple of our tenant/buyers give us more money toward their ultimate purchase, which is always a good thing.

I would certainly try the Lonnie way first, because that does work in most markets. If it doesn’t, figure out what does work in yours. Once you hit the magic combination you will start selling those homes.


#6

Thanks for everybody’s thoughts! I’ll adjust downward my downpayment requirements.

One last question - do these downpayment amounts include first month’s payment, or do the buyers need to make an additional ($400 - $500?) first month’s payment in addition to these downpayments?

Enjoy the weekend,

-Jefferson-


#7

In our case, it does NOT include the first payment. We recently started giving them an amount that it will take them to move in, which they are asking. Our latest ad actually says “$1500 to move in, $540 per month.” We always look at the application when they fill it out to qualify their income BEFORE we submit it for credit and background checks. If they do not make enough money to support the home we tell them and don’t take their application money. Some people have an unrealistic idea of what they can afford. ($7 per hour can not make the above payment.)


#8

Jefferson,

I work in 7 different parks with over 1000 mobile homes together. I find it is similar to real estate-location,location,location. The parks near a lot of industry or retail jobs command higher rent and can bring in higher downpayments ($1000-2000). The parks farther out in the country, farther from industry etc. collect less lot rent and I get lower downpayments ($300-$1000). the final prices of the homes also have to be 15-25% cheaper.

I find people have already spent tax refund $$ in their minds before they get it. Suddenly they decide to buy a financed Mobile to get something nice but now they have to give up some of that stuff their mind already spent to come up with the down. Because they have limited financial discipline, they won’t put most of that refund into the place where they live (unless you count a big screen TV).

Steve