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SUGGESTION: Proposal letter in plain English-feedback please

Home Forums General EHTrust/EHT Topics and Creative Real Estate Financing SUGGESTION: Proposal letter in plain English-feedback please

This topic contains 16 replies, has 0 voices, and was last updated by Avatar of mark_azevedo mark_azevedo 11 years, 4 months ago.

Viewing 15 posts - 1 through 15 (of 18 total)
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  • #4950
    Avatar of mark_azevedo
    mark_azevedo
    Participant

    Greetings all,

    Tonight I was looking over the SEC’s “plain English” handbook that helps companies create clear disclosure documents. In other words, reduce the jargon and legalese.

    Want a copy? – http://www.sec.gov/pdf/handbook.pdf (read the Preface by Warren Buffet!)

    I think the NARS docs would benefit from the same approach. I took a whack at the letter normally sent out to sellers and want your direct input. This a first rough cut.

    Here it is a paragraph at a time. Original in regular font, plain English rework in italics

    Paragraph 1

    I am fully prepared to legally assume 100% of the responsibility for all mortgage obligations, maintenance, management and upkeep of the property. As a real estate investor, I make this proposal in hopes of obtaining the active income tax benefit relative to mortgage interest and property taxes. I will agree to pay you 100% of all of your existing equity in, say, 3 to 7 years. I will, of course, need to reserve the right to sublet the property while fully guaranteeing the performance of such pre-screened occupant party (re. payments, insurance, taxes, maintenance of the property, etc,.).

    I am prepared to take on 100% of the mortgage payments, maintenance, management and property upkeep. As a real estate investor, I hope to take the tax deductions for mortgage interest and property taxes. You will be paid 100% of your existing equity in 3 to 7 years. I will sublet the property and guarantee the occupants payment performance.

    Paragraph 2

    During my tenure in our arrangement I ask that you continue the existing mortgage financing in place (at my expense), and that the property be held in a bona fide land trust with a third party trustee (also at my expense, but in your name if you wish). I require only that you name me a co-beneficiary in the trust, and a ‘triple-net’ lease tenant in the premises. You need never sell or transfer the property’s title to me until I have fully retired your existing mortgage and repaid to you any current (“carried”) equity.

    While I’m leasing your property, I ask you to keep your current loan unchanged. The property is placed in a land trust administered by a trusted third-party company. Along with yourself, you’ll name two people as co-beneficiaries in the land trust – myself and the tenant. It’s important to point out that you never put me on title. Only after you have been paid the equity you “carried” and your loan paid off do I go on title.

    Paragraph 3

    By handling the process in this manner, each of us will have attained our objectives. At no time will the property or its title be sensitive to potential threats of untoward actions on my (or your) part from: tax liens, lawsuits, bankruptcy, creditor judgments or litigation in marital dispute. Neither can there be a problem in my eviction dispossession, should I not perform in accordance with the terms of our agreement. Further, with this method of transfer, your lender’s “due-on-sale” admonitions needn’t be compromised.

    Structuring our agreement this way makes for a win-win outcome. Your property is well protected from potential threats such as: tax liens, lawsuits, bankruptcy, creditor judgments or litigation in marital dispute. And if I fail to perform, the agreement is written in such a way that you can easily evict me.

    What do you think??

    - Mark.

    #26291
    Avatar of mtnwizard49
    mtnwizard49
    Member

    Mark,

    I started to read and then stopped. You are prepared to “take on” the mortgage payments? I prefer legally assume. As a seller, the first thing I would think is “what does he mean take on?”. “Legally assume” is there for a reason — keep it simple and consistent in meaning, including your changes.

    You also omitted “pre-screened” which may be important to a seller.

    At no time will the property or its title be sensitive to potential threats of untoward actions on my (or your) part from: tax liens, lawsuits, bankruptcy, creditor judgments or litigation in marital dispute.

    That’s a lot stronger than “Your property is well protected”.

    Why spend valuable time changing the wording which has proven to be effective over the years? What’s next, the Bible? To me, this is not only a waste of time, but diminishes the effectiveness of what we are saying. Of course, that’s my opinion.

    #26292

    I’ve heard the arguements for a “simplier” and reader friendly Offer or Documents and at one time I would have agreed with you. As one who has done many EHTrust, the more I use the documents, the more I appreciate the “completeness” of the documents. I’ve even had comments from Lenders, Sellers and Attorneys that they felt better about our docs than others they’ve seen because they were more thourough.

    Sometimes in the name of Simplicity we complicate things even more.

    #26293
    Avatar of areyes
    areyes
    Member

    if you’ve got the time to convert the proposal letter into a simpler non-legalese letter, why not? run it through Bill to get his stamp of approval.

    i usually translate a portion of that proposal letter in the email i send out after sending out the NEO.

    #26294
    Avatar of mtnwizard49
    mtnwizard49
    Member

    and how many that have included your translation have closed? Was it worth it?

    #26295
    Avatar of areyes
    areyes
    Member

    i havent closed any EHT’s yet. in regards to this new translation based on explaining what the NEO meant, im getting a lot more interests and a lot more questions leading to a signed NEO. ive gotten a few NEO’s signed and it was worth it. now its time to find a RB eh?

    ive gotten a few comments like Scott where an attorney reviewed the actual proposal letter with the legal translation and had no problems with it. a couple of other seller’s said that it was legit. those that didnt respond, i could care less. some responded with a few more questions where i addressed them accordingly.


    English translation of the 90 Day NEO.

    Everytime I send out my NEO, I include this in the email to address a few objections before they can ask me. The seller will only receive a 4 page NEO ONLY. I do not include the proposal letter, terms of proposal and purchase offer.

    Here is our preliminary 90 Day Non-Exclusive Option for you to review and consider.

    What NOT to expect:
    Do not expect a Full Asking Price Offer with ALL CASH in this down market.
    Do not expect a Full Asking Price Offer with a NEW PURCHASE LOAN in this down market.
    Do not expect a Full Asking Price Offer with any CONVENTIONAL LOAN in this down market.

    What to expect:
    Do expect a Full Asking Price Offer with TERMS in a down market.

    The 90 Day Non-Exclusive Option is a Non Binding Agreement that allows us to market your property to our pool of potential tenant/buyers to come in and take over the payments and responsibilities of maintaining the property using our terms.

    Few differences between Exclusive and Non-Exclusive
    Most real estate agents would tie up the homeowner and tie up the property for 6 months with an Exclusive Listing Agreement and market the property to conventional buyers with great credit and down payment. These pool of conventional buyers are very rare now a days in this down market and will typically low ball a homeowner through a significant discount to make it a good deal for themselves. We won’t tie you up and your property and we certainly won’t low ball you.

    Most real estate investors would tie up the homeowner and tie up the property up for a 30 days with an Exclusive Option Agreement and record this option to cloud your title. These pool of real estate investors are a dime a dozen and will typically low ball a homeowner through a significant discount to make it a good deal for themselves. We won’t tie you up and your property and we certainly won’t low ball you.

    Important **
    Our 90 Day Non-Exclusive Option means:

    1. We’re not tied to you.
    2. You’re not tied to us.
    3. We’re not tying up your property like a typical real estate agent or an investor.
    4. We’re not going to even record the option to cloud your title.
    5. We’re not going to take a quit claim deed.
    6. We’re giving you your full asking price, PLUS!
    7. PLUS, a portion of any profit centers we’re able to create above your full asking price in the next
    3-10 years.
    8. We’re willing to give you 100% of any existing equity, all you have to do is wait for it.
    9. We’re willing to give you 25% of any future appreciation when the property is sold or refinanced.
    10. We’re willing to give you 25% of any principal reduction when the property is sold or refinanced.
    11. We’re willing to give you 25% of any positive cash flow we’re able to create in the next 3-10
    years.
    12. We’re willing to pay you to use your property and partner up with us using our creative strategies.
    13. Just give us 90 days to do our due diligence.
    14. Just give us 90 days to market for our pool of non-conventional tenant/buyers.
    15. Just give us 90 days to market for our pool of conventional buyers.

    So it’s risk free for you to market your property in tandem with us and it doesn’t cost you anything. You are still free to talk to any real estate agent, conventional buyer or investor that can do an outright purchase with you. If we find our tenant/buyer before you, then we would exercise our option and proceed with our full price offer. If you find a qualified, conventional, buyer before we find a tenant/buyer, we’ll withdraw our option and you can proceed with your cash purchase. So this is exactly what it is, a Non-Exclusive Option, that just gives you another alternative to move your property if you can’t find a conventional buyer for what you want now. Kind of like your backup plan, if you will.

    If the non-exclusive option goes past 90 days, then it just expires or it can be extended if we all mutually agree to do this. You can continue to market for your own conventional buyer and we will market for our own. Fair enough?

    After emailing you our 90 Day Non Exclusive Option, we’re willing to wait up to 6 months to decide whether you want to do this or not. This way there’s no pressure on you to make a quick decision without proper legal counseling or talking to a trusted adviser. We can go over how it works, why we prefer to do it properly versus quickly and cheaply. We’ll also go over the risks, pitfalls, what-if scenarios, benefits, incentives, protections, etc. Please remember we prefer to educate first before doing business with anyone. If you don’t ask us questions, most certainly we won’t do business with you. If you decide to decline our Full Asking Price Offer, that is totally fine with us. We’ll still say YES to you down the road if you’ve exhausted all your efforts to sell or lease your property conventionally and need a creative alternative. Just leave our Full Asking Price Offer on the table and contact us if you want to give it a try. It’s only a Full Asking Price Offer and at least it’s in writing. Besides, how many other Full Asking Price Offers have you had within the past few months and in writing?

    Please let us know if you have any questions, concerns or what-if scenarios so we know how to proceed with our time after you have reviewed our documentation.

    #26296
    Avatar of mark_azevedo
    mark_azevedo
    Participant

    Alvin illustrates a good point. Remember a confused mind always says, “no.” Obviously the SEC felt strong enough about it to take action. Warren Buffet who has more money then all of us put together (by magnitudes) appreciated the efforts.

    If you read the Preface in the SEC plain English doc, you will see that Warren says when he crafts his annual report, he does it as if he is going to be presenting it to his sisters (not CFAs, portfolio managers, hedge funds, etc.).

    @Scott Moyes:
    I’m willing to bet in a fair number of instances, the language is one reason sellers seek an attorney or other adviser. Again, if the SEC is behind the effort in the complex securities market, in my mind, there is legitimacy behind it.

    @Gary Mialocq: The first model T was effective for its day. What would our world look like if people stopped innovating? Master copywriters are always testing and tweaking their copy to optimize response rates. Their winning letter becomes the “control” against which they test their new contenders. Should a contender beat the control it then becomes the new control and on it goes. If you use Google Adwords, I’d hope you’d approach it the same way.

    As for changing the Bible, there are enough translations to suite anyone’s tastes. Just look at http://www.BibleGateway.com :)

    Peace!

    - Mark.

    #26297
    Avatar of areyes
    areyes
    Member

    i think if you’re going to translate this into laymen’s you might want to put examples or analogies to give them a better visual on what they’ve heard or understood in the past.

    that long email is my translation of the NEO itself. i havent translated the proposal letter. ill take a stab at it.

    #26298
    Avatar of areyes
    areyes
    Member

    i just talked to mark. the proposal letter that he was referring to was an old letter of intent that he had long long time ago. its completely different from the current proposal letter gary, scott and i were referring to on the template.

    here’s the letter of intent mark was talking about. in my opinion this can be explained on the 2nd or 3rd contact. 1st contact should be “are you willing to lease the property out and then sell it outright in a few years in exchange for a full price offer. would that be of any interest to you to review and consider my full price offer?”

    there would be no mention of land trust, due on sale, lien attachments nor title transfers on the 1st contact at all.

    after reading both, there is an easier way to translate this in every day english.

    here’s the old version he sent me.

    FSBO 1

    [NAME],

    Regarding our brief telephone conversation today about your property in [CITY], please allow me to offer an explanation of my hopes and intent relative to the property.

    I am fully prepared to legally assume 100% of the responsibility for all mortgage obligations, maintenance, management and upkeep of the property. As a real estate investor, I make this proposal in hopes of obtaining the active income tax benefit relative to mortgage interest and property taxes. I will agree to pay you 100% of all of your existing equity in, say, 3 to 7 years. I will, of course, need to reserve the right to sublet the property while fully guaranteeing the performance of such pre-screened occupant party (re. payments, insurance, taxes, maintenance of the property, etc,.).

    During my tenure in our arrangement I ask that you continue the existing mortgage financing in place (at my expense), and that the property be held in a bona fide land trust with a third party trustee (also at my expense, but in your name if you wish). I require only that you name me a co-beneficiary in the trust, and a ‘triple-net’ lease tenant in the premises. You need never sell or transfer the property’s title to me until I have fully retired your existing mortgage and repaid to you any current (“carried”) equity.

    By handling the process in this manner, each of us will have attained our objectives. At no time will the property or its title be sensitive to potential threats of untoward actions on my (or your) part from: tax liens, lawsuits, bankruptcy, creditor judgments or litigation in marital dispute. Neither can there be a problem in my eviction dispossession, should I not perform in accordance with the terms of our agreement. Further, with this method of transfer, your lender’s “due-on-sale” admonitions needn’t be compromised.

    I await your call and am looking forward to speaking with you soon.

    Finest regards,

    FSBO 2 – made some language tweaks (done a long time ago)

    [NAME],

    Regarding our brief telephone conversation today about your property in [CITY], please allow me to offer an explanation of my hopes and intent relative to the property.

    I am fully prepared to legally assume 100% of the responsibility for all mortgage obligations, maintenance, management and upkeep of the property. As a real estate investor, I make this proposal in hopes of obtaining the active income tax benefit relative to mortgage interest and property taxes. I will agree to pay you 100% of all of your existing equity in, say, 3 to 7 years. I will, of course, need to reserve the right to sublet the property while fully guaranteeing the performance of such pre-screened occupant party (re. payments, insurance, taxes, maintenance of the property, etc,.).

    During my tenure in our arrangement I ask that you continue the existing mortgage financing in place (at my expense), and that the property be held in a bona fide land trust with a third party trustee (also at my expense, but in your name if you wish). I require only that you name me a co-beneficiary in the trust, and a ‘triple-net’ lease tenant in the premises. Allow yourself to feel secure in the knowledge that you need never sell or transfer the property’s title to me until I have fully retired your existing mortgage and repaid to you any current (“carried”) equity.

    So just remember there is no risk to you because by handling the process in this manner and each of us will have attained our objectives. As you will recall, at no time will the property or its title be sensitive to potential threats of untoward actions on my (or your) part from: tax liens, lawsuits, bankruptcy, creditor judgments or litigation in marital dispute. By the same token remember neither can there be a problem in my eviction dispossession, should I not perform in accordance with the terms of our agreement. Further, with this method of transfer, your lender’s “due-on-sale” admonitions needn’t be compromised.

    I would like for you to take a few moments to think about how this proposal might well meet your needs. Please do contact me with any additional questions. I look forward to speaking with you.

    Finest regards,

    #26299
    Avatar of mark_azevedo
    mark_azevedo
    Participant

    Thanks, Alvin.

    And just to be clear, the two old versions you posted were not the “plain English” variety I was referring too.

    For plain English this has sure gotten complicated. Haha.

    - Mark.

    #26300
    Avatar of mtnwizard49
    mtnwizard49
    Member

    I simply pointed out the dangers inherent in changing what already works. I pointed out two examples where the “new” language simply did not have the meaning or impact of the original. I think if people spent more time doing things and less time changing things they would be more successful. Just my opinion.

    I always simplify the language, but I don’t do it in such a way that ANYTHING is different as to the terms of meaning of what we say.

    #26301
    Avatar of mark_azevedo
    mark_azevedo
    Participant

    No worries, Gary. I wish you all success in your investing activities!

    Have a great day,

    - Mark.

    #26302

    @mtnwizard49 wrote:

    and how many that have included your translation have closed? Was it worth it?

    Gary, I think this says it all.

    It is the exact language and thouroughness of the NARS Documents, including the Offer that has allowed NARS to prevail in virtually all challenges. I would rather be turned down by a seller because they didn’t understand now than pay the funds to fight them later.

    Get more deals in the pipeline and don’t worry about these nuckleheads.

    #26303
    Avatar of bigdaddy_3
    bigdaddy_3
    Member

    I simply write an offer as follows:
    I will buy your house for $100,000. (whatever the price is)
    Please CALL ME so that I can give you some money.

    I CANNOT CLOSE unless they contact me so this pretty much works every time.

    Shawn

    #26304

    Shawn,

    Thank you, very much.

    To clarify, you are saying that this is how to make your Offer, for an EHTrust that you will be asking for “terms” on, correct ?

    Thanks again, Alan Gross

    P.S. and, as per The Jim and Shawn Show , you would turn the conversation, by saying,” Yes, I can do that. I can give you $ 100,000; etc., etc. (……….. whatever else, here……….. ),

    but, “I’m just not going to pay you that, Right NOW.”

    Are we getting closer ?

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