Tips on negotiating with banks

One of the techniques I have spent a lot of time teaching lately is how to negotiate with banks. That’s right! You CAN negotiate with banks!

Recently, one of my students was negotiating with a bank, and was trying to get a partial release from the bank. A partial release is a mortgage provision allowing some of the pledged collateral to be released from the mortgage contract if certain conditions are met. This student asked me a few questions during the process, and I thought it would be a great blog post to share our dialogue:

Question: Mike, I really appreciate all of your help and we are committed in partnering with you. We are working on getting the bank to do a partial release on a property we are trying to buy. At first, the bank said “no” to a partial release, but a few days later said “yes” to extended financing over the long term. Any advice?
My Answer: Partial releases are one of the hardest things to get right now. Almost impossible. The reason is because there are a lot of condo conversions across the country where the conversion got done and only a handful of units sold. Then the bank had to take back a less than whole project. The only real answer I have found for this issue is put it in your contract or you won’t buy the project.  If you negotiate a contract, and THEN ask for it later, good luck, it probably won’t happen.  The best leverage is, “I can’t buy the deal if you don’t include a partial reconveyance.”  The second-best leverage is a do-or-die addendum prior to the end of due diligence that says the bank will include it or the addendum serves as a cancellation notice.  Sometimes we need to make the biggest threat (loss of a contract) to get the biggest results.

Question: I’m rehabbing some of the units before I close. How can I secure the fix-up money before closing on the property?
My Answer: The best leverage on work before closing is a recorded purchase contract with the seller’s authorization, and having every sub and contractor lien the property for their work. If the seller doesn’t close, they have some major problems now.

Question: I’m an auditory learner. Is there a time we can talk  to discuss these and some other questions?
My Answer: Yes there is! I am hosting a teleconference this Monday called “Ask Mike Any Seller Financing Question”. It will be a live teleconference where I’ll be taking as many seller financing questions as my students, partners, and fellow investors have. The teleconference will take place on Monday, October 27th, at 1:00pm MT. You can reserve your place here. I’m counting on you being there, you have some great questions!

I’d like to invite you to this special Q&A call as well. Any questions related to seller financing are welcome! Remember, banks WILL offer seller financing now as well. I anticipate many questions about that topic.

Don’t make investing harder than it needs to be. Let me help answer a few of your pressing questions!

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