When dealing with motivated sellers, the key that I really found is building rapport with them. It helps out immensely.
You really need to find out when you’re talking to the seller, (Especially with off-market deals) what they need and what they want in order to help them. I have found that when I get the sellers to “Like” me, they are more apt to really tell me what they need and what they want and negotiate freely once you have a certain amount of rapport with them.
You also really want to be able to communicate with them properly to understand their problems and know why they are trying to sell the property and how you can help solve their problem. If you can solve their problem, on it’s a win-win for everyone. They’re happy, you’re happy. You get a killer deal and you know that it’s going to really help out in the long term.
I prefer to buy owner-occupied houses or owner-owned houses. I prefer when there is somebody on the other side and a little more personality, because it does become a more emotional sale to most people. There’s far more motivation on their part than a traditional bank, who doesn’t care either way. So that’s really my strategy.
Being that I was a Clinical Therapist for 11 years, relating to people is something that I take pride in and I am pretty good at doing. People only want to do business with people that they trust.
There are too many investors who come in and their only focus is: “I can buy the house for this much, I can close 2 weeks, etc.”
And then, the person comes back with: “Well, I’m not quite ready to close. It’s going to be at least three months.”
So, they just shot themselves in the foot right there. Now the owner is going to feel that high-pitched sales pressure. You may be the 5th person that has sent them a letter, or called them, or came to see the house.
I think where I stand out is that, my first question to them is: “What are you looking to get out of this transaction? What you looking to do? What options are you looking for?”
Maybe they aren’t ready to sell, maybe they’re in a short sale situation and they don’t know the first thing about short sales. I give them options. They can do a short sale, they can do a refinancing, they can do a deed-in-lieu, etc. Ultimately, the best option is usually for me to buy the house, but I let them make that determination and figure that out on their own.
How do you start with the negotiation process on an off-market deal?
It usually starts out with either sending them some sort of direct mail or you giving the seller a phone call. Then you meet them in some way or they get into contact with you, (Usually, they’ll call you on the phone).
What I typically do is go through a Lead Sheet with the sellers. That is your “Fact finder.” You’re finding out as much information about both the homeowner and their situation as possible through that the first initial conversation.
The next step from there is going to be building rapport. Some leads are super easy. After the lead sheet, after they give me their price, they’re ready to sell. But, there are going be some other sellers that you have to get more comfortable with you.
Here is a Recent Negotiation of a Property
They had their property for sale, (They did a For Sale by Owner). They had it under contract and a week before they were supposed to close the buyer backed out of the sale. Now in between that time frame, (It’s usually about 30-60 days) these people they were moving out of state. He had already put in his two weeks notice at his job and they put down a deposit on another property in the Spokane, Washington area. So they already had put down a deposit and they were really relying on that sale to give them the cash they needed in order to move. It was getting very stressful in their lives. After talking to them, I told him that we really couldn’t pay $135k.
I threw out a number of $95,000.
He tried to see if I can come up a little more but I said that 95k was the best we could do. I told him we could close in a week and you guys can get on your way.
So after just a few minutes of thinking about it, he said: “Alright, let’s do it!”
We signed a contract right there and we ended up closing in a week. He was so thankful because that gave them enough money to move. So it was a win-win for all of us. We ended up putting less than $2,000 into the property and ended up selling it for $135,000.
The key with that was really meeting face-to-face with him, talking to him, getting them to really believe that you’re the real deal. He gave me a tour of the house and every step of the way I was very polite and sympathetic. It ended up working out.
What techniques do you use to build trust and rapport with the seller?
One of the keys to building rapport that I found is that people really like people who are similar to them. In a sense, you have to be genuine. But, you have to almost do some acting in a way. You have to try to relate to somebody is as much as possible. For example, if you met with me and you started talking about golf or anything related to the golfing, that would be one huge way to build rapport with me because I am a big time golfer. I could talk about golf for days.
If you go to the house and you see pictures of their prized dog, or cat, or something like that all over the walls, that’s where a light bulb should go off.
This person absolutely loves their cat, how can I relate to them in that sense?
One way is just by asking them questions about their cat. What’s their cat’s name? How old is their cat?
Anything you see around the house that you can relate to or that you can tell that they’re interested in, you should talk to them about. People love their kids, animals, hobbies and their sports teams. Those are probably for the biggest things that you can really try to relate to someone. I think that is huge.
Just be nice, be respectful. Everybody has a different personality. When you genuinely show interest, their “shell” comes off and they become nicer. I would say be attentive to them also. In the past I’ve gone through some houses with a checklist saying: “We need to do this, we need to do that.” Some sellers get absolutely offended by that. I found for me, it’s better if I don’t take a checklist and don’t even take a notebook in there for the initial walk-through. You can always come back and do that at a later time. Just try to be observant. Remember what you see. Pay attention to them and what they’re saying. Your goal is to really just focus on them and the house is kind of secondary.
Whenever you actually make the offer to them is when you bring up all the repairs. You first need to be building that rapport with them and making them feel comfortable. You bringing that stuff up will absolutely backfire. It’s backfired on me a few times.
You don’t just want to make about buying the house you want to make it a personal thing and relate to them. Even if you don’t care about golf or football, for example, you kind of have to “fake it till you make it” and play the part and just pretend like you do care.
The goal is to try and help them out. I guarantee, if you help people out, you will get paid. I see too many investors just trying to make it about buying the house and “Money, money, money, here’s my offer,” etc. It just scares people away.
A lot of people think that they have to really “Tear down the house,” so to speak. “That’s going to have to be replaced, this wall is going to need replaced, this carpet need to be replaced, etc.”
It’s not about “Knocking the seller down.” You don’t want to be doing that. Remember, this is a house that they probably live in, and maybe their kids live in. You don’t want to walk around telling them what is wrong with their house.
How do I go about talking to or negotiating with someone who really doesn’t know what they want for the property or just won’t give you a price?
The number one rule of negotiating is: “He who names price first loses.”
There are going to be some instances where you just can’t get a seller to name an asking price, but those are few and far between. Always do whatever you can to get the seller to tell you what they want for the property. The big thing there is that it really sets up where you can negotiate from. You’re your thinking may be $100k off or their price may be even lower than your highest offer so you’ll get them to name a price get them to start the negotiation process.
The way I try to get them to give me their price is when I’m pre-screening them and talking to them, (Before I event go look at the property) I ask them what they are looking to sell the house for.
After that question, I ask: “If I can offer you all cash and pay all your closing costs, what is the least you’ll accept?”
Most of the time, after that question, they will give me a price. If they really just don’t know what they want, or want you come look at the property, go look at the property.
While you’re at the property building rapport, just ask them again: “Did you have any time to think about what you would take for the house?”
One I typically say if they don’t know is, “Will you just give me a ballpark figure of what you’re looking to get the property for, because I really don’t want to waste your time or my time if we’re going to be way apart on price?”
A lot of times after that they’ll usually give me some price. And if worse comes to worse and you do have to throw out an offer, just throw it out there after you run your numbers on the property and evaluate it.
If you’re on the phone, and they are hesitant about meeting with you, you could say something like:
“Listen you sound like a really nice guy/girl and I would hate for you to hang up on me because you don’t know what I want to pay for the house, so why don’t you tell me what you want and let me see if I can meet that number.”
What if a seller is demanding an offer over the phone?
If I have a guy who is demanding that I make him an offer right there on the spot, I say:
“Look, I’m kind of like a doctor. In order for me to diagnose problems and give you a prognosis, I need to actually SEE the problem first, (Meaning I have to see the house first). I need to understand how I can help you best.”
It’s not about me, it’s what I can do to help YOU.
I really don’t like the strategy of making an offer only to go and see the house, which turns out to be a dump, and then I have to lower my offer.
What is something that can give you an advantage when negotiating a deal?
Before negotiating, make sure you know your facts.
You really need to know the facts about your real estate market. I think knowing the exact price points of what other real estate investors are paying and what your actual market is doing is going to be important.
It’s not always going to come into play, but if you can really lay out the facts the some sellers and educate them as to what the market is doing, you can build up a lot of trust with them.
If a seller is stuck on a certain price, something I’ve said is:
“I ran some numbers and it looks like some other real estate investors in the area are paying around (Amount) for houses similar to yours in this area. Is that something that you can work with?”
That has worked on several deals for me. If you haven’t done any deals yet, that is something that you can do.
What if the seller thinks my offer is too low?
One of the biggest objections is definitely going to be price, and you’ll come across a lot of different scenarios out there when making offers. People will yell at you, say nothing , laugh at you, swear at you, etc.
One objection that you’re going to get is when you start talking about price, people will start saying: “I don’t want to give my house away” or “I just don’t want a lowball offer”
So I say:
“I don’t want you to give your house away either. But let me ask you: What would you feel would be a price that would be giving your house away?”
You’re asking them to tell you, what would be a number that they would think would be almost ridiculous? Kind of just to see where their bottom end [Number] is.
Another thing that I say is:
“Look, I know you’re probably talking to other buyers and investors as well, and you may get a higher offer from them than what I’m willing to pay right now. But here’s the thing: I’ve been doing this for a long time and I’ve done my research. I can close whenever you want to close, whether it’s 2 weeks or 2 months from now. I’m not going to do an inspection, and I’m going to make this transaction really simple for you. So at the end of the day, you can walk away feeling really good about this deal.
All these other guys, I guarantee you, are going to get an inspection, and knock off 10k,15k, or 20k. They are not going to know what to do. They are going to panic, and they are not going to have the money to do it. Therefore, this is why I feel this is a fair price for this.”
I don’t really “Knock” the competition. But I tell them that they may get a higher price, but I guarantee that those people will come down to a lower price, eventually lower than what I am offering.
What if you have the deal under contract, and the inspection shows other repairs that you missed when you made your offer?
Sometimes, you have to renegotiate a deal. Remember that renegotiating all of this stuff is very, very common practice. I typically blame it on my “Mean partner.”
“I sat down and talked with my business partner and I have not been able to get him to agree with us on the numbers. The price makes sense to me, but I’m not the only decision-maker. My funding partner must approve the deal. If he does not think the price makes sense, then the funding is obviously not there.
I know this is not what we talked about and I’m sorry for that but my hands are tied. Based on the inspection of the property we can do (Price). Is that something that will work for you?”
“After we did the inspection, we found that it’s going to cost is a lot more money than we first anticipated. My partner is not going to fund the deal anymore unless we can get it the price down a little. Are you willing to come down $10,000 on your asking price? “
I’ve done this when I negotiate deals on the MLS as well.
Don’t fall in love with any deal. If you can’t make the numbers work, [you need to] move on to another deal. Don’t try to make a deal that is not truly a deal. You might lose the deal. But I would rather lose a deal, than lose money at the end of a completed deal.
Here are some quick “One-Liners” for when you are negotiating price:
“Why would I buy your property when I can go around the corner and buy your neighbor’s property for half the price?”
“We talk to hundreds of people per week, and in order for us to purchase your property, you need to be competitive on price”
“I just purchased a similar house, not too far away from here, for $XXXX”
“So you’re telling me that if I come to your house with a brief case, with $100,000 cash in it, you’re going to tell me no?”
I realize that my offer may be lower than you wanted, but in reality, the average days it’s going take to sell the property is around (X Months). Most likely your house will sit on the market for a month or two and after that, it’s going to take your buyer another 60 days to go through the loan process. And remember if they find anything that’s wrong with the property, your going to have to fix those things before closing, which could extend the closing date. Or your buyer could back out.
If the property is a complete dump, I tell them:
“You’re going to have to put in some work and some money in order to fix this property up, to bring it up to current market standards and make it move-in ready for a new buyer who would pay retail. You have to fix it up so the house actually qualifies for a loan.”
Let them know all the different costs involved, like real estate commissions and closing costs. Let them know, for example, if they have to put 30k into property to fix up. All these different things can help you negotiate if the seller is really stuck on their price.
In the past, when talking sellers, some of them flat out told me: “I met with a couple of other real estate investors, but I decided to go with you because I felt like you were legit. You knew what you were talking about.”
That is all from building rapport and talking to the sellers.
Some other real estate investors may have been getting there before us. But because we went in and built so much trust and rapport with the people, they sold to us.
I know that I’ve beat out the “We Buy Ugly Houses” franchise in this area on two houses just in the past year. After talking to the sellers, they flat out told me that [The We Buy Ugly Houses Company’s] offer was a right around the same price as ours, but we were more trustworthy.
– Chris Seder & Kyle Garifo