Motivated Seller Negotiating

Hope you had a great week! I am actually pretty stoked because I think I just locked down another deal for 8K I am supposed to go sign the contract tomorrow and the best part is I already had a buyer for the property!!! Stick with me and I will show you a thing or too How would you like to sell a property in minutes?!?!? It’s all about the buyers list baby! Actually it is all about the WAY you handle your buyers list. We will talk about that in another post.

Well let’s get back to our little discussion on negotiating with motivated sellers. I have tried to lay out for you some of the major points when you are wholesaling houses and talking to a motivated seller. Hopefully it has been helpful to you! The last and major part of any real estate negotiation is the close. Most real estate investors are terrified of closing. Matter of fact, most people in any type of sales position are not looking foward to the actual close. Don’t get me wrong! We all want the deal to close so we can get paid but that is not the type of closing I am talking about.

I am talking about the type of close that takes place when you have to actually get the seller to sign your contract. Most people are terrible closers and there is one major reason for this. It is because you have to apply a little PRESSURE in order to be an effective closer. Now listen to what I am going to tell you, because this is really important. The better you are at building rapport and engaging the motivated seller the EASIER the close will be. 

If you are terrible and getting the seller to like and trust you, there is no way in hades that you are going to be able to close a seller unless you offer them 100% full price! On the other hand, if you took all the right steps by showing interest in the seller, asking intelligent questions about the seller (not necessarily realted to the sale of the house), and conveying confidence that you can solve the sellers problem, you will find that the close comes quite naturally. Ok, so what are some helpful tips when it comes to closing a motivated seller?

Ask for the Business

You know whatever business you are in you have to remember to actually ASK for the business. You can give the greatest presentation in the world but if you just finish it with a “OK, just let me know what you want to do,” you are not going to get very far. When you ask somebody something it puts them in a position to where they are going to have to answer you. They actually have to think and it puts just a little bit of pressure on them to take action either way.

Sometimes I have a weakness to sales people are anybody in general when they ask me if I want something. Especially if I feel they have done a good job with their presentation. A waitress is a good example of this. The restaurant business is based on ASKING for the business. Perhaps you have heard this question before “Would you like fries with that?” Do you think that is a question that they ask you because they feel like it? NO! They are told to do this because they know the numbers show that if you ask for the business a good percentage will give it to you.

Test Close

Using a test close will really give you a peek at the mind of a motivated seller. Basically this is the way it goes.

“Mr Seller, if I can do X will we be able to come to an agreement today?”

I cannot tell you how many times that has helped me close a wholesaling real estate deal. The reason this is so helpful is because if whatever “X” is not enough for them to strike the deal, they will tell you. If they don’t tell you, you will need to ask the extra question.

“Well, Mr. Seller, I understand you really want to sell this house, what is it that is keeping you from putting this house behind you?”

You will use the test close just a little before you get into the main close. This will help you what REAL objection you are going to have to overcome to get the deal done. Suprisingly enough, it is not always price that is holding a seller back from selling the house. It could be a number of things. For example, the lady at the house I just left today is still slightly attached to the house because it was her mothers and she grew up in it. So I had to be very sensitive to that fact and let her know that I felt her pain. However, the house is becoming a burden to her and because it has been vacant, somebody stole all of the copper out of the air conditioning unit. This leads me to my next point.

Remember the Pain

Ok, so we are almost there. When you are asking for the close you need to incorporate their reason for selling (the pain) in the question.

Mr. Seller, If I could give you 50K for your house and close in a few weeks so that you won’t have to worry about your annoying tenants anymore, do you think you will be able to put this house behind you?”

When you bring up that pain it triggers something in their mind that makes them remember all that the house has put them through and automatically makes them want to accept your offer! They may even need to think twice to reject it. Remember what I told you about how I am a sucker when the waitress asks if I want dessert. If she gave great service I almost feel obligated to take her offer!

Well this has been a brief primer on negotiating with motivated sellers in your wholesaling business! I hope you have enjoyed it and if you have any questions for me about negotiating be sure to leave a comment and let me know. Also, if there are any other questions you may have about real estate investing or wholesaling houses  comment about that too. I will do my best to answer with a post just for you!

Well Kris Allen is the next American Idol! I love watching stories where people go from completelty ZERO to HERO, literally over night! This guy came onto that show without really knowing if he was going to make any progress at all. Next think you know he turns around and he is the next American Idol! Incredible! It just shows that you can really do anything you put your mind to and the only person preventing you from success is yourself!

You see, Kris did not have to show up to the Louisville auctions. He did not have to get into his car and drive from Arkansas to Kentucky. He did not have to wait in line for hours to see Simon, Paula, and Randy. He did not have to do any of those things. Because he did and because he took action, he now has a million dollar recording contract! The key word is that he took action.

You have the same choice in front of you every day. You have options. You don’t have to learn to wholesale houses. You don’t have to learn to find and talk to motivated sellers. You don’t have to read this blog. The very fact that you are seeking the right info is a step in the right direction. Now take one more step of action and actually put what you learn into motion! You will be glad you did  

The next part in our series of negotiating with motivated sellers is crucial. When sellers first call you up they may think that you have all the money in the world and you are going to buy their house for top dollar! Obviously, we really do not want ot be talking to a seller who has such a mindest. Normally they can be weeded out in the prescreening process.

However, even when you are talking to a seller and they are asking way below market value sometimes it is not low enough! So what do you do? You learn how to properly handly sellers expectations.

Properly Handling Seller Expectations

When it comes to properly handling seller expectations there is a right way and a wrong way.  The wrong way would be to walk around the house and totally verbally trash the house.

Wrong way: “I can’t believe you can even think about asking 100K for this house. Don’t you watch the friggin news?? There are houses that are selling for like $3.00 right now and your house needs like  a million dollars in repairs!!!

Obviously that is the wrong way to handle things and even though you might feel like saying that, do yourself a favor and don’t…LOL…

Now the interesting thing about approaching this the wrong way is that every concept you need to convey to a seller is contained in it. You just need to be able to present it in a lot smoother fashion. Actually, you will find as we talk a lot more about the negotiation process it is all about the WAY you say certain things. You will also learn to apply this when you ask seller questions as we talked about last week. They can give you an answer and if you listen to the way they say it, you will find out more than what they are actually trying to tell you. We will talk more about that later.

Let’s look at the right way to break this down to a seller.

Right Way: I understand what you are asking for the property and believe me I would love to pay you 100K for the house. In fact, I would love to pay full price for every house that I get called on. However, the fact is that market is very troubled right now and I would be out of business very quickly, if I paid that type of money for houses. Because of the way the market is there are houses just like yours selling at prices that are really difficult to compete with. Given the fact that your house needs some updating we are going to have to purchase your property for considerably less than what you are thinking. I don’t mean to offend you but would you be willing to consider a lower price?”

You will be surprised what happens when you treat people with respect and honesty. People do not want you to beat around the bushes. I used to struggle with that quite a bit and I still do. I have found that if I just get right to the point with sincerity, I get a lot further.

Another way you can correctly handle expectations is by showing the seller what they actually would NET on the transaction. A lot of sellers are so in the dark when it comes to understanding what it REALLY cost to sell a house. There are a lot of different factors when it comes to a house sale.

Realtor Commission-This will be a minimum of 6%

Repairs or Updates to the House- What is it going to take to get the house in “sellable” condition. There is a difference between “good condition” and “sellable condition.”

Closing Costs for Seller and Buyer-This can actually end up being another 3-4% of the purchase price right off the top. You think I’m kidding. One of my investor buddies just rehabbed a house and actually ended up paying 18,000 in closing costs! Yet another reason why I love to wholesale real estate!

This is just a brief overview of this and can really be broken down into a lot more intricate details. Perhaps in a future post I will do that. Meanwhile if you are looking for more information and a great breakdown of the above process you can check out Virtual Wholesaling or you can look at Real Estate Voodoo. Virtual Wholesaling is the system I use every month to get consistent results. Real Estate Voodoo is a “lite” version of Virtual Wholesaling.

Anyway your overall goal is to show them that they really are not leaving that much money on the table by going with you. Really it would be foolish for them to try to get even 10 or 20K extra for their property and deal with realtors, contractors, and finicky buyers. They have a sure shot in you and should take advantage of it!

I hope you have a great weekend! My wife and I are going to dinner with one of my top buyers. We just closed a deal for 12K and he is paying for dinner

I love wholesaling!

Check out the Next Wholesaler in my Family

The Next Virtual Wholesaler

Last week we talked about learning how to build rapport with sellers and talked about how critical that is to learning how to negotiate with them. If you build rapport with a motivated seller you will put yourself in a very strong negotiating position. You will be in a position to where they will like and trust you and start to tell you exactly what is going on in their personal lives. This is key because you have to be able to understand EXACTLY where the seller is coming from. Remember people do business with people that they like and trust. YOU have to be that person.

There are some investors that believe you should look at the hard numbers and just throw an offer out the window as you drive by the house.  Lol…The theory is that if you make enough offers somebody is bound to take one. While playing the numbers game is defintely part of  learning to wholesale houses, this is not the type of business model that I follow. I am not  a big fan of the “throw enough against the wall and see what sticks” approach.

Don’t get me wrong, I don’t spend this type of time with every motivated seller that calls me. Shoot, I get like 500+ calls a month. I consider myself a people person but if I was talking to that many people I would be out of the business very quickly. In fact before a seller gets to me they have to go through my Virtual Assistant. You should get one they really don’t cost that much money They make sure that the sellers I do talk to are definitely qualifified. I will talk about qualifying sellers in another post but in this case if they have enough equity in the house and are asking  a reaonable price they are worth  the time investment.

Asking the Right Questions

Once you have taken the time to build some rapport with the seller you can then move to the next step of the negotating process–asking questions. If you have noticed a little bit of a recurring theme here–it is all about the seller. You are going to make them feel important and that they can trust you. Then you are going to ask them questions directly related to their situation. If you have built rapport correctly, they will answer pretty much whatever questions you ask them. These are a three different questions that you can ask a motivated seller to help you negotiate the deal.

The reason they will answer the questions is because you have earned the right to the answers. There is a principal of reciprocity that comes into play here. Because you have taken the time to listen to them and give them full and direct attention, they feel that it is only right to answer your questions.

1. Why Are You Selling?

There are different types of questions that you are going to be asking. First you will be asking You are going to be asking questions about their situation. When you build rapport correctly the reason they are selling their house will naturally surface. This is THE most important fact that you need to get ahold of. WHY are they selling the dang house? However, if for whatever reason this does not come up, you need to ask this question. You will need this information in order to organize your close. Thats right, I said the word “close.”  But Alex, I did not know I would actually have to CLOSE somebody! Listen, sometimes people will just agree to your first blind offer, but most of the time you are going to have to follow the steps of negotiation. Trust me, when you think you have a slam dunk of a deal and you skip some of these steps, you can lose deals. We will talk about closing in detail in a future post so stay tuned

2. What Will You Do if You Don’t Sell the House?

The answer to this question will give you an idea of just how motivated the seller really is. If they answer you this question with a whole ton of options the chances are you will not have a deal. I was talking to a seller yesterday and she said,” You know Alex, I am really just not in a rush to sell the house and I am even thinking about keeping it.” Right then and there I knew i was talking to an unmotivated seller. She even asked me to go by in my spare time and take a look to give my opinion. Will I go? Maybe, if I happen to be on that exact street in the near future! Lol I am not trying to be a jerk but when you realize the most valuable commodity you own is your time, you learn that it needs to be spent in money making activities.

3. How Much Money Were You looking to put In your Pocket from this Deal?

The reason you ask this question is to find out what your seller is truly expecting. They may have a number fixed in their head of what they are trying to walk away with after the dust settles. You need to know that number because it is a lot easier than working with the total purchase price of the house. For example, if somebody has a house worth 100K and owes 20K, you don’t want to necessarily ask what they are asking for the house. If you can get them to start speaking in smaller numbers you will be in better shape.

You: If I could buy your house today, how much money were you looking to walk away with?

Seller: Well I know this house needs some work so I was hoping to walk away with 20K. (You see, know we know that they want 40K for the house but because we are talking the smaller equity number it will be a lot easier to negotiatie that down if need be).  Always talk equity with a seller and NOT purchase price. They must understand what they will NET not what they will GROSS. We will talk more about that in future posts as well.

There are a lot of questions that you could potentially ask a seller but if you stick with this line of questioning you will put yourself in the position of becoming a master negotiator and putting some serious CASH in your pocket!

Have a Great Weekend!!

Have you ever thought to yourself “I really love making money wholesaling houses, but I hate all the darn negotiations!” Why doesn’t the seller just take my offer price right away? You know sometimes that actually does happen. You will give an offer price and the seller will take it right away! But you know what the problem with that is? Lol…You offered too much! If the seller takes your first offer without any objections, that means they would have taken lower. I know it seems like an uphill battle everytime but this is just the name of the game. Negotiating with motivated sellers is an invaluable skill that will make you a ton of money in this business. So you better get good at it!

I am thinking about doing a series of posts on the blog about seller negotiations and what I think are some key points to reaching a win win situation with the seller every time. This would be the first of a mini series if you will I am not sure if they will all be posted in succession but I will do my best.

Rapport

Remeber this key phrase: Motivated sellers will sell to people that they like. So be likeable, darn it! I have seen a seller actually sell to me for a LOWER price than the competition because they just happened to think that the other investor was a jerk! If you are not the best at being a people person, get better at it. You may have to fake it until it comes naturally to you. You have heard the old addage “Fake it till ya make it” Well it definitely applies to this situation.

What does that mean? That means you have to convince your own mind that YOU are a great real estate investor and negotiatior BEFORE  you become one. Listen, you can be greener than the fresh spring grass outside and still learn to wholesale houses successfully. It is really all a mental game and before you can conquer the mental games of negotiating you need to conquer your own mind and convince yourself that you ROCK! This may seem like a bunch of mumbo jumbo but it is true. You have no idea how powerful your mind really is!

What are some ways that you can build rapport or make the seller like you? You have to understand what makes a motivated seller tick. There is one main reason why you are sitting in their living room in the first place; the reason is because they have a problem. People who have problems like to be heard. They like to be listened to. Listening is hypnotism. If you can sit and listen to a motivated seller in distress they will listen intently to what you have to say and more often than not go along with it. The reason they will be more receptive to your ideas is a principle called reciprocation but we will get a little more into that later.

You see a lot of investors get into the house or on the phone or whatever the case may be and just start talking. They start talking about how long they have been in business, how much money they have to buy houses, how much they know about the business, and they just don’t SHUT UP! These are the investors that lose deals because the fail to listen to what the seller needs and wants. This is so important when it comes to closing a motivated seller on why they should sell their house to you.

Remember the last time you had a problem or maybe you have something in your life right now that you are working through. Sometimes that listening ear even if it is from a complete stranger can mean the world to  you. I am sure you have sat on a plane before next to a complete stranger and after the flight was over you knew their entire life story! They had you as a captive audience. You werent goin no where! Lol

Now don’t just sit  there and nod your head thoughtlessly. My mind goes a million miles a minute and sometimes I find myself thinking about everything under the sun but what that seller is actually saying. I guess you can say I have ADD:) You really have to listen in and identify with their problem. The main reason to listen to their situation is so that you are fully equipped to provide a solution to it. So when it comes time to close the deal you can actually present your offer as the solution to their problem.

For an example of a close, Mr. Seller I can offer you 56K for your house so that you will never have to deal with that terrible tenant again. Wouldn’t it be nice not to chase after him for that payment every month? 56K and you will never have to worry about your house again and I can close in a couple weeks. How does that sound? That is a line right there that I have used many times when it comes to closing out a deal.

Another way that you can build rapport is asking questions. Keep in mind these questions are geared towards the seller. As you listen and glean some information ask them more about what they have already told you. You want to expound on their statements. For example, the may be telling you about their problem tenants. You could say “So what did you do when you knew that tenant was not going to pay you and you were going to have to come up with the payment for that month?” You want them to talk more about their current situation so that the more they think about it the more they want out of it!

So remember that you need to be liked if you are going to be a succesful wholesaler or negotiator with motivated sellers. Stop talking and listen to what the seller needs so that when the time comes to close them you will know exactly what to do, because they will have already told you.