BiggerPockets

Negotiating with Motivated Sellers and Wholesaling Houses Part 2

Friday, May 15

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!!

Negotiating with Motivated Sellers and Wholesaling Houses

Tuesday, May 12

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.

Wholesaling Houses with Confidence

Tuesday, May 05

I have been talking to a lot of new people lately who are interested in learning how to wholesale houses. It seems there are a lot of people out there who are trying to break into the real estate game and make a great stride towards freedom. Maybe you are in a situation to where you need money right now for a personal reason or maybe you are just looking to break free from the J O B. You know what J O B stands for, don't you. Just Over Broke! 

I will tell you one of the main reasons that people do not take that one step towards breaking free--FEAR. Fear that you won't know what to do, fear that you won't know how to find these houses, fear that you won't know what to say when you speak to a motivated seller, and fear that you will not be able to flip the property to buyer once you have it under contract.

There are a lot of different fears that you can encounter and the only cure to these fears is the direct opposite of fear and that is CONFIDENCE. The only way to get confidence is through experience. You need to get out there and start talking to motivated sellers. That means you need to start putting out the bandit signs if you don't have a lot of money for marketing or if you have a little bit of money to invest you can start with a direct mail campaign. The main thing is it is going to get the phone ringing and you are going to start to speak with sellers and learn what to say to them, how to say it to them and when to say it to them.

If you are just starting out you don't need to worry about all the mechanics of speaking to motivated sellers. Don’t get me wrong there is a whole science that goes behind talking to motivated sellers and the better you get at it the more money you will make. But don’t worry about that right now!  You just need to get out there and do it. If you put your marketing out there you will speak to sellers and you will actually find that they will just give you an excellent price without you even having to negotiate one bit! That happened to me today! A seller is asking for 60K when I know the house will sell for 135K I have not even talked to the seller yet! My virtual assistant got all the information on the deal!  Do you know how he did that? It is really simple….He asked Questions! In another post I will talk about the right questions to ask so stay tuned.

Pretty soon you will showing up to a seller’s house in shorts and flip flops like me! I walk in like I am ready to go to the beach and I walk out with a signed contract! Sometimes I do go to the beach afterwards J! So get out there put out the marketing and start talking to some sellers. You WILL get a deal YOu WILL make some money and you WILL be on the path to financial freedom.  

If you have any questions feel free to comment!

Wholesaling and Cheap Marketing Tips

Tuesday, May 05

A lot of people are having trouble jumping into the wholesaling business because of low marketing capital. In the beginning of my wholesaling career I really did not have any significant money to market with. One of the original real estate mentors, Ron Legrand, said it best " You have to crank up the buying machine!" He would also say that you could be the best at structuring all different types of real estate transactions but if you do not have anybody calling you, you are straight out of luck!

I have been in the position before where I was wondering where I was going to get the money for my next marketing campaign. The fact is that inconsistency of my marketing campaigns is what was keeping me from going full time and generating a significant income. I tried many different ideas to get some deals coming in and had some mediocre success at best. If this is exactly what you are doing, this should not be a shock to you.

The bottom line is that these cheap marketing tactics are what I refer to as fillers. They fill gaps but do not give you a significant income and cannot send you to full time status. The purpose of "filler" marketing is to get you to your next deal when your other marketing is experiencing a dip for whatever reason. Filler marketing will produce a deal once every couple months. This is fine, becuase this is the purpose of it.

If you are low on marketing dollars you need to get some filler marketing out there so that you can score a deal to get some consistent marketing going. This is exactly what I did to start my road to full time status. I heard that internet marketing was all the rage so I bought into a couple membersites. You know the type that you pay a monthly fee to and you get about 30 leads or so a month.

I got lucky and my first month into it I scored a deal that made me 13K! All I had to spend was 100 bucks for the membership site. I eventually cancelled the site because the results I got after that were mediocre because it is what it is----a filler site. So I took that money and invested it in direct mail to really get my marketing machine moving and have not looked back since!

I just thought about this post because I was out running an errand for my wife returning a movie to redbox. Redbox is one of those DVD vending machines for a buck a day. Normally I leave a business card right on top of the credit card swiper. There is a great little shelf for it! It is almost made for Real estate invsestor marketing! However this time if you could believe it--I FORGOT my business cards! I missed out on some great filler marketing.

Oh well learn from my mistakes and use every opportunity to get some filler marketing out there. Leave business cards whever you go. I leave them at gas pumps in the credit card applications clear box. Leave them at restaurants after you finish your meal. You can leave your business cards everywhere and actually end up getting a deal from it. So get your cards out there, start getting some calls so that you can invest  in some real marketing to finally be on the pathway to financial independence!

Handling Incoming Motivated Seller Leads

Thursday, April 30

How do you handle your incoming motivated seller leads? The answer to this question will give you a good idea of where you are in the
development of your business.

Please don’t tell me you have all of your leads go to your cell phone. That is the worst possible thing that you can do! I used to do that myself
and when I was working back in my JOB that was very difficult to maneuver. Especially if you are spending a lot of money on marketing you don’t want to waste a single dime! You try to get every call that comes in.

Since most of my marketing is done through direct mail I use a pre recorded message line. I will tell you that it has given my life back. When you get 500 calls at a time like I do, you will know what I am talking about. I can actually sit down to dinner without worry about missing a call. The cool part is that the voicemail is emailed to me as well!

When you really want to take your business to the next level you can hire a VA to screen your prerecorded messages so that you only talk to the most motivated and actual deals. I recently did this and it has helped a ton!

My recommendation is to keep having the calls go to the prerecorded message line and keep talking to the sellers to gain experience but as soon as you are ready–outsource it!

Any suggestions or comments? Let me know what you think?

The Wholesalers Deal Machine

Tuesday, April 28

Just wanted to drop a quick note on how the business of a wholesaler works. There is one key word here...VOLUME...

The reason I decided to write this is because I just got off the phone with a seller on a deal that I am working on in a virtual market. Drop me a comment if you want to know more about what Virtual Investing is.

The short story is that I have a buyer who is ready to go at 45K. I offered the seller 30K because it is in need of some serious work. I just got off the phone with him and he said he would take 35K. Do I do the deal? There is another factor here though. I have 2 other partners on this one. One partner is somebody that I have teamed up with on some marketing costs and the other partner is the investor that is bringing in the buyer.

So basically 10K split 3 ways is 3300.oo or so. I thought to myself "Should I go back to the seller and hit him for 32K or go back to the investor that is bringing the buyer to take less of the deal?"

The answer is that I should just take the deal and take my 3300 so that I can build my relationships with the investor who brought the buyer so I continue to do future business. One thing that is very important in this business is to build relationships! They will keep you in business.

So anyway that deal for 3300 with another deal for 10K and another deal for 10K is what 23,300? This is the wholesaler's deal machine. The little deals keep you in business to get to the bigger checks. You know I have not had a 20,000 deal in a while and it starting to get on my nerves. I will keep you posted though :)

Keep on Keepin On