What to say/not to say 1st Initial call

Question

Ok, I am getting calls and getting forms submitted through my site and now I need to know some basic things to say and how to negotiate with the seller.
How do I present the option agreement to the seller so that they dont become confused,offended or not interested.
Clearly the I BUY HOUSES people cant really buy all the homes that people are offering to sell to them. OR CAN THEY?
So what do you actually do when you find a house that you really have no interest in  because the seller is asking to much and there is no way you could work with the numbers?

Mike C · Answer

Ryan,
          
          First, you are over thinking too much. If you canâ€™t say no and not feel bad about it, then this is the wrong business for you IMHO. Of course the sign or marketing says I buy houses. That doesnâ€™t mean I buy every house of everyone I talk to. Remember, they called you. They want or NEED to sell you donâ€™t need to buy. This is a business decision for you: nothing more and nothing less. If I canâ€™t buy or control the home AND make a profit, I donâ€™t buy it. Very simple.
          
          When we talk the numbers and it is obvious the numbers wonâ€™t work for either myself or the seller, I tell them the truth. I tell them exactly what I just told you in the previous paragraph. Something like this â€œThis is a business decision for me. I canâ€™t make your problem my problem. I donâ€™t buy homes where I canâ€™t make a fair profit or I would be out of business. Buy all means try to sell the home the way you want. If you canâ€™t sell the home and you actually NEED to sell in a few months, then give me a call. We can part friends.â€
          
          In truth, it wonâ€™t take more than 5-10 minutes on the phone to know if I have a deal. If not, move on. This is a contact sport. The more sellers you talk too, the more homes you can buy.
          
          I ask 4 questions of every seller I talk to. Remember if the seller isnâ€™t motivated, why are you talking to them? 
          
          Why are you selling? (I want to find out if they are motivated. This is the most important factor in my buying the home. If they are just testing the waters, they are wasting your time. If they are motivated, I can usually work something out.)
          
          What are you asking for the home? 
          What is the home worth?
          What are the repairs?
          
          How did you arrive at these numbers?
          
          Yes, it really is that simple. After I know the answers to the above questions. I know where I stand and will delve into more detail if it is warranted. Often times, it is not. That is ok. There are a lot of sellers out there who are motivated these days.  
          
          Best of luck
          
          Mike C

Maryann L. · Answer

That said, when I first get a homeowner on the phone I try very hard NOT to talk at all.  I try to get out of them what they are looking for and what they want to do.  Usually I can tell right away if they are someone worthwhile.  Some questions I use:
Tell me about your property?
Tell me about the timeframe you're looking for to sell?
What is your situation?

When it's time for me to talk, I try to be brief and not confuse them.  I ALWAYS get an email if at all possible and get permission to do a follow up email and then send my marketing packet so that any question they may have had is covered.

Good luck.

Mike C · Answer

Ryan,
          
          The fact they are asking for full market value (or what it used to be) automatically means they are probably not motivated (one exception listed below). You wonâ€™t offend people if you are honest and upfront with them. Tell them the truth. Tell them exactly why you wonâ€™t buy and what it would take for you to be interested. But be brief because you canâ€™t convince unmotivated sellers to become motivated. But their motivation level will change over time most of the time (but not always). You donâ€™t have to be offensive or unscrupulous to buy houses. In most cases if they are motivated, they are looking for someone to save them and want you to be credible so you will buy their home. The point being they wonâ€™t be fighting you on every point of concern if they are motivated. 
          
          It sounds counterintuitive but put yourself in their position. If they were just transferred (or whatever) and move in two weeks and canâ€™t afford 2 payments, if they are concerned about their credit, they are probably motivated. Help them and they will thank you whole-heartedly for it, even if they are giving up equity or cash to end their pain (remember, I need a reason to get involved).
          
          Now the one exception. When all other offers fail because they want too much or we canâ€™t come to terms, I always offer this option (if the numbers make sense which I will explain). I will pay them their full price if they will give me my terms. You wonâ€™t get many this way but a few make it worth asking for. Now there are some caveats with this strategy as in a falling market, you have to be careful and understand what is going on. But with the right terms, I will still buy the home for full price. If the numbers make sense, I will take it sub2 or even on a L/O (although I have never done a L/O on this type of deal but would in the right circumstance) if there is good upside. I pay them full asking price for whatever their payment (or less if possible but very, very unlikely) is for as long a term as I can get on a L/O. I say something like â€œI will pay you your full 200k at 1000mo (or their payment) for the next 200 months.â€ If a L/O, I want a long time so the market can turn and finally start appreciating (that will be a while probably). I would want at least a 10-year option. This will only work if I have a good cash flow spread between their payment or what I am paying them and what I can put a tenant buyer in the home for. Also remember, I only buy in the 150-250k range, the meat of the market and not in the low end so be cautious with this strategy on the lower end. 
          
          You can always ask because you donâ€™t know what is important to them. They may only care about getting full price, even if they donâ€™t get the cash today. This whole strategy hinges on a good spread for cash flow. Do not take it without a good spread. This is a great deal for you (even in this market) if the cash flow is there AND they understand this is a long-term deal. I care about cash flow. If you care only about backend profits, then this is not for you. This is good because of the time value of money. If I pay 200k for a home over the next 25 years (the remaining term on their loan), if you discount the present value of that in todayâ€™s dollars, you will like what you are really paying for this house (figure it out on your own). And realistically, I am not going to hold it that full 25 years. It will probably be 5-10 years, or until the market turns. One other caveat. You have to run an am schedule because if you are paying 1000-1400mo to them (at 0% or a low rate that is disclosed these days), their loan balance is not falling as fast as your balance is. So if you hold it a long time, they could technically owe more to the bank than you owe them for the home. You have two choices. Only do deals that donâ€™t over amortize your payments as compared to theirs. Or do what I do. Put in the contract, I will pay off whatever they still owe to the bank at the time I pay off their loan or exercise my L/O so they donâ€™t have to worry about the potential (and probable if a newer loan) to owe more than I owe them. Sure, I am giving up some money but I will still do fine on the deal. This is just extra cash for me over what I sold the home for. The longer I held this, the more I will make. The backend is gravy to me anyway.
          
          I donâ€™t recommend this for your first deal or few deals, but it can be a good deal if you understand what is going on and what the potential downfalls are. But as long as I have good cash flow, I will hold this as long as it takes the market to start appreciating again unless I am cashed out sooner. It that happened, then I would get essentially no backend if someone bought in the next few years but I would have made some good cash flow, helped out a seller, had a tax right off and made some money.
          
          Good investing. Sorry for the long post. Negotiating is the key to this business. Learn to love it. 
          
          Mike C

Steve Babiak · Answer

Ryan,

Go to the free library nearest you before buying any books ...

Ali Samana · Answer

Thanks for the compliment Ryan.  I just sent you my IPQ sheet via email.

Ryan Mertz · Answer

Ali, Your very smart with your response. I like your style.
I will add you as a colleague and we will network and share strategies. 
You can e-mail me at the email below.
I would like to look at your IPQ sheet.
I like the philosophy of if your not embarrased by the offer its to high.
Ill remember that in all my future buy and sells.
I just moved from buying and selling cars, to buying and selling real estate. 
 Only time will allow me to sharpen my skills!

Ali Samana · Answer

Hi Ryan,

I am a little bit more structured so I have what I call and Invesment Property Qualification sheet with a bunch of questions.  I am getting my website made right now and I am going to put the questionaire on there also.

Sometime though, I know the seller is motivated even before I fill out the whole sheet.  If you PM me, I can send you a copy so you can use it also.

As for negotiation, I heard someone say that if you are not embarrased by your offer than it is too high :)

Rod Marlow · Answer

"The Art of the Deal"...some guy named Donald Trump wrote it :-)

Ryan Mertz · Answer

Thank you guys,
I can say no. Ive said no to every person who called me so far because they ask for me to buy there home at full market value.
But I do get where your coming from.
          I talked with enough of you  guys to realize you dont buy every house. Just wondering how you would go about negotiating without offending people.
          I am going to go to borders tomorow any good negotiating books?

Brian Haskins · Answer

Well its pretty simple you want to ask them open ended questions and then let them talk, they will give you a ton more info that way. Ask them about the condition of the home and all the details, ask them why they are selling. Ask them how much they owe and how much they think it will take to fix it up.  as far as the option agreement you won't even talk about that over the phone. Wait until the appointment. And no we don't buy every house that people want to sell  not by a long shot. you have to do tons of research on these houses and you have to know your market really well to be able to make educated offers. In my area it takes about 20 - 25 calls to buy a deal, it may be much higher for you in your area. If your not interested in the house you just say it doesn't look like the numbers are going to work out. If the homeowner owes much less then what they are asking then you will follow up with them regularly to see if you can buy the deal later. Follow up is key, not many will sell on the first phone call or appointment.

Brian Haskins

What to say/not to say 1st Initial call

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