Am I scaring sellers away by low balling???

OP

Investor · Atlanta, GA · Member since 2013 · 43 posts · 7 votes

11y

appointment?

Rick Baggenstoss

Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes

11y

"Appointment?" Hmm. Let's go back to that.

You are selling a solution to the seller's problem. A key part of the solution is an offer they feel is justified and from someone they can trust -- someone who understands their needs.

While your offers may be too low, it may be that you're skipping a critical part of the sales effort. Gathering the needs of the seller and building trust (I think rapport is to broad).

Do you uncover needs of the seller through probing questions?

Do you describe your method for determining a price/solution?

Do you describe to the seller what to expect if they were to accept your offer?

Do you meet with the seller to look them in the eye and confirm a mutual understanding?

If you're getting to motivated sellers, then the appointment is worthwhile. Your close rate will go up significantly.

I'm just guessing on what would make a difference. Your note suggests it's price. Have you followed up to see what the sellers ended up getting for the houses you missed? Probably a good idea to see if you're being too cheap ... Or if they even sold, therefore weren't motivated.

Since you're seeking feedback, you're going to do great. It's a good sign that you're willing to learn and adjust.

Best,

Rick

9 Reply

JPaul Mills

Wholesaler · Navarre, FL · Member since 2014 · 252 posts · 86 votes

11y

I'm with you 100%. I recently started wholesaling a few months back and have been Very Successful. I have had a long work history in sales and the most important thing would be to FIND THEIR HOT BUTTONS!!! and NAIL THEM. for instance, you ask them what their situation is? why are you wanting to sell? then have your pen and paper handy and BE QUIET, LISTEN, AND WRITE INFO DOWN. I currently sell cars as my "DAY JOB" and statistics will tell you that 81% of customers said they bought from you because they LIKED TRUSTED AND RESPECTED you. Now if you don't build a relationship with them they will never trust you therefore never see why your price is what it is. Wholesaling can give you a great source of income but you also don't have to make grand slam deals every time (ie. 10k or higher). Now I'm not saying to shoot for the stars but don't walk away from a 3k deal either because that's more than what you started the day off with right. I always go into every appointment knowing what my starting offer is and what my highest offer can be. also You cant be afraid of NO. if the numbers don't work then they don't work.

JPAUL

3 Reply

Sebastian Gast

Investor · Denver, CO · Member since 2010 · 99 posts · 20 votes

11y

Great advice guys. I think a fair question to ask would be, how do you make sure you GET an appointment? I wouldn't think anybody would be interested in an appointment if they feel like they are being lowballed. I also don't think anybody would be interested in making an appointment if they don't at least get an offer on the phone. How do you handle this?

@JPaul Mills

@Rick Baggenstoss

OP

Investor · Atlanta, GA · Member since 2013 · 43 posts · 7 votes

11y

@Rick

Thanks for your input. Valid points there of things I've been missing-building trust! I am a very personable...person, but I have definitely dropped the ball from the questions you've asked. I do believe that part of my issue is the sellers are not motivated-even though they call me. Another part, I keep getting other investors calling, which I think is the cause of their numbers being higher than I can take and still turn a profit. But you're right. I need to sell them on it! I need to really figure out what They need and provide the solution. I've worked in sales for half my life, i should know that this applies to motivated sellers as well.

Thanks a bunch!

Rental Property Investor · Kansas City, KS · Member since 2014 · 604 posts · 222 votes

11y

@Iris Burrows Here's how I handled my latest deal: Got a call from a referral from one of my yellow letters. The lady had inherited a house from her recently-deceased mother and wanted to get rid of it very badly and as quickly as possible. I set up a time to meet her at the property to do an initial walk-through. I brought my checklist and started marking off stuff that needed to be fixed. Checked basement walls for leaks/cracks, looked at the roof, etc. During this time I'm building rapport with the seller. Talked about how I grew up in that same neighborhood..asked about her kids, etc. Assured her I didn't care a bit about the condition of the house. At the end I told her I'd take all the info and work some numbers and get back with her within 24-48 hours. I took the pics and worked up an itemized repair estimate. I then talked to a buyer I know that's hot for a deal. Showed him the pics and repair estimate and he made me an offer (sweet!). I then called the seller back and set up an appointment to meet her back at the property today (so she's again in the house she wants rid of so badly...keeps it fresh in her mind as to WHY she's selling) and we'll negotiate the offer/sign the contract there (Lord willing!). The buyer I have is offering right at what the seller initially said was her "bottom dollar" so my payday is going do depend ENTIRELY on my ability to negotiate her below that number (hence why we're doing it at the property. I'll also mention she can have cash-in-hand within 10-14 days).

Hopefully this can give you some ideas on how to build a relationship with the seller AND do a thorough evaluation of the property for your potential buyers. Best of luck to you!

3 Reply

Kirk R.

Peoria, IL · Member since 2013 · 967 posts · 383 votes

11y

@Jim Viens

I appreciate you sharing.

Is it worth trying to negotiate deal on first meeting? Go in with comps and then adjust for condition?

OP

Investor · Atlanta, GA · Member since 2013 · 43 posts · 7 votes

11y

Thanks for the details @Jim! I'm always concerned, too, about if I should even speak to a buyer when the seller and I haven't contractually agreed to a price. I'm certainly going to use some of the method you've shared. And God willing, your deal will pan out for you. As @jpaul mentioned earlier, even if the deal isn't a huge pay day, a profit is better than nothing. I think Phil Pustejovsky said, "a quick nickel beats a slow dime" and Anthony Robbins said, "50% of something beats 100% of nothing"

Keep the advice coming guys, I'm soaking it up!

2 Reply

Rental Property Investor · Kansas City, KS · Member since 2014 · 604 posts · 222 votes

11y

I tried that once but I'm not comfortable enough with my on-the-spot repair estimating skills to be willing to do that again anytime soon. Just starting out it's too easy to overlook something the first time through (thus the ton of pictures). I figure if the seller is desperate it may help to let them stew a little bit. Builds anticipation. You just have to be very careful not to wait more than a day or two to get back to them. Someone else may swoop in and steal the deal out from under you before you get the contract! But if you build the trust/rapport/relationship with the seller and get back with them quickly you should be able to get a solid look at the numbers and make a good offer.

Rental Property Investor · Kansas City, KS · Member since 2014 · 604 posts · 222 votes

11y

@Iris Burrows My situation with the buyer is somewhat unique in that we work together at our full-time job and we're both hungry new investors (there's actually three of us in the work group I'm in at my company that are getting into REI). We talk about all our potential deals and such. I figured I'd let him have first-look so he can get his first flip under his belt. At least now I'll know for sure how much I'm going to make as soon as I get it under contract! :) Normally I'd get it under contract THEN contact my buyers.

Rick Baggenstoss

Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes

11y

@Jim Viens Yep. That's a great way to do it. Work backwards from an investor's number.

Rental Property Investor · Kansas City, KS · Member since 2014 · 604 posts · 222 votes

11y

By the way...got the house under contract tonight. If my buyer sticks with his preliminary offer after he does his inspections I stand to make about $7k.

2 Reply

Kirk R.

Peoria, IL · Member since 2013 · 967 posts · 383 votes

11y

@jim

@Jim Viens undefined

Congrats

Nathan Paisley

Flipper/Rehabber · Atlantic County, NJ · Member since 2012 · 514 posts · 209 votes

11y

@Iris Burrows it's a numbers game, especially with mailing letters. Not to mention it usually takes several hits to the seller before you see a willingness to negotiate the numbers. Who are you targeting? Free n clear? Absentee? Pre-foreclosures etc...

Wholesaling is one of the hardest if not the hardest areas of re to walk into and start closing deals. Especially on a tight budget and lack of experience. One of the most important things I can tell you is to be able to adjust and know what's working and what's not. Wholesaling is a game of trial and error. What works for someone in California might not work for someone in Massachusetts. Keep track as best you can on who you target, when you target, how many times you target, how many mailers went out on every campaign.

Being successful is not easy. That's why most if not all eventually give up. I always say it's a marathon not a sprint. Some get luckier then others, it's life. You'll be fine just never give up.

@Kirk R. Time is money, go in with guns blazing. If they say no, move on to the next one.

A good thing to do in the beginning of wholesaling is to go to every house you can in your target area so you can see all the differences in the houses you're targeting. This way you see what a fixed up/updated kitchen, roof, deck, bathroom etc... looks like in comparison to the original. Go online or to Home Depot and look up prices of material for a basic number for estimate costs.

Do anything and everything you possibly can to give yourself an edge to be successful.

@Jim Viens congrats and good luck.

OP

Investor · Atlanta, GA · Member since 2013 · 43 posts · 7 votes

11y

Hey @Nathan. Great tip on driving the neighborhoods on my list. You obviously put plenty of energy into your work.

Right now, I'm targeting absentee homeowners. I just got one other home under contract yesterday! Now I have to flip it. I'm pretty excited. I don't stand to make a bunch off of it, but I have plenty of room for the buyer as a selling point. It's ok, though. It's my first actual deal, I just have to make it happen.

Mike HurneyPro Member

Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes

11y

@Jim Viens $7k, Nice! and you deserve it, for studying the Methodology, Market, Sellers, Buyers and Stepping Up!

Seems you're selling the Contract before you have to Buy it?

That's actually what I call a "Flip".

Just like "Flipping" a coin, you don't need to wait 3-6 months to tell whether it's heads or tails. Most folks mistake Buy-Fixup-Sell/Rent for "Flipping":-o

Mike HurneyPro Member

Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes

11y

@Rick Baggenstoss & @JPaul Mills I agree Trust and a willingness to help someone is very important. I add a little personalization, like whether and how they like their coffee and what's a favorite food.

A gentleman in our Wholesaling/Flipping subgroup bragged that he's been to one Buyer at her house 7 times and feels he's getting "close". I asked what's the reason she's selling? He didn't know. Since you're there in the morning why not bring coffee or a muffin she likes? He said he didn't care he just wants the house for half what it's worth!

Wanna bet on whether he gets it or not?

Barton Wallace

Wholesaler · Houston, TX · Member since 2014 · 47 posts · 18 votes

11y

Great discussion. There's some really good advice for people to improve their negotiation and sales skills. Remember, real estate is much more about people skills than it is about real estate knowledge.

@SebatianGast - I regularly get people to make appointments without giving them a verbal offer over the phone. I try not to waste my time going to a property unless I have gotten the seller to admit to some selling price that is within reach of what I think is reasonable. If they are grossly unrealistic in their terms, it will be a waste of everyone's time.

You never know though. I recently visited a property where the Seller had told me his absolute bottom line and it was well above what my offer would be. I took a real estate agent with me so if I couldn't seal the deal, I would hand it off to the agent and at least get a referral fee on a market listing since I am an agent.

I discovered that his "absolute bottom line" that he gave me over the phone came down another $40,000 while we talked. Keep at it. We all can get better at building rapport and negotiating offers.

3 Reply

Erie Springer

Boston, MA · Member since 2008 · 52 posts · 10 votes

11y

I'm Johnny come lately here but this is all great information here

Thanks to all who posted on this thread

OP

Investor · Atlanta, GA · Member since 2013 · 43 posts · 7 votes

11y

I appreciate all the input. I listened to a BP podcast where they interviewed @Ben Grise. He's been in the business just a year and has already done at least 5 deals. He happened to mention that he uses different formulas for different purposes of real estate. For instance, the standard is the 70% rule. But there is more to consider when trying to flip to a landlord. That tid bit of information should also help me keep my numbers in check when I deal with sellers.

@Barton Wallace, you said you regularly make appointments without having an offer on the table. My fear is that my numbers don't work and I get out to the house and they still don't work, for myself or the seller. I'm at a point in the game where I'm willing to cut some of my profit to better fit the buyers needs. Is that naive? Or is it that although I'm harnessing my negotiation skills, the sellers really aren't that motivated?

Podcast Guest on Show #91

Ben G.Pro Member

Investor · Indianapolis, IN · Member since 2013 · 647 posts · 196 votes

11y

@Iris Burrows buy and hold investors are more concerned with Cap rates and CoC or cash on cash return for their investments. They don't apply the 70% rule when making an investment decision.

Determine what cap rates your landlord buyers are aiming for and then buy the property and price it accordingly.

This article by Ali Boone should help: http://www.biggerpockets.com/renewsblog/2014/05/10/cap-rates-cash-cash-returns-explained/