I'm meeting with a seller today that I got through my direct marketing campaign. This is my first lead. On the phone he told me what he wanted to sell it for. He must be in a delusion because the house is worth $150K less than that. Since I'm still new at this, I decided to take the appointment if only to practice my in-person skills.
What should be my approach with this seller? You could argue my time is worth more than this but I need the practice.
Start by going over some of the standard questions from the phone conversation "just to make sure I got the info down right." Make sure you hit on what repairs or updates they think the house might need. I'd ask them again what they think their house is worth...then ask them to explain how they came up with that number. I'd also go prepared with info on actual recently sold comps in the area then gently go over those numbers with them. Something along the lines of "Well what I've found in doing a basic market analysis of the area is this..." Then finish with something like "Does that make sense to you?"
Make it a teaching session. If the lights still don't come on and they won't budge, they're not motivated to sell. Just leave them with your contact info if they ever decide they want to work something out and make sure you ask for referrals.
It's good practice. Go there with information that will show him how you come to your price. What it's going to take to fix the place up. What local houses have sold for within the past 6 months. How that, even though houses have sales prices, that is not necessarily what they are going to sell for. Keep it very black and white. Don't tell him he's crazy. Present it all in a very logical manner. Remember that he is probably coming at it from an emotional standpoint. You have to come at if from a "this is just business and these are the real numbers" standpoint.
@Tony Hernandez , it sounds like the "Seller" is looking forward to wasting your time, because not only is he likely to know that his home is worth $150k less than what he says he wants, he will also be aware that you will be trying to get it under Contract for a similar amount LESS than what it is actually worth!
Anyway, be prepared to show him whatever low $ comps you can find in the area (while dutifully NOT mentioning any high $ comps), and be upfront about the fact that you are aiming to help out MOTIVATED Sellers by being able to close quickly and with Cash.
[But, if you DON'T know how to close quickly and with Cash, then exactly what ARE you bringing to the table]? All the best...
Adjusting seller expectations will have you walking a fine line between reason, and emotion. People have a (proven) attachment to things they own that makes them think it's worth more just because it's theirs.
@Nat Chan gave you some really good advice. You don't want to go to this guy and tell him his house is worth less because YOU said so, you want the market to tell him that. You want HIM to show you flaws in his house, and maybe even what he thinks it'll cost to fix them. Try to keep the dialogue open, and positive, even if you aren't agreeing. Getting confrontational won't help his, or your situation.
Find out why he thinks his house is worth the number he gave you. Many times people will admit to irrational reasons (that's what I owe, that's how much money I need, that's just what I want for it, etc) but for most people, emotional decisions will beat out their rational mind. You have to win his emotions AND reason.
Either way this will be good learning experience!
For me the answer is simple. You don't. You are excited about it because it is your first lead and I completely get it! Its exciting when you first get going! However, if you stick with it then I guarantee in about 4 months you instantly junk this lead and move on to the next one. Feel free to play this one out and the people above gave you great strategies to play it out, but eventually you will not pursue leads like this one.
@Micah Copeland - Agreed. I won't want this lead in the future. I'm definitely taking this as batting practice.
@Alexander Felice - I think he saw the 1890's house across the street sell for a ton and thinks he can get something similar. However, his house is nothing like that one and would take $150k to remotely come close. I think he wants what its worth if someone fixed it like that.
@Brent Coombs - I'm trying to figure out what I can do for this guy. Sure, I can wholesale the deal to some cash investors who can close quickly. However, the rents in the neighborhood would only net someone 5% Cash on Cash ROI. If you used leverage (assume 25% down) you would likely lose money on monthly cash flow. Maybe an investor would see appreciation as the exit strategy?
@David W.- There is only one comp that is close to this guy. The house is an a historic district where there are really old homes next to stuff built 10 years ago next to stuff build 40 years next to a 1900 house. Do I just show him the one comp that is close? The one comp is pending. I know from calling the agent on the property that they are getting asking.
@Jim Viens - Great advice! Seems like a good way to start off.
@Nat Chan - Thanks Nat. As I said to David, I only have one good comp and its pending. Thoughts?
Where are you getting your comps from?
Try using Redfin estimate tool. It will give you an options of many comps dating 1 year back in a wide radius and it allows you to pick and choose your comps to suit yourself.
Don't humor him. Tell him the facts, show him the comps. Then tell him your offer, leave him your business card, and leave. Then use the time you may have wasted by finding better leads.
instead of burning a dead dinosaur to sit in this guys territory i'd hash out the unrealistic price over the phone. If he seems flexible and motivated (hint: you know their flexible when they lower their price) then I'd follow up and walk his house with him.
Did you ask him why he needs to sell? By what timeframe? Whats his backup plan if it doesn't sell in time? How much does he owe? How much is he looking to put in his pocket at end of closing? Will he owner finance in order to reach his price? Why did he choose a batshit crazy price? What is more important his motivation for selling or getting his crazy price?
All of these can be discussed on the magic apple walkie talkies we carry in our pockets. ;)
Some sellers think their property is worth more than the market dictates. Does he have a recent appraisal? Make sure to check the comps. Anything more than 6 months doesn't give you a good indication of the FMV now. Good luck.
Every seller thinks their home is worth more than it really is. I recommend having comparable sales handy to show your seller. This helps so they're aware of what's sold the past 12 months, and what's currently available on the market, which would be their competition.
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