Over the past decade investing in real estate I have responded to sellers’ phone calls on the heels of other investors in my local area. That is to say that I was not the first investor to look through the property in the past few days. Oftentimes sellers will go right down the yellow pages phone directory calling every real estate investor they find. Yet this ‘competition’ was not a financial problem for my real estate business. In fact I was thriving with deals while certain big fish around me (A nationwide Real Estate Investing franchise I believe we all know) were falling on hard times. Why was I picking up monthly deals when my competitors were not?
There are two main answers why I seemed to be closing the deals that other investors before me just could not.
Deal Making Criteria: Know your deal making criteria before your visit with a seller. What separates you form the next investor? Plan ahead and know the minimum percentage of profit you must make on any single real estate transaction for the deal to be worthwhile for your business plan. Will you be offering creative terms to solve the seller’s problems or just making cash offers? What are your selling strategies? What repairs are you willing to accept? How old of a property are you willing to purchase? What areas of town? Will you purchase wood frame built homes, concrete block homes, condos, mobile homes, etc? If you cannot seem to make a deal work because the numbers are not in your favor, is there anyone you can wholesale or bird-dog this property to?
Knowing your deal making criteria will drastically cut down on your time on the phone and in the field. Knowing your buying criteria can instantly make you sound like a serious and creditable buyer that knows what they are looking for. Sellers should know up front what your criteria are for quickly buying their property; this also helps to place a realistic price/terms target in the seller’s head even before you begin negotiations. There is no sense in wasting anyone’s time if a deal is never going to work out anyway.
A major reason I was able to sink deals left and right was because of the variety of ways I was willing to buy real estate. If a seller would not agree to my low cash offer I would continue talking with the sellers and making offers until I had the home under contract or until it was determined that there was no deal to be made. I did this by making multiple offers; cash and terms. If I was not able to purchase these homes at a low cash offer, I may still be able to workout a Win-Win deal to make money with the seller’s unwanted property.
Negotiation Tactics: Every seller you speak with will have their own ‘deal making criteria’ or ‘seller goals’ he/she wish to accomplish from the sale of their property. If sellers do not achieve their goals by selling to your competition, they will most likely not sell. Then it may be your turn to make a deal. Some seller goals may be to: receive a certain purchase price, sell by a certain date, get annoying creditors off their back, improve their credit rating, receive monthly payments for the sale of their home, not be taken advantage of by an investor, simply get rid of their property once and for all, the list goes on.
Knowing your sellers unique deal making criteria can only be done by asking the seller what he/she wants, then listen to the response and take notes. Cross check your seller’s goals with your own to see if there is a deal possible. Almost every time you will not be able to meet everyone of the seller’s goals for the sale of their property. In fact you may only be able to agree on a single ‘seller goal’. If the offers you make to the seller are better than your competition you may have yourself a winning deal; and if not right a way, then perhaps the seller will call you 3 months later when they can’t sell for better terms than what you previously offered.
Keep in mind to always treat sellers with respect and decency. If you are caring and helpful to sellers, actually involve them in the deal making process, and begin building a good reputation, the number of closing you have should increase rapidly.