Good morning, everyone! Welcome back to another episode of “Monday Morning with Daniel and Ryan.” Today, we’re diving deep into negotiations and making offers in real estate. It sounds basic, but many investors forget the critical steps after spending hours analyzing a property. So let’s get into it!
The Fear of Making the Offer
Many investors hesitate when it’s time to make an offer. They do all the hard work—analyzing the property, running the numbers, and then freeze at the crucial moment. “What if they don’t accept it?” That’s the paralyzing thought. But here’s the truth: hesitation costs you deals.
Getting Comfortable with Lowball Offers
The idea of making a lowball offer freaks people out. But you’ve got to get comfortable with it. One strategy is to call estate sales or listings on Craigslist and offer 50% of the asking price.
The more you get told “no,” the more resilient you become. It’s like building a muscle—you get stronger with each attempt.
Building Rapport
Building rapport with the seller is crucial. You need to be friendly, but not too friendly. Establish trust and credibility. Listen more than you speak. Find common interests, but always remember, this is a business transaction.
Balancing Friendship and Business
It’s easier for someone to turn down a friend than a business associate. So yes, build rapport, but maintain that professional boundary. This ensures they take your offer seriously and not just see you as a friendly face.
Timing the Offer
If the seller is motivated, get to the property as soon as possible. Don’t negotiate too much over the phone. Set the appointment, bring the contract, and get it signed quickly.
Winning Negotiation Strategies
The “Double The Price” Technique
One unique technique is to initially offer double what you think the seller expects. Then immediately counter with a much lower number. For example, if you think they’re expecting $100,000, offer $200,000 first. Then, pull it back down to $50,000. This catches the seller off guard and opens up the conversation for more realistic figures.
The “Multiple Offer” Technique
Always come prepared with multiple offers—cash, short-term financing, and long-term financing. This gives the seller options and makes them feel in control of the decision.
- Cash Offer: Start very low, typically 15-20% below your maximum willing to pay.
- Short-Term Financing: Offer a higher price for a 6-9 month finance term.
- Long-Term Financing: Offer a significantly higher price, amortized over 30 years.
This approach makes them analyze different offers, making it more likely they’ll accept one.
The Seller Net Sheet
A seller net sheet helps break down all the expenses and numbers involved in the sale. Get the seller to write these numbers down themselves. This psychological commitment helps them see the reality of the situation.
Overcoming Objections
Common objections include, “My uncle can do it cheaper.” Your response should be, “Why hasn’t he done it yet?” Most often, they’re just trying to stall or back out. Stick to your numbers and gently counter their objections until they see the logic.
Making the Offer
Once you’ve built rapport, walked through the net sheet, and addressed objections, state the final agreed-upon numbers. Fill out the contract in front of them, reiterating the terms. Then get the signatures.
Handling Deferrals
If they say they need to think about it or talk to someone, don’t let them defer. Ask what specific concerns they have and address those immediately. Keep the conversation going.
Follow-up is Key
Never waste a lead. If the deal isn’t closed on the first visit, follow up relentlessly. Many investors lose deals because they don’t follow up. Persistence pays off.
Insights on Cash Offers
Your cash offer should be 15-20% below your maximum willing price. This gives you room to negotiate.
Short-Term Financing Offer
Short-term financing can be a game-changer. Offer a higher price if they allow a 6-9 month finance term. This eliminates acquisition costs and opens up multiple exit strategies.
Long-Term Financing Offer
For long-term financing, use an amortization calculator to estimate payments over 30 years. This allows you to offer a much higher price, making the monthly payments appealing to the seller.
Understand Their Motivation
Always ask why they need to sell and how much they owe the bank. Understanding their situation helps tailor your offers more effectively.
The Worst That Can Happen
Yes, you might get yelled at, called names, or even have the door slammed in your face. But these reactions are rare. Most sellers will be more open to negotiating once they understand your offer.
Real-Life Reactions
In nearly ten years, I’ve only had a couple of extreme reactions—one from a grumpy old man and another involving language barriers. These are the exceptions, not the rule.
Persistence Pays Off
Don’t leave the property until you’ve exhausted every option. Be annoyingly persistent but not rude. Camp out in the front yard if you have to. Ensure the seller knows you are committed to closing the deal.
Bringing Out the Contract
Only bring out the contract after agreeing on all terms verbally. Calling it a “purchase agreement” instead of a “contract” can ease the seller’s mind. Reiterate the agreed terms while filling it out.
Getting Signatures
Point out where to sign. Sellers rarely read the entire contract if they trust you and understand the terms.
Final Takeaways
Mastering real estate negotiations is both an art and a science. By overcoming the fear of making offers, getting comfortable with lowball proposals, and building rapport while maintaining professional boundaries, you can navigate the complexities of real estate deals with confidence. Effective negotiation techniques, such as the “Double The Price” and “Multiple Offer” strategies, can catch sellers off guard and open up realistic discussions. Providing a seller net sheet and addressing objections head-on can further cement your credibility. Persistence and follow-up are crucial, as deals often hinge on continuous engagement.
Remember, understanding the seller’s motivation and maintaining a professional yet assertive stance can turn potential rejections into successful transactions. Keep these strategies in mind, and you’ll be well on your way to closing more deals and achieving real estate success.
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