Understanding the Most Common Seller Objections
The three most common objections are the seller’s Indecision, the desire for more money and delay tactics such as needing to speak with a spouse or family member before making the decision. In order to overcome these objections, you must build a detailed Avatar, which is a detailed description of each type of seller. As an investor, you must be able to distinguish the seller’s wants versus their needs, have a “solution” for every objection they raise and ask open-ended questions to determine their true motivation.
#1: Indecision
The first objection, the seller’s indecision, is frequently centered around the concern of where they are going to move. The solution to this objection depends on the seller’s equity position after the close. If you are dealing with a seller who stands to gain significant equity at close, you can offer them a Seller’s Temporary Leaseback, which is where you “lease” the property back to the seller on a temporary basis (Ex. 14 days) to allow more time for move out (Temporary is KEY). Retain a large portion of the seller’s equity if you do a leaseback. For example, if they are getting $35,000 in equity at close, give them only $4,000 at close, only give them the remaining $31,000 once they have completely moved out.
Be sure to include a clause in the special provisions stating that In the event that you the seller fails to move out on time, they must pay a per diem rent, the buyer has the right to use the retained capital in escrow to pay for eviction costs, damage, legal suites incurred, removal of items left behind. Every day they are in the house beyond the move out date, you charge them per diem rent. It is critical that the price the per diem be slightly higher than a hotel in the area, so the motivation is to get them out of the property. When equity is withheld, and the seller states they need money to move, offer to pay for the move, but only out of their equity. Do not give them the money directly.
If you are dealing with a seller who will gain no equity at close, ask if they have anyone they can stay with until you bounce back. Wording is important. Stating “until you bounce back” instills confidence in the seller, that they will be able to recover. Do you have any income at all right now? They could rent a decent RV and rent and RV Lot. If there are no solutions regarding money. Are they employed? If not, you may need to have If no money coming in, such as no employment, you may need to have the conversation about the importance of the seller getting a job – Delicately.
#2: Money
The solution to the second objection, the desire for more money, also depends on the type of seller. If you are dealing with a Left-Brain Seller, they are very data driven, so use data to support your price, if the seller is data driven, ask them to provide you data to support their price. Go over the repair costs with the seller, have the seller write down the repair costs, they feel in control and the actual repair costs become a reality. Create a Seller Net sheet that lists all the fees the seller has and all the fees the buyer has. On the net sheet, use the seller’s numbers on repair costs, etc. Or, if you know you can get it at a lower price, tell the seller you can get it for less, so that if they understate a price for a repair, you can negotiate the price down.
One effective tactic is the “What If Close” where you ask the seller, “If I could give you, say $20K more than you are asking for and close in one week, would you sign right now?” Typically, they will say yes. The investor’s response illustrates why both parties must come to an agreement. “As they buyer, I could not give you that much for your house because that does not make good business since. I would go out of business, my spouse would divorce me, etc. I would love to pay only $1 for your house, but you, the seller, would not do that. So, what is the number that makes since for both parties?”
When dealing with a Right Brain or emotional seller, appeal to their emotional needs. For example, seller had memories around the magnolia tree in the front yard, Daniel cut a clipping from it and planted it, which showed that he cared about the seller’s concerns.
If you get the Intractable Seller who is determined to list the house with an Agent, have the seller list with a realtor, preferably on your team, when the house does not sell in 90 days approach the seller again.
#3: Delay Tactics
To avoid seller delay tactics, tell the seller that everyone who needs to be there to sign off on the transaction must be at the appointment. If anyone is not available, request a live call with the all the parties necessary. If you are at the appointment and they state that they need to speak with their spouse, family tell them to call that person, while you step out and speak to your partners to confirm that you did not offer too much for the property. Create a loss aversion scenario, where the seller is afraid that the offer will get lower the more likely they will delay the decision.
Negotiate, Negotiate, Negotiate
Ultimately, as an investor, learn to negotiate. We negotiate every decision, every day. Treat negotiation as an academic practice as it could be the most important tool you will ever use.
