#1: You Must Make an Offer
Investors will walk through the property, estimate repairs, have an offer idea, but not make an offer because they think the offer will be too low and offend the homeowner. If the homeowner accepts the offer right away, you may have bid too high. Recheck your numbers.
#2: Investors Must Be Good at Numbers And Negotiating
Some new investors are good at either negotiating with the seller or coming up with the accurate numbers, but may not be good at both, which impedes getting a deal.
#3: The Quicker You Get Comfortable with No, The Quicker You Will Be Able To Overcome It
Fear of rejection can prevent investors from making an offer. To overcome this fear, call FSBO (For Sale by Owner) on Craig’s List and offer half of the asking price. The seller may get angry, will likely say no, they may curse you out. Once you get over that fear, you will be able to make offers with no problem. Best case scenario, the seller accepts your offer.
#4: Don’t Make the Offer Over the Phone
Even when calling FSBO clients, build a rapport, then make an offer and the sellers would get angry, hang up or do something that killed the sale. The lesson is to NOT make the offer over the phone. Get an appointment so you can see the property and make the offer in person. You must establish rapport, which includes being knowledgeable about solutions for the seller. Rapport buys more houses than money ever will.
#5: The First Person to Speak Loses
Both the investor and the buyer know this. To overcome this, offer twice what they are asking, knowing that is not possible. the seller will jump on that. You then state that you could not do that the same way they could not accept $1 for the house.
#6: Importance of The Seller Net Sheet
Bring a seller net sheet, which lists the offer, expenses, the benefits of your offer over other offers. This is a good tool to use with the analytical sellers. Have the seller complete this form along with you. There is a psychological component to them writing it down. Make sure you and the seller agree on each item, as-is value, repairs, etc. For example, if there is disagreement on as-is price, pull up comps and show why you value is more accurate.
List all the repairs and estimate the cost. If they overestimate on one of the repairs, lower that number and let them know you may be able to get that done at a lower price. This establishes trust that you are not trying to take advantage of them. Weed out all the objections throughout this entire process so that when the contract is presented, every possible no has been addressed.
#7: Before You Bring Out the Purchase Agreement, Review the Facts
The seller must understand who is paying the taxes, title costs, what is the inspection period, when is the close, are there contingencies, and all other aspects of the deal. Review the exact terms that have been agreed upon by stating it clearly. For example: We agree that if I close this within the next 7 days, you are selling it to me for $60,000 cash, you will be moving out prior to the closing date, at closing you are willing to accept “X” as a final net, you will pay the closing cost and the title fees, I will pay “X” and I will place $500 in escrow and you will give me a 3 day option on it.
#8: Give the Seller Multiple Options
If you only offer one option, they could just answer no. With multiple offers, they will consider the benefits of the offers. Be confident and know what you are talking about. You can use wording such as “We have multiple ways we can structure this.”
#9: The Multiple Offers Strategy
This is a very specific strategy that employs a cash offer, short term financing option and a long-term financing option. The Basics: The seller wants: $90,000. Your legitimate offer: $60,000. Do not issue your legitimate offer as the cash offer. The cash offer (initial offer) should be 10-20% less than your legitimate offer. Issue the $60,000 offer in a short-term financing option.
#10: The Cash Offer Is Sticker Shock
Do not offer your legitimate price with the cash offer. Offer 10-20% lower. In this case, offer $50,000 cash. The seller will have sticker shock and may try to get out of the conversation, stating they need to speak to their spouse, etc. or they may try to shut down the conversation. Do not let them shut down the conversation. They may issue rebuttals, which is opportunity to learn more about what they want. Address all their concerns or questions. If they are not going to accept this offer, move on to the short-term financing offer.
#11: The Short-Term Financing Offer Allows Multiple Exit Strategies
I can see that the $50,000 is not going to work for you, I do have I can probably get closer to $60,000 if you give me 6-9 months to pay this off, and if you can give me 6-9 months to pay this off, I can probably get another $10-12,000 in your back pocket. Getting the seller to finance the property eliminates the acquisition costs typically involved with private money or hard money.
#12: Three Potential Exit Strategies with The Short-Term Option
Rehab and sell it using the seller’s cash as financing. You don’t have to pay the acquisition costs. Rehab do a cash out refinance, put it in your rental portfolio and use the seller’s underlying lien to finance the project. Purchase it from the seller, put it directly on the MLS.
#13: The Long-Term Financing Offer Is an Option
Pull up an amortization schedule (10B2 calculator) showing what the value of a 30-year loan would be and offer to pay that over 360 payments. For example, the $90K amortized over 30 years may be $200,000. If you allow me to make 360 payments on this, I can give you $200,000 (or whatever the value is.) Notice it is 360 equal payments, not interest.
