How to Negotiate Real Estate—Expert Deal-Making Tactics with J and Carol Scott and Mark Ferguson

This is the BiggerPockets podcast show number 321.

‘Mark: Personality trait for a good a negotiator, it is empathy. It is really being able to put yourself in the other person’s shoes and figure out what they are thinking, what their motivation is, what their goals are, what they need, what they want, how they feel. If you can do that, you can be a good negotiator.’

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Brandon: What is going on everyone? My name is Brandon, host of the BiggerPockets podcast. Here with you today with my friend, my co-partner. Is that a word? Co-partner in crime.

David: Another word you have made up.

Brandon: David Greene. David Greene, welcome to the show. Hoe are you doing buddy?

David: Thank you, Brandon. I am doing good. I just did a meetup yesterday in the South Bay area and got like four or five buyers we are looking to get under contract. A lot of them are trying to house hack right now. Life is really good for me, I have no complaints.

Brandon: Very cool. You got that new BRRRR book coming out pretty soon. Everyone is going to… I mean people are… I put a thing on my Instagram the other day about like I got a first draft copy of your BRRR book and like I was holding up and like I have never seen so many people freak out about a book coming out. People are going to love that thing. Like they were like, ‘I have been waiting for this book.’ Anyway, it is coming out soon. You will hear more about that.

David: I believe you can pre-order it right now but it will be a game-changer, man. The BRRRR strategy is powerful.

Brandon: It is powerful stuff. Anyway, but today we are actually be talking about it a little bit different topic than BRRRR-ing and a different book than the BRRRR book. We are talking about negotiation today with three just rock star investors that I know you probably all know already, but if not, you will meet them all in just a moment. Before we get there, let us get to today’s Quick Tip.

David: Quick Tip.

Brandon: For today’s quick tip, we want you to be on the BiggerPockets real estate podcast. That is right, we want you to be here, talk with me and David. We are going to choose a few of you to appear on an episode in a couple months. Here is how you can put yourself in the run in for that. Go to your BiggerPockets profile. Make sure you sign in to your account, scroll down to where it says investments and share some deals that you have done. We are going to pick a few people who did this and invite you here on the show to talk about it. Again, go to BiggerPockets.com, fill the details at least one of your investment properties. We will pick a couple people and bring them on the show. That is going to be kind of cool. Alright, one last thing before we get to today’s show with our three guests.

Look, if you are interested in real estate, crowd funding which is a super cool new kind of adventure in real estate that I am passionate about. I want you all to check out Sharestates. The company’s name tells a story, right? It allows you to share real estate. Here is how it works. Sharestates connects you with carefully vetted real estate developers across the country. You choose which deal you want to invest in. Like I am talking single family, multifamily and mixed use commercial land and here is the great thing.

You do not need to be a fancy multimillionaire in a three piece suit to do it. You can start with just like a $1,000. I do not know about you but I do not want all of my money stuck in like stocks and bonds or even just my own real estate. With sharestates, returns are like 8% to 12% on average and to date, none of their investors have lost any principle on these deals. Like Sharestates has funded over 1.5 billion in real estate deal so far. If you are a real estate developer and need a funding, Shareestates can partner with you on your next project.

To learn more, go to BiggerPockets.com/sharestates. That is BiggerPockets.com/sharestates. Alright, with that, we got to get to the today show. First of all, thank you to all of our listeners. You guys are what make this show possible, you rock. Now, let us talk about negotiation. This show is one of those that is like bound to help you make more than the cost of actually attending this show and I am kind of kidding there because it is free to listen to it, but really like this show like listen close because there is so many good things in here that is just like here is how to save more money.

In fact, later on the show, one of the guests J mention is that there is like, he is like, if there is one tip that has made me hundreds of thousands of dollars over the past decade, listen for that and there is probably 20 different tips that are in this show that are going to help improve your business. Without further ranting and raving, let us get to the show with J Scott, Carol Scott, and Mark Ferguson. Alright. Welcome everybody to the BiggerPockets podcast. Welcome J, Carol and Mark. How are you guys all doing today?

Carol: Awesome. Thanks much for having us. Great Day.

J: Hey, how is going Brandon? How is it going, David?

Brandon: What is up guys?

David: Hello, hello. Yep.

Mark: Great to be here.

Brandon: Alright, alright. Today is going to be a little confusing. Obviously, we have a lot of people talking. We will try it, oh, I guess. Here, do me a favor so people can hear what you sound like. J, will you just tell us real quick who you are so people can kind of hear your voice so as we are going through today, they know that is you talking. Obviously, Carol, well, I know who Carol is. But I will go to J and then we will go to Mark and then we will go to Carol. J, for those who have not heard you on the show the last 700 times you have been on the BiggerPockets podcast, can you tell us about who you are and what you do a little bit?

J: Hey, everybody. J Scott here and I am the husband of Carol Scott who is on with us today. Carol and I started our flipping business back about 10 years ago. We had been flipping houses for the last 10 years. Also doing some buy and holds lending, some other random stuff. But I have been a faithful follower of BiggerPockets since 2008. I think I was in the original crew of BiggerPockets members. So thrilled to be back.

Brandon: Yes, you were here before I was here which was a long time ago. Yes, cool. Alright. Mark, what about you? Tell us a little brief bio of who you are. You were on our show. By the way, J, I do not remember what show numbers you were on but I know you have been on a couple. Do you remember them?

J: 10, 311 and one of them in between.

Brandon: Alright. Then, Mark, you were on show what? Number 68 maybe?

Mark: Yes, 68. I think. Other people can listen to your whole story but Mark, tell us about yourself real quick for those who have not listened to that episode yet.

Mark: Yes. I became an agent in 2002. Worked with my dad for a while. He flipped houses, learn from him. Really focused on REO and HUD sales for a while then got more into flipping then bought rental properties and now primarily focused on flips. We did 26 last year and 26 year before that and started my own brokerage last year too so that has been a little crazy as well.

David: Not bad, not bad.

Brandon: Then finally, Carol. Carol has not been on the show before but Carol is awesome. Carol, tell us about yourself a little bit and how you got into this.

Carol: Absolutely. After a million years doing corporate craziness back in 2008, J and I were like this not sustainable. After watching way too much HGTV, I am like if these ding dongs can flip a house, we can certainly flip pass. We bought one which led to another and another and another and the best part about it is that I get to spend my days with my crazy eight and nine year old boys while generating income for the family. It is pretty good gig.

Brandon: There you go. That is awesome. Well, all three of you all, I love all you guys. It is great to have you on the show in one big shot. Today we are talking though specifically about a certain topic that is near and dear to every real estate investor’s heart and that is negotiation. Obviously, the three of you wrote a book together on negotiation specifically on real estate negotiation. We will talk about the book a little bit more later. We mentioned it in the intro but I want to first kind of get into the basics of negotiations so maybe we can start with misconceptions or things that people get wrong. I will let you guys decide who wants to go first. But what do you think people get wrong from negotiation most often?

J: This is J. In my opinion, the biggest thing is a lot of people trying to over complicate it. I am not going to say that negotiation, there is not a bunch of art and a bunch of science involved, but a lot of what negotiation is it involves the skills that all of us are already have. It involves building rapport and involves being able to have a conversation with people. It involves being able to do simple research and involves being able to… Honestly, if you were to ask me the biggest personality trait for a good a negotiator, it is empathy. It is really being able to put yourself in the other person’s shoes and figure out what they are thinking, what their motivation is, what their goals are, what they need, what they want, how they feel. If you can do that, you can be a good negotiator. You do not have to rely on the tips and tricks that we hear about negotiating that make it sound like it is really complicated. Certainly, there are some of that involved in negotiation but 90% of negotiation is literally the skills all of us already have.

Brandon: That is reassuring because like I know, I have said this before in the show when we have talked about negotiation. I just like, I do not like it, right? I do not like the idea of having to go and like widdle somebody down and take advantage of them and like that is because that is the feeling I get with negotiation. Like if I win, they have to lose. Is that true? What do you guys think?

Carol: I think that is a really common misconception, Brandon. Exactly what you are talking about. People feel who are not comfortable or not familiar with negotiation. Then at the end of the day, somebody is going to win and somebody is going to lose. But in reality, if it is a successful negotiation, you both feel, you both at the end of the day come out feeling like you both won. It is really all about if you take an approach where you are not necessarily trying to win but you are trying to solve a problem so that everybody is happy at the end of the day, you are bound to be more successful. When you get yourself in a different mindset about what negotiation is about, it is not just about widdling people down, it is not just about getting the best price. It is figuring out what people’s motivating factors are and working together with them. If you can kind of approach it from a different mindset, that there is so much more to it, it becomes more and more natural over time.

Brandon: Alright, that makes sense.

J: It is like climbing a mountain. I mean you are climbing a mountain with somebody else and the goal is not to win and you get to the top and if they fall off, who cares? The goal is to help each other get to the top of that mountain and if you can do that, it does not matter who got there first. It does not matter who got there fastest. You can both like get to the top of the mountain, you can both win if you help each other.

Brandon: Yes, that is great. Alright, let me frame this discussion a little bit as well for who this is for. I mean are we talking today negotiation, is that for people who are doing a lot of real estate deals?? Should people still be listening to this show and reading your book. If it is, I am trying to buy my very first deal. Maybe I will throw that one at you Mark, you have not answered yet one of these. Who was negotiation really ideally for?

Mark: It is for everybody because I think echoing what J said, it is not about winning one battle or one negotiation to get a couple thousand dollars extra, it is about building a business. When we are doing so many flips or buying rental properties, I am an agent, I am a broker, I am in the community all the time. People know who I am and if I get a reputation as someone who is just going to beat people up all the time, they do not want to work with me. That starts from your first deal, your first couple of deals, people begin to realize who you are if you are doing a lot of deals. You want to start building a good reputation from the beginning and that does not mean you cannot negotiate, you cannot go back and forth but you also want to act in good faith.

Some of the best negotiating tactics that have helped me is making it as easy as possible for somebody else. I mean I have other agents from other offices bring me deals because I know we will close, we have no inspection and they do not even have to list the house. We can just do it right then and that is the best deal in the world. We do not have to spend a dime on marketing, someone comes to you. It is about making it easy, treating people right and it is about winning the whole war, not just one battle, but building in the future and just having stuff come to you.

David: Yes.

J: Brandon, you have a two year old child.

Brandon: I do.

J: If you do not think negotiation is important, you give it a couple of years and you are going to realize how important being able to negotiate is.

Carol: Every second of every day.

Brandon: That is funny, that is funny. Well, how much negotiation in real estate is similar to negotiation in other things then? Maybe I will throw it that. I mean like if you just learn how to negotiate in general, does that mean you will be better always in negotiation or was it a specific like they are real estate specific negotiation things we should learn?

Carol: I think it is really two fold, Brandon. I think there are so many specific skills in negotiation in general that are applicable across the board. For example, one of my very favorite ones, believe it or not it is just learning to sit back and listen without talking. Really, really hard, everybody likes to fill the silence. See, it is really hard to listen to, right? Silence is not a comfortable thing.

Brandon: Yes.

Carol: But that is one negotiation skill, no matter if you are negotiating real estate, if you are trying to negotiate a better price at home depot, if you are trying to negotiate your kid to clean their room. Whatever it is, if you just sit back and wait, that across the board is just a great negotiation tactic. That said, for real estate, there are so many different nuances as well because it is such a longer process, right? You are not just, as Mark said, you are not just tried to do that one deal.

You are trying to do many many and build upon it. You are also though, just the nature of a real estate transaction, the price tag on it, the fact that a transaction does not close, it is not the same as negotiating what color paint we are putting on the wall, it is a 10 minute decision. It is the nature of the process means it might take 30 days or 60 days or 90 days or two years to get one of those deals. There are some nuances that are very in particular to real estate negotiation.

Brandon: Alright.

David: One thing I have noticed when negotiating for my clients as a real estate agent and on deals I am trying to buy is that we always have a tendency to think logically, right? Like I have the power in this way. How do I force the other side to recognize where my strength is? But I have found success often comes from illogical things. The other side’s emotions often influenced their decisions much more than the facts that we are looking at. Can you guys talk a little bit about techniques you found that make it easier for the other side to give you what you want?

Mark: It is weird but just being nice to people make such a huge difference and can be used in every day aspect of every world. Being polite, being courteous, responding to people when they ask you to respond, and even responding to people how they want you to respond. Like if someone emails me and says, ‘Please email me.’ I am not going to call, I am going to email. If someone wants me to call them, I am going to call them. Because it just makes people more comfortable, happy with you and does not annoy them. Starting off on the right foot and just being polite, courteous, and it does not mean you have to give up everything but just getting on rapport, like J said earlier, is so important and that plays into your emotions. Buying a house is so emotional for people and selling a house is crazy.

People will do illogical things because of their emotions are going up a right for like I do not like those guys, I am not going to do anything for them in the inspection or someone comes in with a little offer. Like I am not even going to counter them. Just nothing because I am pissed off. Just trying to be nice and build that rapport really helps with getting the negotiation and starting sooner. And one thing I always do too if I have come in with a low offer, I will email or I will call that agent first and be like, hey, heads up, we are bringing an offer. It is going to be low. I do not want to surprise you. Be prepared and that helps so much in just getting it off on the right foot.

Brandon: That is such a good tip.

J: There is a story that Carol and I experienced. The book that you mentioned, we try to put as many real life stories in the book as possible but one that Carol and I experienced was related to this back in this was probably 2010 or 2011. It was a Sunday morning, we get a phone call from our closing attorney who was a friend of ours. He was walking his neighborhood. He went to a garage sale and he was talking to the owner of the house or the person that were throwing the garage sale and it turned out it was a woman whose mother had recently passed away. This was a estate sale.

She was basically emptying out the house and he said, ‘Are you considering selling the house?’ She said, ‘Well, I do not know what I am going to do with it, but I might consider it if you know somebody.’ He called us. Carol and I actually drove about a half hour up there to meet her to see if potentially there was a deal here. As usual, Carol did all the talking. She is much more of the people person than I am. She talked to the woman for a probably, you can jump in Carol if I am getting this wrong.

Carol: Yes.

J: She talked to the woman for probably an hour, basically just talk to her about her mom, talked to her about her house, just empathized and was there and like just formed a little bit of a friendship. She, at some point, I imagined she asked about selling the house. I believe the woman said something along the lines of I am just not ready to sell it yet, I need to figure that out. Carol is like, no problem. They talked for a while. At the end of the day, Carol got her address and got her name.

Carol: Actually, I am going to jump in. You know what? I did not even make it close but I did not even make it that formal. Just like you said, we chit chatted forever. I think at the very end as we were walking out. I asked her if she was going to sell the house and she just did not know. Like, great, here is my card if you want it. Then I just decided, a couple months later it is Christmas time, right? I figured mail that was still going to her mom was probably being forwarded to her house. I did it, I was not even direct. I was just very very subtle about the whole thing. I just sent her a Christmas card through the mom’s address. It is just sad just thinking of you at the holidays, it has got to be really hard.

I can imagine it is difficult to celebrate this first Christmas without your mom wishing you all the best. Fast forward, another three or four months then she picks up the phone and, ‘I have been thinking. I think it is about time to sell my house. Do you want to buy it?’ It was just establishing that long term relationship and not going really hardcore into I want to buy your house, it is a great deal, let us make this happen. Again, it was just about really empathizing and really, really getting to the heart of what those emotions and what that person is all about.

Brandon: Yes, that is really good. Let us shift a little bit here and talk about some specific tactics that real estate measures can do. I know we have already talked about a number of them, I want to get a little bit deeper. Let us just say somebody here is marketing for deals, right? Maybe they are sending DirectMail marketing or maybe they got a website, they are putting out signs, whatever. They are doing to get the phone ringing. Now, the phone rings. They get the phone call coming in. Like I am assuming that you would say like negotiation really begins there, right? It is the building relationships, empathy. But what are some things that on that first phone call that our listeners can do right now or to try to help the chances of the deal coming down the pipeline later and working out?

J: Yes. I would say the first thing is it is very natural for us as investors and talking to people we do not know to treat the whole thing very transactionally. Yes, I have some questions for you, tell me what is the square footage of the house? What year was it built? How many rooms? How much work does it need? But instead, think of it from the perspective of somebody picked up the phone to call you because presumably they have a problem, they are in a situation? They are putting themselves out there. It is hard to call somebody and say, ‘I need to sell my house.’ If they were not desperate to some degree to sell their house but they wanted to sell it, they probably would have gone to a real estate agent or they would have listed it themselves. But they are in some situation where they feel like this random letter that they got in the mail was worth picking up the phone to call and talk to a stranger on the other line and basically say, ‘I need to sell my house.’

If you approach it from that perspective of somebody has a problem and they are reaching out to you to solve their problem. Again, it goes back to the empathy thing. Put yourself in their position. What would you want somebody to talk to you about? Would you want them to just jump into a whole bunch of questions about your house and treat it like a business transaction or would you want them to try and get to understand you and what your needs are and what your situation is and when you approach it from that position, it is really easy to start with, ‘Hey, tell me about what is going on? Why do you need to sell your house?’ Oh, my husband got a job in a new city and we have to move in two weeks. Oh, that is great. What does your husband do? Oh, you have kids, we have kids. Like where do your kids go to school and build that relationship.

Then by the time you get into the questions about, well, what year was your house built and how much do you want for it? At that point, you have built some trust, you have built some rapport and it is a lot easier for them to, to give you that information because they are now not just answering questions that a strangers ask and you did not call him up and say I have a poll I want you to take. Now, you are having a discussion with somebody that you have at the very beginnings of a relationship with. Treating that first phone call more like a discussion. Treat every conversation like a discussion as opposed to a questionnaire is really, really important.

Brandon: That is really good. I actually… A couple years ago, I was negotiating this deal. I ended up wholesaling it. I guess I just gave the end of the story away. Anyway, I got this deal. I am sitting here with this woman at her house and I am talking to her about the property. Well, I am talking to her, right? But before I talked about the property, I asked what is going on? Why are you trying to sell? Yes, I found out that like two weeks, her husband I think it was, had left to go to California and got a new job. She was there in charge of selling the house. She is missing her husband ton.

I got really into that story of why she wanted to go to California so bad and all our family was down there, there is always reason. The house was just embarrassingly in bad condition. The more I talk to her, the more I realized that she just was really embarrassed to have people come over and look at it. It was hard enough to have me come over and look at it. She was ecstatic when I ended up buying her house and I got a great price on it and I made some good money and it was all because like she had some other reason for selling that, I just figured out in that very first conversation.

J: Yes. There is also the benefit of if you can figure out what those other reasons are, it gives you more negotiating leverage. It gives you other things that you can negotiate again. I talked about a situation where we had somebody who we talked to for a while. We realized that his biggest thing was he wanted to move across town and he felt like he had to pack. He did not know how to call movers. Like literally he had not moved in maybe 40 or 50 years, I do not know. But he seemed to be really concerned about how am I getting to get all my stuff from here to where I need to get it to and with us it was easy enough to say, hey, we have got moving companies we work with and we can take care of that for you.

We will pay for it, we will send somebody out to talk to you, look at your stuff, we will take care of it. All you have to do is be there and they will pack it up. They will put it on the truck, they will move to the other place, they will take it off the truck. To a lot of us, that is obvious. You call movers and you do that. It had not occurred to him that it is that easy and when we offered to help him do that and we offered to pay for it, so he did not even have to worry about this. It is going to cost me $500 or $50,000. It was just one huge thing off his plate. At that point, he is now out of the mindset of worrying about that thing and now we can get into the real discussion about negotiating the price of the house and all the other stuff.

Brandon: I find that in so many areas of life that, and I know I am hogging all these questions David, I will let you jump in in a second. But like so many people just want to be told what to do, like clearly and easily. Because things seem overwhelming when they are not clarified, right? I mean real life example, that conference last week. The Best Ever Conference in Denver and there was one night where like there was like 10 of us that had kind of talked about doing dinner that night, but nobody really knew what we were going to do. Then my friend Tara Yarber, you guys know Tara, right? Like Tara comes in and like hey guys, I made reservations. There is spots for 11 at this place.

Here is the 11 people that are coming or leaving at this time, go. I was like, thank you, like somebody just like took control and like it would not have a met… I mean like I know that was not like a financial thing, but like I just like sometimes in life people just want to be told what to do, where to show up, how to be there. When you can be that person as a real estate investor to be like, here, we are going to take care of all this for you, do not worry about it. Like that is so valuable.

J: There are plenty of studies that show that if somebody has too many choices, it makes it a lot harder for them to make a choice. If you walk into the supermarket and there is one brand of oatmeal on the shelf, you pick that brand of oatmeal. There are 30 brands of oatmeal on the shelf. If you look for 20 minutes and you walk away frustrated because you do not know the benefits and drawbacks of each. It is the same way with any type of negotiating as well. If you give somebody too many choices, if you leave it to them to make too many decisions, it is going to get overwhelming.

A lot of times one piece of conventional wisdom and negotiating is give three offers. Give the cash offer, give the finance offer, and give the whatever other offer and let them decide what offer works for best for them. That is good but presenting it as I am going to give you three offers may not be the best way to do it because it just adds more on their plate. The only ways to do that where you do not overwhelm somebody with decisions or choices that they have to make but at the same time, you still give them choices and decisions.

Brandon: Yes, I love the multiple offer. I think I have used that successfully a number of times.

David: It speaks to human psychology because, like Brandon said, we want someone to tell us what to do. But like Jay said, we do not want to be filling like they are forcing us to do something we do not want to do, right? Like a good negotiator makes you want what they want you to do. That was one of the things I wanted to ask you guys. Obviously, if you go in there and try to strong arm somebody, they are going to push back at you, right? That is why building rapport in the beginning is good because they do not know they are in a negotiation when you have built a relationship. They like you, they want to help you just like you are trying to help them. Can you give us some tips from the book about what you guys do to win over another person onto your side while holding to the stance that you have you need to get this property for a certain number?

Mark: Yes. This kind of goes back to what I was going to mention too. Going back to the first time you talked to somebody, I am an agent and a broker. The first thing I have to do is disclose that. For people who are brokers, it is very important that you say, ‘Hey, I am an agent.’ Some people do not want to be agents and investors because they say they have a disadvantage. By disclosing that, I think it helps me. When I say, hey, I am a broker. I give a short presentation or I have been an agent for 17 years. I have been in this community for 17 years. We bought 30 houses last year. I am not going to list your house or sell it, but I am a buyer. That immediately builds trust from somebody who might be very skeptical about calling this number who they have no idea who this person is.

By giving that short little presentation about myself and telling them who I am and building that trust, that kind of starts off the whole conversation as, ‘Hey, I am not trying to steal this house from you. I am not some weird guy off the street who has never done a deal. That I think helps you get on the right foot about I know what I am doing, I know values. At the same time, I am very honest too that hey, this is my business. I will be honest and say I might buy as a rental, I might want to flip it, I have to make money doing this and I hope you understand that. It works for some people, it does not work for everybody though.

J: Yes.

Brandon: Yes.

J: Really knowing what is important to the other side, what they need, what they do not need. Asking if you can figure out a tactful way and there are tactful ways, especially once you have built the relationship a little bit, there a tactful ways of asking what are you going to do with this money? If the answer is I am going to buy another house, I am trading up to a bigger house while they are probably going to need all the money. If the answer is my daughter has a wedding coming up in June, well then the conversation comes to, oh yes, we had a wedding, they are so expensive. We spent $25,000, how much are you planning to spend on yours? Oh yes, our budget is 35,000. Okay, great. They just told you they would be $35,000 in cash. If the pay out on…

Carol: J had mind tricks involved.

Mark: Yes, yes.

J: If they say to you, ‘I do not know, I do not really need the cash. I just need to be out of this business.’ Well, okay, in that case, how about if we do seller financing and you are making, oh this is a rental property for you and you are making $500 bucks a month off in this property. I make you a deal, I will give you $500 bucks a month for the next 20 years. You will make the same amount of money you were making but you do not have to manage this property. In 20 years, it is paid off and they are like, great, I am making the same amount of money and I do not have to do any work and now you are getting an interest free loan. There are a lot of things. Once you know what their motivation is and what they need and what they want and what they are going to do with the money, it gives you a lot of options on how you can structure a deal that can benefit you and them.

This goes to David’s question of like without strong arming them, you figure out what their motivations are and you appeal to those motivations, to those needs. You solve those problems and at the same time, hopefully there is something that they need that you are willing to give and then you get what you need and hopefully they are willing to give on that. Obviously, at both sides, both sides only care about price, if it boils down to you want the lowest price and they want the best price for their house then you are probably having a negotiation that is not going to work out. That happens a lot, let us be honest. 80% or 90%, I am making up numbers, but a large percentage of real estate negotiations are never going to work out because both sides care more about price than anything else. But it is that other 10% or 20% where being a good negotiator and listening to the other side and figuring out what they need, it is that other 10% or 20% were being… Doing that is really going to make a difference and that is going to be where you make call your money.

Brandon: Hey, it is Brandon. I want to take a get a quick break from this podcast to invite you to this week’s Webinar on BiggerPockets. This week, we are doing on of my favorite webinars of the year called the 90 Day Challenge. How to buy your first or next property in the next 90 days? Because look, we do this occasionally a few times a year where we really help you set down some time to make some big goals and then make a plan to achieve them. To help you prepare, we are hosting this special free online workshop to dominate the next 90 days. I am going to walk you through the process of creating a actual goal that you are going to work towards and then we are going to walk through how to create a daily and weekly plan of action to help you actually achieve those goals.

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David: Carol, I was going to ask you Carol I have always found that I have the hardest time negotiating against women because men tend to be, just overall, not every man of course, we tend to be a little more analytical and just like purpose driven, like what are the facts, what do I want? Whereas women always kind of have a way of making you like them or empathizing with you or making you feel like they are on their side. Maybe they are, but it is just so much harder to stand your ground against like a really kind sweet woman. Can you share like some of the strategies that you have used that maybe guys just overlook? We do not put as much importance on when it comes to what Jay was mentioning earlier, getting somebody to see it from your side or looking at things other than price that they might care about?

Carol: For sure, for sure. Again, I know if brought this up over and over and over and it is about listening and seeing what really motivates them, but I do not know how to put it into a solid tip. But at the end of the day is a woman and it is interesting you bring this up because I think about this a lot when I am negotiating with men because let us be real. Let us just be completely honest. In real estate investing, it is primarily men. Right there are very few. Fortunately, I have adapted to that over the years and in my old life when I do corporate stuff is same type of thing. But one thing I realized, and not all men are this way, is that at the end of the day, to feel successful, men need to think that the end solution was your idea. It is my job as a woman to sit back and listen to what is important to you. If you spit out some numbers, you want some information about some numbers, I am going to give you some information about those numbers.

Also, have you thought about this in relation to that? Going through that dialogue over and over, I will subtly suggest little things to add on to the deal, to sweeten the pot. Not most of the time but at the end of the day I cannot tell you how many times the person on the other end of the phone is like I think I have come to the best conclusion. It was all the stuff by them planting in the brain for the past seven weeks. But that is okay, at the end of the day it works. Obviously I think you all know that I do not mean that in a rude way at by any stretch of the imagination. It is just women are the same way. Trust me, we want to think that everything was our idea and we are going to tell you it was not our idea whether it was or not. I would say keep that in mind. It is just find ways to really honor that other person on the other end of the phone, no matter what gender they are and realize that everybody likes to feel that they have good thoughts and ideas to bring to the table.

Brandon: That is really good. That is a really good tip. Just people want to make… They want to believe that was their idea.

Carol: 100%. Everybody wants to feel smart.

Brandon: Yes, exactly.

Carol: It is that simple.

Brandon: That they came out ahead.

Carol: Valuable.

Brandon: We have talked about this before on different negotiation shows we have done. We are talking about like at the end of the day a lot of people just want to be able to go later and tell their spouse or their family or whatever that they won the negotiation, that they got what they wanted, right? That is why like… I was negotiating a mobile home park last year and the seller listens to our show actually. Ed, what is up? Like he really wanted a certain price. Like that was the number he wanted and so we gave him the number he wanted and so he won that. But I mean like he also wanted passive income for life. What do we do? Seller financing, right?

I got what I want, I got my deal and he got what he wanted. It was kind of his idea, but it was kind of my idea, both of us probably felt like we won and it was our idea. That is really powerful. What about… Let us shift slightly away for a minute from the buying, the selling the deals. Let us talk about contractor negotiations, right? Because a lot of us who flip houses, do rehabs, that is one of things I hate almost more than more than the real estate negotiations. I am actually a decent at real estate negotiation. But when it comes to a contractor who asked him how much it is going to be and he says $30,000, I am usually like, okay. Like I do not know where to go from there because I need him, I need him to do work in my house. Maybe I will start with Mark and then we will go around to whoever else has ideas. But like what do you do to get your contractor to negotiate with the contractor? Whether it is someone you have been working with forever or somebody brand new.

David: Other than give the phone to David and let David do the negotiating for you.

Brandon: Yes, I have done that.

Mark: Oh, this is a horrible question, Brandon. I am dealing with this all the time. One easy solution which most people cannot do is I hired contractor as full time employees and then I do not have to worry about it. But for other guys, I have had this come up right now recently where he keeps coming in high on everything and I am just like I cannot pay you that much. We have sat down with him a few times and shown him the other deals he did and be like, ‘We did not make hardly any money on this deal because we paid you so much.

He kind of realized, like he did not even realize how much he was making because extras are being charged on other stuff and we went through all the numbers with him because I think a lot of contractors see the spread like oh you bought that house for $100,000 and you sold it for $180. You just made like $60,000. I am like well no we had all these other costs, carrying cost, financing costs, selling costs and they do not understand that we are not making like millions of dollars every year coming in.

Just being honest with them and showing them that and then I have to play the card of hey I can hire somebody else cheaper to do this. I can bring in subs who can do this paint for $2,000 where you are charging for. I can bring a dry waller in to do this. I can bring other guys in that can do this cheaper than you. You have to come down in price or we cannot use you. We have done that a number of times and sometimes they leave and it sucks and we have to find new people but it does not make sense to keep using somebody if you are not making any money.

Other times, they realize it, we negotiate. Sometimes we meet in the middle but you really have to be on them every single job and just letting them know that you are paying attention to the numbers in really keeping track of what they are bidding and they cannot just wildly bid whatever they want also helps as well. We have had guys just coming in at double what they should be just thinking, ‘Oh, he is not going to care.’ Every deal you really have to lock in with them, show him what is going on and be up front with them.

Brandon: J or Carol, anything you want to add to that?

Carol: We are actually dealing with some right downstairs right now. I hear it down there. I am so thrilled, it is awesome. I have some contractors downstairs and we had an interesting situation come up. We had, just last week, we are looking at a bunch of stuff to do at the house and they came in with a number and it was about double what we wanted to pay and I just kind of looked at him and he just kind of looked at me and I just kept kind of looking at him and he just kind of kept looking at me. Then finally it is like, and then next thing you know he comes down a little bit, right? He slashes this price about 15% and then I just kind of looked at him and then I just waited and I finally said, I was like I will break the silence.

I am like, realistically, this is what I need done. This is how much money I have to spend on it, can you do it or can you not do it? He is like I cannot do it for that. I am like, okay, fair enough. What can you do for that number? He went through my laundry list of all the stuff I had. Jotted down on my pink post it note that had like a million little line items and he said, I can do this, I can do this, I can do this, I can do this, I can do this, I cannot do this, this, this, this and this. Then, at the end of the day, of course we started adding. Well, we could do this, but we will also do the doors or something. I guess the tip that you can glean from that is with when your contractor comes in high, say this is the realistic note.

First of all, silence and wait for them to come off of their original price. Second is tell them the realistic budget you are willing to spend and see what they are able to do for that number and you will be surprised at the end of the day, we have had so many situations where a contractor would much rather just figure out a way to get that work done rather than risk losing your business to somebody else.

J: Yes. I mean we started this whole discussion with when you are talking to a homeowner, do not make it transactional because there is a lot of emotion involved in selling a house and all that. But when you are talking to contractor, it is transactional and there is no emotion involved or there should not be any emotion involved. When you are dealing with a contractor, you are taking kind of a different tact instead of going after, ‘Hey, tell me what you need, blah, blah, blah, blah, blah.’ A contractor, most business people, they are going to have no problem actually talking about the numbers. Instead of saying, hey, okay, $40,000 for this scope of work. Let us see a breakdown in the line items. Exactly what Carol said, start breaking down the numbers a little bit more closely, see what numbers you can agree on.

You cannot agree on negotiate things individually as opposed to as a big group. Too often we look at it negotiation as all or nothing. We look at it, okay, you are going to do my scope of work for $35,000 or you are not going to do it, or you are going to do it for $30,000 or you are not going to do it. But instead, hey, you guys have a good breakdown of the price for me. I can look at it. Your plumbing prices are great so let us do the plumbing and your drywall prices are great. Let us do the drywall. Okay, electrical, you are a little bit high. Let us talk about negotiating the electrical here and before you know it, you have got the… The scope of the work could be the same, but you have gotten the price down to something that is reasonable. Do not be scared to break things down into line items and get very transactional about it.

Brandon: Yes, that is fantastic. Anything else you guys want to add before I move on?

J: Yes. I mean just the other thing to point out is if we were having this conversation 10 years ago, it would have been a very different conversation. 10 years ago, contractors were really easy to deal with. After the recession from 2008 most contractors went out of business and those that were still in business after 2008 when the good ones, they were good at dealing with cash flow and they were good at doing the business stuff, they are good at customer service. They showed up on time, they did quality work. The ones that could not do that went out of business after 2008 but the ones that were left were good and dealing with contractors… I mean I wrote in my first flipping book, the first edition of my flipping book, that the easiest part of flipping houses is dealing with contractors.

Basically, you incentivize them by offering them more work and treating them well and as long as they are getting more work, they are going to keep coming back over and over and over again. Five years later, I wrote the second edition to my flipping book and it went from this is the easiest part of the job to contractors are literally the most difficult part of the job.

Brandon: Yes. Just something to keep in mind that times change and it very much boils down to when it comes to contractors how much leverage you have. When it is a buyer’s market and contractors are desperate for business. You got a lot more leverage, you can get a lot more concessions. These days, it is a seller’s market. Contractors can make, frankly, they can make more money working with homeowners than they can working with investors for less headaches. These days, you just need to be reasonable and as investors we give in a lot more than we probably want to when it comes to contractors but that is the way it is until the next recession.

Brandon: Yes, that makes a lot of sense. Alright, I want to shift down. In a second, I am going to ask you all, if you want to start preparing in your heads, like what your all-time favorite or current favorite negotiation tactic is and then if you can back it up with a story, even better. But before I get there, I want to just mention the book real quick as we talked about a number of times. Just want to say what it is so if people are interested in picking it up, they should. It is called The Book on Negotiating Real Estate: Expert Strategies for Getting The Best Deals When Buying and Selling Investment Properties. It is out today over on BiggerPockets and we would love of all of our listeners went over there right now and picked it up. Just go to BiggerPockets.com/negotiatingbook, negotiating book.

If you do not know how to spell negotiating, Google it. You might as well order like the ultimate package there. I think it is like $50 or something like that but you get the physical copy shipped to your house, the audio book version, the Ebook version and a bunch of bonus material including a few videos where I actually drill down on some of these concepts with J and Carol. That was actually really really fun to work on. Anyway, it is all there and there is access to a Q&A Webinar with all three of our authors and more. Oh, then there is a quick reference guide that is a super cool.

It is like a one page cheat sheet, all of the most important tips on there and tricks. Like that cheat sheet alone, like I would pay the 50 bucks for. Anyway, you can get the ultimate edition or you can get just the audio, just the Ebook, just the physical, and all that good stuff. Again, BiggerPockets.com/negotiatingbook. If you cannot remember that, just go to the bookstore. It is up in the navigation bar. Anything you all want to add to that?

J: No, that was great.

Brandon: Alright, yes, look at that. Alright, it is really fantastic. I mean you guys really are like changing the game here. It is one of those, again, I say this with some of the other books that we have done but I will say it again here, maybe even more so than any other book we have launched. Like it would be almost impossible I feel like to not make way more in the next hundred years of your investing career then what a $50 or $20 or $30 book costs, right? Like it is one of those like returns on investment that is like infinite. You know what I mean? Like if one tip helps somebody negotiate one better deal and get 1% more on the sales price or 1% lower on a purchase price, well there you just paid for itself. You might go get it, get one and get one for a gift for somebody else, but we had to move on. I am going to start with you, Mark.

Carol: That is awesome, Brandon.

Brandon: Well, thank you.

Mark: Okay.

Brandon: We will start with, Mark. Mark, what is your favorite? If you have one tip or something that is just, maybe not a favorite, but something that you just think is cool that you use in your business and if you have a story to go with it, even better. We will start with you.

Mark: Yes, I still buy most of my deals from the MLS. I am doing two to three properties a month and we are in Colorado, which is a crazy market. It is not like we have a ton of properties.

Brandon: No, but Mark, you cannot find deals on the MLS. Clearly, right?

Mark: I did it, that is impossible.

David: Do not do it.

Mark: Yes, I hear it all the time. But I do a few things in my offers. They get them accepted over other higher offers all the time. The first thing, obviously, we act really fast. First day, we will submit offers. I only have asked for an inspection in like 95% of my deals. I do not ask for an inspection. That is part of experience, walking through a house, knowing what to look for and always building room into your price for those unknowns. But the other cool thing I do is I will always make them cash offers, but I still get alone.

I will not have any inspection contingency, no appraisal, no loan conditions but I have got private lenders, I have used hard money before, I have used banks and all I do is I write a little clause that says, ‘Hey, I have the cash available to buy this house. However, I may use a private loan or a bank loan to purchase it but it will not affect the seller at all.’ No contingencies, none of that. That allows me to do these kind of cash like deals but still use, I can do 100% financing still. That is one trick that has really helped me get more deals.

Brandon: Because I struggle with that. That whole like, I want to say cash because it is cash sort of but it is like I will do the hard money lender sometimes. Sometimes I will pay cash for it. I never really know what to do there. I am going to totally take that from now on every offer. I am going to have that little clause in there that says I might use a form of financing, but

it does not affect you at all. Yes, that was worth this hot cost of this interview right there.

Mark: The first couple of deals I did, I just wrote cash. Then the title companies are like, ‘Why are you getting a loan?’ I am like, well, it is not really like… You have to do it. I am like, okay, I made that little clause. Never had a problem since then.

Brandon: Love it, love it.

J: We do the same thing on every one of our offers.

Brandon: Why did you not told me this stuff before, come on?

David: Brandon, I do this all the time too. I think you are the only one who does not do it.

Brandon: No, I always talk about the whole like low cash. Yes, whatever. Alright, J or Carol? Carol, Carol.

Carol: I will go. I actually have two. The first one is it goes back to something you said earlier, Brandon. It is all about kind of get the ebgbs when it comes to negotiation. People just do not like it, right? My number one tip is negotiate everything always for the simple purpose of I am just learning how. You are always, always, always practicing. Every time you go to home depot, I do not care if there is a sale, I do not care if it is not scratching down, I do not care what it is. Talk to somebody and ask if you can get it for a lower price and you will be amazed, maybe will not be amazed, you always get something for a lower price. They can always figure out a way to do it. No matter where you are, maybe not the grocery store that is excessive, but just negotiate everything always in. Like I said, it just keeps you in the mindset of waiting and being patient and all those things you need to do as part of a successful negotiation.

Brandon: You probably could do the negotiations though. Imagine you get a big bag of oranges, right? It is like you find the one bag that has something wrong with one of the oranges, right? Like you go put it in the thing and then as they are weighing it up, oh wait,  there is something wrong with that one. Can I just get a discount on that one since there is one orange bad? Sure, we will take off half price.

Carol: Certainly, they will just take it off of the thing because it is easier to do that than go back and  replace it. Always ask because you have to remember the worst that can happen is they can say no. Number one negotiating tip is always, always, always negotiate everything.

J: Can I throw something in about that?

Carol: Yes.

J: When I was in the corporate world, my company that I worked for paid a lot of money for me to take this high price negotiating course. It was a couple of day of course and I remember our homework on the first day was go to a department store, pick out an item that I wanted to buy anyway and negotiate the price. Basically, the goal there was going into the place where you are least likely to get a discount on something and doing the best you can because what you realize is it is, it is kind of like for all the guys out there that that have like hit on women or asked women out and it is terrifying. It is terrifying, it is nerve wracking, and you do not want to be rejected. But what you do not realize is there is nothing wrong with rejection.

When you are negotiating, there is nothing wrong with having the other person say no. The more times you hear no, no, no, no, no, and trust me when it comes to women, I know this really well. Carol was the only one that was brave enough to say yes. If you hear enough no’s, you get desensitized and it makes it a lot easier and a lot of us are just so terrified of getting that person know that we never try it. But you realized that the worst thing they can do is say no. Here is the homework that I have for everyone, just listening to this. Go to JC Penny or Macy’s or some department store tonight, pick out something that you are going to buy anyway and do your best to try and negotiate just to see what the other person says. They might be so caught off guard that they say, well I do have a 15% coupon here that we are allowed to use for customers. Great, you just got 15% off. Not only you just get 15% off, but you know that there is a coupon sitting behind the desk. The next 50 times you go, you get 15% off that time too.

Brandon: Well, what is funny is that every time somebody has ever emailed me or like sent me like an Instagram message, I get a lot of Instagram messages over on @BeardyBrandon, like that plug? Like I get a lot of Instagram messages. People occasionally maybe like once a month, maybe once every couple of weeks, will say, ‘Hey, is there any current discount codes for our pro membership?’ I do not think I have ever want not giving them a discount code for a pro membership. Like every time, because I am like I know if we have a sale running, I know what it is on my head. It would be easier for me to write that to them, it does not affect me at all, and give it to them. Like that would save them potentially up to a $100 a year on their pro membership just by asking me that question. Like very few people ever do that but now I am going to get slammed, but yes.

Mark: What is that code?

Carol: Rebates.

Brandon: We should make a code just for the show. Hey, people who are listening to the show right now, we submit the code negotiating. Negotiating gets a 20% off a pro membership right now.

J: You will know, you have to buy if you buy the book.

Brandon: Oh, if you buy the book, 20% off your pro membership. Yes, use the code negotiating. We will make that happen.

J: There you go.

Brandon: Kevin is our podcast producer. Kevin, I am putting you in charge of that one. We make that happen.

J: Get her done. Carol, I am sorry. You have a second tip.

Carol: No, that was fantastic. My second tip is every negotiation always practice patience. Sit back and wait. I know I have said it before and I cannot emphasize it enough. I want to share a recent story. I was selling a property and we listed it and we had a ton of showing everything now, something like 40 some showings the first weekend, et Cetera, et Cetera, et cetera. An agent called me over and over and over and over and if she really wanted it and sends me an offer and it was the lease price on the house was 650. She brings me an offer for 625 and basically no contingent… The financing contingency but really really simple deal. This was actually, this was not an investment property, this was a deal I was selling for a friend. I took it to my friends, the sellers, and I was like, guys, we were thrilled with the 625 offer but I am like, ‘Eh, I am just going to sit back and not entertain this right now.’ I just waited a day.

J: She approached the property really high.

Carol: Priced the property really high. We are like let us just see if anyone bites, let us see what happens, right? I priced it at 650, they bring me an offer for 625. Sellers are thrilled. I wait a good 24 to 36 hours. I am like I am just going to hang tight. Agent calls me back a day and a half later, apologizing for sending me such a low offer. I so wish we could have brought more to the table. They really really really want the property. I am just sitting here listening and listening and listening, thinking, oh my goodness, we were ready to accept this offer but now you are apologizing that you think it is too low. Well, who has the power now? It shifted all the power, we ultimately landed at 648 on that property and it all worked itself out. But it is just one quick and dirty of many, many examples where if you just sit back and wait the person to a point. You do not want to like freak people out too much but you got to let them freak out just a little, got to cause a little bit of friction. If you make it too easy, then people go away feeling like, oh, maybe I should thought a little bit more. But if you are patient and you wait it out, you very often end up with a better deal.

J: Carol and I have literally made hundreds of thousands of dollars over the last 10 years because she is so good at this. If it were just me, I hate doing it. I get an off her and it is like it is the same way when I get texts or emails. It is just like I do not like things sitting on my plate, I just respond to immediately. If I get an offer, I am nervous and Carol is always like, ‘Ah, we will call him back tomorrow or the next day or the day after and it is driving me nuts because I just want to get a deal done, I just want get something locked up and she is like, ‘Nope, just wait.’ Invariably, I mean we make more money. The longer we wait, the more money we make and it is so effective. I could not do it myself, but luckily Carol does support me.

Carol: That is sweet.

Brandon: Yes, there you go.

Carol: It is that old adage, the person who cares the least has the most power.

Brandon: Yes.

Carol: Keep that in mind. If you care less, you do have more power.

Brandon: That is fantastic. Very, very cool. Alright, let us move on. J, did you have one to do? Did I ask you? Did you got rejected one?

J: I am going to give one real quick. This is another thing Carol is so good at. She is so good at research. Constantly, I mean, if somebody makes an offer she finds their Instagram, their Facebook, she finds him on LinkedIn. She will go back and look through property records, she will call family members and ask them questions. I mean she will do anything. It is amazing what you can find if you are willing to do a little bit of research. We have a story in the book that I really love. We had this property that we were selling and it was a few years ago and we listed it and we got no offers and it was like two weeks and we were getting ready to drop the price.

We had a showing and we got a low offer on the property. I do not remember any of the numbers on the deal but we got a low offer on the property and we were getting ready to accept it because we are going to drop the price anyway that weekend. Carol was like, ‘Okay, well let me do some research on the potential buyers.’ She has done research and she comes to me and she says you got to come see this. I actually took a screenshot of this and I put it in the book because I know nobody would believe me if I did not screenshot. I did it at that moment because I knew it was going to be useful at some point. She found the person on Facebook, this is a few years ago back when everybody’s Facebook profiles were public and this woman, we knew that she was looking at this house.

She had a boyfriend or a husband that was far away that did not come with her but she wanted him to see the house and she wrote a post on Facebook and I am reading it out of the book. She wrote on Facebook, ‘Was getting ready to give up on this trip but I think we found our house today!’ Exclamation point. Made an offer this morning and waiting to hear back from the agent. I have a name blacked out here for privacy, blank, has not seen it yet but I know he is going to love it. Best part is it is only a couple blocks from, and there is another blacked out name there. We could be neighbors!!! Fingers crossed. Basically this woman went on Facebook and wrote a Facebook post that she was so excited about this offer that she made, her boyfriend or husband or whoever it was going to love the property and they could be neighbors to somebody that they knew. Basically, this told Carol, especially because she was doing the negotiating everything she needed to know.

Brandon: Yes.

J: This was the house, this was the last house they were going to look at. She said finally was getting ready to give up. This was the last house they were going to look at. It was the perfect house for them but they put in a low offer. Ultimately, what happened, we did not drop the price. We negotiated. I do not remember if we have got full price for it but I am sure we got close to full price for it because this person put information out there that we were able to leverage. Research is that important.

Brandon: We did the exact same thing on one of the last projects we did. We looked in their Facebook, find out some really good information about how excited they were about it, yes.

J: Yes.

Brandon: I mean like we have to remember too as when we are selling a property. Like as an investor it is a number’s game for us. We just like throwing a number. We do not get an offering, not a big deal. When you were selling properties though, if somebody goes to the hassle of making an offer, like that is a pretty big deal to people. Like they want the house. Like they do want it a lot of times. Like they are not going to just give it up real easily. When you are selling a property like a flip or whatever, you can I think push a little bit harder in negotiation than maybe we all believe we can. Well, we got to shift this over to the next segment of our show which is our Deal Deep Dive.

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Mark: Yes, I am.

Brandon: Alright, we are going to jump into this deal of yours and we are going to fly through this because I know we have a hard stop in a short while. We are going to fly through it. Let us start with, first of all, what kind of property is this? Let us start there.

Mark: It is a 68,000 square foot strip mall I bought last year.

Brandon: Whoa.

Mark: That is where I started my office and yes, I decided to go big.

Brandon: Alright, that sounds good. Question number two, David?

David: How did you find this property?

Mark: It was a pocket listing from a commercial agent who I had worked with. I am a broker agent, but I knew to do this big commercial stuff, I had to have help from somebody else.

Brandon: Alright, that is smart. How much was it?

Mark: 2.1 million.

Brandon: Wow, 2.1 million. Alright.

David: How did you negotiate that price?

Mark: Well, he brought it to us as a pocket listing. Told us it was a pocket listing. I had a partner who bought it with me and they are asking 2.25 million. He is like, just buy it at that price. You are dumb if you do not. I am like, well, nobody else knows about it. He wanted to sell it to me so we could get both sides so I said we will come at it to see what happens. It was an amazing deal. Like I would have paid 2.25 no problem. They counter us at 2.1 so I said done, deal. Let us do it

Brandon: Right. Yes, I think sometimes the agents will be not exactly on our side because they just want… I mean they make no difference, really no big difference commission if they pay 2.2 versus 2.1 but they could lose a deal at 2.1 or 2.2, right? Like an agent will always encourage you to not always, but oftentimes encourage you to do something that is not in your best interest and they are not being bad, it is just how they think.

Mark: It is the business.

Brandon: It is just business. Alright, how did you fund this deal?

Mark: We used a local bank. Part of the reason I brought a partner in was because I did not want to spend $500,000 for a 25% down. My partner helped fund the down payment, we used a local bank and was actually my partners local bank he used because he is a flipper from the past and now he just kind of lends private money. That is why I had my partner, it was to really secure that financing. It was a 4.6% interest rate with a 25 year amortization in a 10 year balloon.

Brandon: That is awesome.

Mark: Yes.

David: To clarify, a pocket listing is a house that is listed for sale with a broker or an agent but it is not put on the MLS where everybody else can get it. It comes from the, before the internet, when agents would have a book of houses for sale and they would put like a piece of paper that showed all the detail. Well, that agent might keep that in his pocket so no one else could see it and it is a way that they can give a deal to someone specifically. It is kind of like an off market deal, but

the person still being represented by agent. Anyway, what did you…

J: From a negotiating perspective, the most interesting part of that deal was the fact that Mark was able to build a relationship with that broker, that the broker brought him that deal before they took it to anybody else.

Mark: Yes.

Brandon: Yes, that started long before the deal ever came out.

Mark: Yes.

J: Exactly.

Brandon: I mean full circle.

David: Okay. What did you do with this deal?

Mark: I still have it. We bought it at about a nine cap where properties around here were selling at a six cap for commercial. It was an amazing deal. It had a grocery store in it, at coffee shop, restaurant, some office space, and so we basically did nothing to it but I started my own office and started paying myself rent and that increased the income even more. I plan to keep it basically forever.

Brandon: That is cool, that is cool. Well, it kind of comes up, what was the outcome but maybe specifically like I mean do you know like if you are comfortable with saying like what kind of cash flow does this generate a return does this kind of give?

Mark: After our loan, we are making about $10,000 a month on it after all expenses and our loan is paying off $4,000 to $5,000 a month in principal.

Brandon: That is amazing.

Mark: Yes, no, yes it is so awesome. I want 10 of them.

Brandon: Yes.

Mark: I want ten of them, I cannot find them.

J: You said you put about $500,000 down, you are making $10,000 cash flow month, which is about $120K a year. Basically you are getting back about 25% cash on cash on that.

Brandon: Yes, that is awesome.

J: That is awesome.

Mark: Not counting the taxes, the principal.

Brandon: Yes, yes.

Mark: All the other stuff.

Brandon: That is amazing. Very, very cool. Alright. What lessons did you… Sorry, David. I am taking your question. What lessons did you learn from this deal?

Mark: The biggest one was we almost lost it. We got under contract, we had an inspection on this one because I had never bought anything more than 5,000 square feet before. Inspection came back and said the roof might needs some work, there is some electrical, there is a whole list of stuff. My agent actually is like, okay, we can kind of use this to push against the seller, which is weird because he is representing both of us. I am like, well, alright. But he is like let us really try and get the price down. We asked for I think a $125,000 concession and we did not hear from the seller for weeks. I am like, what is going on? That is the other weird thing about commercial is it is done so different.

It takes so long to get stuff done. I am used to having it done that day. But nothing was happening, I kept asking my agent and eventually he is like, yes, sellers does not want to do it. He wants me to cancel the deal. I am like, what are you talking about? I actually… Our broker accidentally forwarded me some emails that showed some stuff I was not too happy with and so I contacted the seller directly and told him the whole situation. We still wanted the deal. I am like, you know what? We will not even ask for any inspection items, let us just continue. He is like, ‘Okay, cool. I am glad you told me. Let us keep doing. Let us do the deal.’ My big lesson was like we asked for way too much stuff. If we would ask for 25, 50, or some other stuff, we might have got it. But because we went full bore, let us get as much as we can, we got nothing and we almost lost like the most amazing deal in my life. Being realistic with your inspection stuff was my biggest lesson.

Brandon: Alright, that is good. That was a really good, that was a good Fire Round. I mean Deep Dive because we do not always like talk about the commercial side of things but it is a fascinating thing that I am looking to get more into. It sounds like you are as well, awesome.

Mark: I love it.

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It is time for the Fire Round

Brandon: The fire round are the questions that come direct out of the, well, the fire round is. Do I say the ‘Fire Round are’ or the ‘Fire Round is’. The Fire Round is the questions, that is weird to say is not it? Any of you guys grammar?

J: Fire Round, round is singular so is.

Brandon: Fire Round is the questions which sounds weird to say… The question are weird. Alright, the Fire Round is the questions that we ask every guest that come out of the forum. They are different questions every week and we throw them at our guests and so we are going to throw them at you right now flaming hot. Number one, let us go do this one first on J. ‘I found a really nice deal on a single family home. The seller owns the property outright. It seems like she has open to seller financing. I need advice on getting her to agree to this and making it work.’

J: Yes, absolutely. The nice thing about seller’s financing is because you are not getting a bank loan, you can typically pay more if you provide a lower interest rate. Couple things. One, you are saving money on your upfront loan fees. Let me give you an example from the book and it is this example which is in the book real quick.

Brandon: Sure.

J: We had a house in a neighborhood. We had bought the house next door. A woman, we send out letters, a woman calls us. She says her dad owns the house, she wants to sell it. I knew the house pretty well because it was right next door to another house we are doing. I knew we can pay 94 for it and she basically said, my dad wants a hundred for it. He is not going to take a penny less. I know that, that is just his nice round number and I could tell that negotiating was not going to help here. Like a hundred was his number. I said… We talked for a while and basically said, what are you going to do with the money? She is like, ‘I do not know. He does not… He is just keeping the money. It is an investment property for him, he does not really need the money for anything. We do not know what we will do with the money.’

Okay, that basically told me everything I needed to know. They did not need the money tomorrow. What I figured was, okay, if I do a zero interest loan, I am going to save. I was going to flip this house over six months on $100,000 loan at I do not know what it was, let us say it was 12% back then. That is $6,000 in interest I was going to pay plus I was going to pay a point or two up front. Basically, I was going to pay $8,000 to get the loan from the bank. What I said to her is I will give you the $100K but I want him to seller finance it for six months for me while I do the flip and then at the end of the flip I will give them the full amount, I will them the $100K then.

Brandon: Yes.

J: I knew I was going to save $8,000 in loan costs, which basically takes my $100K purchase price down to $92,000 which was below my $94,000. Went back and forth a little bit. Ultimately, I gave her like 20,000 down. Did the other 80K later but it worked out because the numbers worked for me. I was saving money by doing the seller financing. That is the story behind the answer. The answer is figuring out how much money you can save by doing seller financing. Figure out if you do a 0% down loan, how much money you are going to save.

If you do not have to pay the origination costs, how much money are you going to save? Then take a portion of that and roll that into the purchase price that you are going to willing to offer. If you are willing to offer $200,000 and you are going to spend 30,000 in loan costs over 30 years, well maybe offer $220,000 for not having any loan costs. They get $20,000 more on the sale price, you save $10,000 on your costs. It is a win win for everybody. That is the benefit of seller financing, you can generally offer more money because you are saving money elsewhere.

Brandon: Really really good, really good. Alright, number two.

David: Number two. This one is for you, Carol. ‘I have a condo under contract that was a foreclosure and it is being sold as is. I just came home from the inspection and there were some problems. The AC breaker was not powerful enough, the furnace needs a tune-up and there was a wet spot on the ceiling from the upper neighbor’s unit. Any tips on how to lower the price after an inspection on an as is sale?’

Carol: Absolutely, that is a great question. We have had lots of those. You might be surprised at just how many foreclosures, how many bank owned properties, how many of the banks are willing to drop that price if they do realize what the true condition of the property is. A lot of times these banks, they have guys that go out and snap a bunch of pictures, but they do not really know exactly the true condition of the property. If you can come in with some solid bids from your contractors on it needs $8,000 in roof work, it $7,000 in duct work. Guess what? The AC unit is missing? There are all these things I did not know about and you can provide an itemized list along with contractor bids and present that as one big package back to the bank. Very often they will open up that negotiation process again.

I would say pretty much without fail, every time we have done that, when there are some big ticket items that are substantial, the bank would really rather work with you because they have already started the process and in a lot of times it is been on their books for such a long time. They want to be able to keep that momentum forward. As long as you really go in armed with really good solid information and just say this is what needs to happen, they will very often work with you on that price.

Brandon: That is great. As is, even when list says as is, it is never as is. I mean like…

Carol: Exactly.

Brandon: Yes. I mean like oftentimes like if it is between them losing a deal or not, all of a sudden it is no longer as is. All of a sudden they are willing to move.

Carol: You got to remember that as is often just means they do not want to have to deal with the repairs themselves. They are happy to throw money at the problem, they do not want to throw time at the problem.

Brandon: Yes, I love that. Great tip, great tip. Number three, Mark. ‘I am naturally not very aggressive or confident in myself and I am wondering if that is hurting me. How important is sounding confident in negotiations? If it is important, what can I do to become more sure of myself on the phone?’

Mark: Oh, wow. That is a good question. I am a natural introvert. Like I hate talking on the phone. When I was a kid, I was the person who hid behind my parents’ leg whenever anybody else was around. It can be a problem and I think it is not… You do not have to sound crazy salesman confident, you just have to be yourself. Just talk to people, right? Just talk to people. If you have done your education, if you have learned about real estate, being knowledgeable is the most important thing about being confident.

If you know yourself, just be yourself and just talk to people. If you have a problem with confidence and being… I hear some people say, ‘Well, I am an introvert, I just cannot do that. That is not true, you just do not want to do it. I mean I have spoken at conferences before, it was the scariest thing in my life, but I still did it and you feel absolutely amazing after you do it. You just have to kind of practice. Talk to yourself in the mirror, talk to your friends, role play if you have problems with really, talking to people. The more you do it, the more you practice, the better you will be at it.

Brandon: Yes, really really good tip. Yes, the more you do it,  the more you are going to get better at it. I almost wonder also if like talking like being the confident person that really like, high D, like to go to the DISC profile, are like super calm. Like that probably actually hurts oftentimes the negotiations because then people think they are going to get taken care of, taken advantage of rather than taking care of.

David: Yes. Remember that book, Moneyball, that Billy Beane wrote from the Oakland A’s.

J: Yes.

David: He was just like beating everybody in every trade. Well, there came a point where nobody wanted to negotiate with them anymore because they just thought they were going to lose and it actually was not in his best interest to everyone knew he was good at that.

Brandon: Good to know, good to know. Alright, well let us head over to the last segment of the show, which we lovingly refer to as our Famous Four. Alright, these are the same four questions we ask every guest every week. We are going to start. I know Jay, you have answered these before. Mark, you have done it before, but just real quick, let us have everyone just fire off. Favorite real estate book? We will start with J. Current, other than you written.

J: Oh, The Book of Rental Property Investing. The book of Long Distance Investing.

Brandon: Wow, look at that. Wow, nice guy.

J: Honestly, I have spent the last eight months writing and I have not read a book that I have not been writing for the last eight months. I am going to let the other two handle this question.

Brandon: Alright. Carol, current favorite real estate related book?

Carol: I cannot not say The Book on Negotiating Real Estate, Brandon. I mean, come on? I write them. What am I going to tell?

J: Good negotiation there. That was good, that was good. Mark?

Mark: Oh, the current? I really like Gary Keller stuff. It is just so timeless. It is not really that current, but Millionaire Real Estate investors are kind of like a Bible for a lot of people.

Brandon: Yes. When I think Keller, I mean like it changes every year or two for me.

Mark: Not 30 years ago.

Brandon: Yes. Some people’s current favorite might be Nickerson’s, 1752, amazing book. I do not know what it was like in 1920s. But anyway, alright. How about each of you a current favorite business book? Like something that you are just really enjoying from a business standpoint right now or that in your past you have loved?

Carol: I will go. This is an old one. This is from maybe 20 years ago but it is one of my all-time favorites. I still recommend it to everybody. It is Marcus Buckingham’s Discover Your Strengths. It has I think 30 different strengths and it is really good building teams and working with other people. It has worked really well for J and me, for example, because we are are husband and wife investing team and very in the beginning of our working together, we were both positive that we knew everything about everything. We tried doing the same stuff always. But discover your strengths, you figure out who is good at what, divvy up the roles and you are a lot far more successful.

David: Alright. Anything from you, Jay? I am sorry, anything business book for you J or Mark?

Mark: Two Perfect is, I forgot the author’s name. But it is all about like being an OCD and just that book just makes you relaxed and kind of realize nothing not everything has to be perfect. Sometimes doing 90% of the work is just as good as 100% and you get much better results.

Brandon: Alright.

J: Yes. I picked up the one thing, last week we did a little vacation and so I had read it before but I picked it up and read it on the plane on heading out on vacation a couple of weeks ago and just reminded me I really liked that book. It just has some really good high level concepts in there to help you focus and really get your business moving in the right direction and free yourself from the stuff that you should not be focusing on.

Brandon: So true. Alright, hobbies. One word each, hobbies. Sorry, David. I just totally took your question. No, David asked it. I am going to let David ask it.

David: The cat is out of the bag. You guys go ahead. I get paid per question, this is costing me a lot of money

Mark: Cars.

Brandon: Alright, I knew that.

Mark: Yes.

Carol: Building epic box forts.

Brandon: Wow. Carol breaking the rules again.

J: She is getting a lot of the box forts these days.

David: Nice.

J: What are my hobbies? Do I have any hobbies?

David: Clearly not thinking what they are.

Brandon: Cyrpto…

J: Yes, I am going to go with poker.

Brandon: Poker.

David: Poker, that is like a perfect J Scott hobby.

J: I love poker.

Brandon: That is great. Which I still want to play some poker with you, Jay. We have not played yet, but we will get there.

J: Absolutely.

David: You will never beat Brandon because he is wildly unpredictable. Brandon’s whole strategy is to like not even know what he is doing. Like you could never read his mind because he does not even know what he is thinking at any given time, yes.

Brandon: It is the best strategy. No, my strategy in poker is easy, I just look at what the guy next to me is doing and I just do exactly what he is doing. If he fold, I fold. If he doubles down, no matter what, it works surprisingly well. Anyway, alright, last question. Because I took yours, David, you want to take mine?

David: Alright. Tell us what sets apart successful investors from those who give up fail or never get started?

J: Okay, I will start. Just taking action every day. It is really that simple. I see too many people that they spent so much time planning and they think about where they want to be a year from now or five years from now or 10 years from now. They get overwhelmed because they think, oh, that is unachievable. But instead, do not think about a year from now or five or 10 years from now. Think about what you are going to do today and every day just do something. I probably use this tip on my last three times on the podcast, but I love it. It is very very rare that I ever meet somebody that has only done one deal in real estate. If you can do that first deal in real estate, you are going to do a whole lot more. Nobody stops at one because after the first, it is easy. That first deal is really tough, but just keep going to get that first deal. I promise you, once you get that first one, you are going to do a whole lot of deals.

Brandon: Alright.

Mark: I would mention knowing your market. So many people do not know what a house is worth or they do not know if they are getting a good deal. If you know you are getting a good deal, it makes buying it so much easier. Once you do it, like Jay said one time, it just snowballs and you keep doing it over and over and over again. But you have to study your market, you have to know your market, you cannot depend on agents or other people to tell you. You need to know yourself.

Brandon: Alright, that is really good. Thank you very much. Lastly, it would be Carol but actually Carol we just lost her. We will come back to that or you all can follow up with Carol actually over on the show notes, over on BiggerPockets.com/show321. But you guys, this has been fantastic. I think we got one final question. David Greene here will ask the final question.

David: David, tell us, how can people find out more about each of you?

Mark: Alright, investfourmore.com is my blog, investfourmore.com. Started about six years ago,  have a bunch of articles on there. We do videos of almost all my flips and rentals on YouTube, the Investment Four More Channel. I have a few books, besides this one as well that I have written and you can always email me, [email protected]. Happy to talk to people and help any way I can.

David: Jay, where can we find you and Carol?

J: 123flip.com is our blog, the numbers 123flip.com. We are on BiggerPockets’ J Scott and Carol Scott. You can find me on Facebook. J Scott Investor, J Scott Investor is my Facebook handle and 123flip on Twitter if anybody wants to follow me on Twitter.

Brandon: Alright, sounds good. Well, thank you guys all for joining us today. It has been a fantastic show. I hope this is helping a lot of people negotiate better. I know it has definitely helped me. Without further ado, I will let David Greene just take us out.

David: This was awesome. Thanks you guys. This is David Greene for Brandon ‘I buy houses cash, well, with someone’s cash’ Turner, signing out.

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