Phone Call: looking for tips to manage the first phone call

[William Boyce]

Hi, I am a newbie to Real Estate Investing. I have been doing my due diligences looking into direct mailing, finding lists, and so on...

I am now looking into the phone call part, thanks to show 77 on the awesome podcast, I was able to see important questions to ask on the phone and how to lead the conversation thanks to @Michael Quarles. One thing that I seem to not quiet understand is the part that if the sellers does not know how much he wants to sell his house for. Michael says that you should ask the sellers if they can do him a favor and do some research to estimate their house value and  get back to him in a few days once done. Michael seems to me to be one of the best at negotiating but on the other hand, I have heard from many other great investors that you should not let this potential lead somehow 'go away', because if one day pass by or maybe two that lead could have found another buyer... So my question is what do you think would be the best approach if you have a seller that is unable to estimate what its house is worth? 

Thank you a lot for your help guys

Have a great day 

[Ross Denman]

First off, I would read a little bit on phone sales. Being able to build rapport and trust over the phone is really important. People are more likely to be more flexible in their expectations if they like and trust you.

Beyond that, get as much information as you can without seeming too overwhelming. I don't attack the house questions first. I ask about their specific situation. By understanding the circumstance, you will have a better idea of what they need and how you can help them. Many people don't know what tools may even be available.

For instance, I need $10k for a medical procedure. While I'm currently living in the home, I have a place to stay after I sell it. The home could be worth $90k if it was in better condition, but it probably needs $25k in work. They may jump on a contract of $10k immediately and $500/mo for 24 mo ($12k) and a $20k balloon after that. That would be $42k. While it is probably less than they expected, all they really need is the $10k and $500/mo will probably nice as well for someone in that situation.

After understanding the situation, it's time to ask about the house. Find out about upgrades, maintenance, on-going problems, outstanding financing, judgements, or liens.

Always try to meet at the house when possible to sit down and negotiate the offer. This gives you time for more due diligence. In many places, there will be 2 markets... A retail market and an investment market. Determine the ARV from the retail market information that you can get, but also pull the investment market comparables as well and take them with you. Show the person that there are plenty of homes that have sold from $30-40k. (You will probably need tax data for these sales as they will probably not have used a broker or ever been on the MLS.)

Walk the house and point out as many issues as possible. Make them aware of the cost to take care of these things. While many investors have access to below retail materials costs and good prices on labor, express the cost if you have to fix it for retail costs. That gives you a larger window for profit and makes your offer seem more reasonable. Tell them that they have about $25k in work that needs to be done even though you know that you can do it for $18-20k.

You will probably have to go through tons of calls to get the right deal, but when you position yourself properly with a plan, you will find that the deals you do pull together will be much more lucrative.