Question about sales and negotiating with private sellers

[Michael Sanders]

Hi, I have a couple of questions about sales and negotiating with private sellers. I have done a couple of wholesale deals before, both with private sellers, but feel like sales and negotiating is one of my stumbling blocks. I am currently studying the subject of sales and negotiations in more depth.

When negotiating and selling with motivated sellers, I tend to run into sticking points with the sellers, and would like your input on how you would tackle some of these as I'm sure there is someone out there thats already mastered these areas of negotiating and sales.

Situation 1- The buyer having a retail number in there mind even though the house is outdated, and trying to sell the value of the all cash number.

For example a lead that just came in today called looking to sell his house because his long term tenants of 9yrs are moving out because one of the tenants had a stroke. They informed him that they will be moving out by end of month and won't be paying him anymore rent. The tenants before that rented for about 20yrs. He also says he hasn't seen the inside in 9yrs. When asked the basic wholesaling 101 question, paying all cash... closing quickly... whats the least you'll except... he said, well a realtor that he spoke with said it could go for 120- 130k. That's pretty much retail for that house in that neighborhood. Now I'm almost positive that after a 20yr tenant followed by a 9yr tenant the house is gonna needs some work. 

My question is what is your method in offering the standard 70-75% minus repairs offer "when the retail number is stuck in the head" of a motivated seller head, and explaining the difference between cash value and retail value? 

I feel like I have the worst time when a property is "functionally" in working order, but seriously outdated.

Situation 2- The seller wants to get rid of a "problem house" and even made me an offer to sell pretty close to what I could pay for it, but doesn't know how to get family out

This lead is a little tricky. Call came in that a daughter wants to sell house that she "jointly" holds title with her mom. The daughter is out of state, the mom is here in town, and she says that the house has become a problem. Her situation is that what seems to be a "problem" brother is living in the house and they can't get him out. Another brother of her's recommended that she sell the house to be rid of the problem. I go 2 weeks without being able to reach the seller and then when I finally do get a hold of her, she apologizes for me not being able to reach her. She updates me to the situation and says that now her mom, who jointly owns the house, has moved back into the house. She explains that the problem with that is that her mom is elderely, and that her and her family is trying to convince her to move with family where she would be tooken care of, but is having a hard time convincing her. What would you do in this situation?

To all the salesmen, negotiators, and problem solvers, how would you handle theses situations? 

I know the second one is more unique and sensitive but the first one I know will continue to run into with motivated sellers and wanted to what other investors methods were.

[Chip Towner]

Great question! Long answer

Best advice I can give you is, immediately, as in right now online, buy and read You Can Negotiate Anything by Herb Cohen!!!!! It’s an absolute must read. I read it at 19 and cant even begin to imagine how much that book has made me in the 25 years.

Below is how I would manage the conversations you cited as examples.

Example 1

1. Knowledge is your best friend. Educate the seller, run a CMA and help the seller determine the real value of the property including condition. Show current listings previous sales etc. A Realtor isn't writing a check for the property, they are trying to get a listing. (Apples n' Oranges)

2. Don't haggle! Don't start low and work your way up in little small increments. In my initial conversation or direct mail piece I offer 90% of my maximum price. Example 1st Offer = 90% of your max offer 1st price adjustment 97% of max offer 2nd price adjustment 100% of max offer. (Done move to the next deal) Every adjustment ask for something in return ie. “We’ve already spent a good amount of time trying to find a way to make this transaction work I’d hate to just walk away. How about this? I could go up to (97% Max Offer) but, I’d need to have possession by the XX/XX/XXXX. That’s the only way I could complete the renovation and have the home back market by XX/XX/XXXX. Otherwise, I risk not being able to sell it until next year and that just doesn't work for me. So, if I can have possession on or before the XX/XX/XXXX I can pay (97% max offer) but that’s it” Never give a concession without getting something in return.

3. Everything is in working order. Tell the seller “I understand everything is in working order. But look at it from my perspective. As an investor I’d rather replace a broken air conditioner and pool filter than having to install new flooring, granite counter tops and repaint the entire home …. It’s one phone call to replace an AC unit. A complete update takes time, money and planning.” Look at the comps and current listings. “I’m here because I WANT to buy your house not because I HAVE to buy your house. The most I can pay you is (97% Max) and if you accept that offer I guarantee we will have a quick and easy close, all I ask is that you let my contractor in the home the week before we close so he can order the cabinets and …. If you can do that for me, do we have a deal at $XXX,XXX?

Example 2

I actually like these difficult negotiations. Talk with daughter and setup a meeting with her and mom. You need to find out exactly what mom wants and figure out how to give it to her. I bet it’s not money or living alone. Read the book he cites these types of examples and with practice you will easily arrive at a win / win.

Good luck,

Chip