Tuesday, August 27, 2013

Talking with Sellers

A novice investor recently emailed me:
“I really don't know how to talk to convince a seller, and this scares me to death. Indeed, I realize that communication or the art of talking is one of the most important things I need to learn first; I mean I need to know how to talk to a seller or a home owner in order to get the deal, and then assign it to a buyer; I want to start my real estate business as wholesaler.

What should I tell a seller in a deal discussion to avoid major mistakes, and get the deal under contract? What attitude should I adopt when I face them for the first time?”

 First, let’s talk about what is the thing that is scaring you the most. Starting a new business – such as real estate investing – is full of moments that will push you outside your comfort zone. Yet in order to succeed, or to change the life you currently lead, you will need to accept the fact that life will be full of scary moments that push you outside your comfort zone. Just accept this, and do not let it stop you.

Every journey begins with a single step. None of us is proficient at anything the first time we try it. It is commonly held that a minimum of ten thousand hours is required before we become an expert at anything. The best way to begin is … well, just to begin.

Let me start with attitude first.
It is best to practice scary things in situations where it really does not matter whether you succeed or fail. You may want to ask friends or family members to pretend they have a house to sell you, and practice running through some typical scenarios. You may want to visualize the different conversations, obstacles or questions you are likely to encounter, and think about how you might respond. Write up some practice scripts to help you through your first few calls – and use it!

You then should practice talking with real sellers. Craigslist is a great resource for finding motivated sellers. Look under houses for sale by owner – not by broker, and give these people a call. They cannot see you, so feel free to use your script. It may go something like this:

“Hi, my name is Wendy, and I am calling about the house you have for sale on Craigslist. Can you tell me a little more about it?” (Be prepared for a response like “what do you want to know?” Don’t let this throw you. Ask any specific questions you may have about the house, but otherwise continue with your script. Asking questions is a good way to get a seller to talk. You should be doing a lot more listening than talking. If you are talking more than the seller, something is not right).

“It sounds like a wonderful house, is it in a good neighborhood? What are your neighbors like? Are their houses in good shape?” (Again, you are drawing out the seller and trying to establish rapport. If you are asking questions, you are in control of the conversation. If the seller is asking you questions, then you have lost control. If this happens, just give a simple answer and follow up with another question, such as “yes, this house would be for me, but I want to make sure this one is a good fit. It isn’t under power lines or on a busy street, is it?”)

“It sounds like a great house. Why are you selling?” (It is very important to listen closely at this point, as you are looking for someone who is motivated to sell. Some reasons may be divorce, inheritance, medical issues, loss of job, and so on).

“How long have you owned it?” (This will help you determine whether there is likely to be any equity in the house).

“I am expecting to have quite a bit of cash to put down on a house in the next few months, what is the lowest price you would be willing to accept if I paid all cash and could close quickly?”

No matter what they say, your next response is a pause, and then,
“Is that the best you can do?”

Thank them for their time, and let them know that you will get back to them if this will work for you. Your attitude should be, simply, that you do not care whether you reach a deal with this seller or not.  You are simply practicing talking to sellers. Try to make at least five calls a day, and by the end of the week, you should feel much more comfortable talking with sellers.

Simply collecting an address and a price from the seller will give you enough information to run some basic comps. This will tell you whether the house is a deal or not. If not, keep moving on. Be prepared to talk to at least ten sellers for every one-two that sound promising.

If it sounds like a deal, call back and set up an appointment to look at the house. Take someone with you, if you think you need the support. You do not need to make any decisions at this point. Again, thank them for their time and tell them you will follow up if this will work for you. In the meantime, you should be doing or have done your research to know whether this is a deal that your cash buyer(s) may want.

If it is, then it is time to move on to negotiation. Your cash buyer may just pay you for the lead, and want to step in to do her own negotiation. You might ask if you can tag along, to see how it is done. Or you may have the skills to write up your own offers. If you do, it is best to present them in person; but it is also possible to respond via mail or email. I like to present multiple offers in writing, so that the seller feels like they should pick one.

Many good books for investors out there that include scripts for talking to and negotiating with sellers.

Happy Investing!

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