Negotiating with Sellers
Anthony:Good morning, everybody, this is Professor Moore. We have a killer training for you today and I’m beyond excited to bring in my mentor and, ultimately, the person that really got me excited about real estate again. Anybody that’s been following these Saturday webinars knows I started real estate a while back in 2004 and went through the crash and everything like that. I got reinvigorated by the man, the myth, the legend, Than Merrill, so I’m really excited to have him on this call today.
He’s going to walk us through negotiating with sellers and all the different components involved with it. This whole series has been on creative real estate and what’s more creative than negotiating, so I’ve asked Than to come on and just teach us a few of his tricks that he’s learned along the way. So without further ado, I’m going to hand it over to Than. At the very end we’ll take some Q&A, so bring your best questions.
Than:Anthony, are you there? Can you hear me?
Anthony:I can hear you, man.
Than:Excellent. Well, I appreciate you being on the call and, more importantly, I appreciate everybody joining us. All the Mastery students from different parts of the country logging in either early in the morning over here on the Pacific Coast or on the West Coast, some of you guys on the East Coast, Midwest and everywhere in between. I really appreciate it.
Like Anthony said, we will be answering some questions at the end, both he and I, so by all means. You guys know how to use the GoToWebinar functionality and input your questions there as we go because we want to make sure this applies to what you’re doing, where you’re at and where you might be going in the very, very near future. This series of trainings that Anthony has formulated is very valuable for you as an investor. It’s a creative real estate series and Anthony has been talking everything from subject-to to owner financing to lease options.
There’s a series of Saturday trainings and the whole point of these Saturday trainings is Saturdays are really geared toward trainings that correspond and last a couple different weeks and this Saturday I’m going to be covering and talking about negotiating with sellers and getting more of your creative offers accepted. So we’re really going to go through two things.
- A system for how to meet and influence the seller in a positive way, and
- Creative offers, subject-to offers and owner-financing offers primarily, how to present those to the seller and get them to actually accept your offer.
Creative real estate is a wonderful tool. In fact, without understanding these concepts that I’m going to teach you today I can tell you we would have struggled early on because we had a lack of financing. When I got started in 2003-2004, I didn’t have a bunch of private lender relationships lined up yet. I didn’t have hard money lender relationships lined up to any extent. We had a couple private money lenders and one hard money lender we were working with. However, all lot of the projects we bought in 2004-2005 rolling into 2006, were creative offers.
Now, over time as we built up our private lender base and as we built out our relationships, obviously a cash offer or having private lenders is always going to trump a creative offer in certain situations where the seller wants cash. So creative offers are best when the seller doesn’t have options or when you don’t have a lot of competition on a deal and you want to structure a better deal. The only time you just have to be aware of what you’re presenting to a seller is when you’re competing on a deal with somebody who has a cash offer.
So creative real estate in a lot of situations is going to be a huge benefit for you as an investor, but be aware if you’re presenting a subject-to offer against a cash offer you have to be prepared to handle the seller’s questions and objections that have to do with your creative offer. So it has its place in real estate, it has a very valuable place in real estate and it’s a great way to get a lot of your deals financed, which we’re going to talk about here in a second.
Let’s get rolling. Obviously, I’m going to be the main instructor. However, Anthony has joined us, as well, so he’s going to be playing the color commentary. Anthony, I have one important question before we get started. When are you going to update this picture because I know this picture was taken like 20 years ago? I feel it’s a little bit like one of those Match.com misleading pictures when you’re 40 and trying to get a date but show a picture when you’re 22. Can we get an updated picture?
Anthony:You know what? Maybe in July when I’m out there in San Diego we’ll get more of a Nutty Professor photo up there for you.
Than:Okay. I’m glad to hear that. Now, we may have a third instructor. I want you guys to be aware that I have, possibly, a guest appearance. A lot of what he’s going to say may not make a lot of sense, but you may hear him in the background, so I just want to preface that now. It’s just going to be babble or a lot of noise, so I’ll try to do my best because as we speak I’m actually on babysitting duty, as well.
So let’s rock and roll through this and the first thing is everything that I’m going to share with you guys right now, there have been three fundamental books that have really influenced the way I think and my approach to creative real estate investing. I always like to mention and give credit to some of the people that I’ve learned from or some of the resources I’ve gotten over the years. Really, that’s what education is all about. You’re learning from me, Anthony and Pat on all of these different group training webinars we do.
I want to give you some really good resources, so write a few of these titles down. You do not need to get out of the mastery curriculum and then start reading these books. Over time, over the next year or two, I would highly recommend, though, if you go on vacation here’s three good titles that really will help the way you influence people.
The first one is a classic written by Dale Carnegie…
- How Win Friends and Influence People.
A great book, it really changed the way I think about relationships, how to build relationships, how to build rapport. Creative real estate investing and getting offers accepted is all about influence, positive influence on how to get a seller to listen to what you’re going to say. It’s a phenomenal book that I highly recommend.
Another title I recommend is written by Daniel Goleman is…
- Emotional Intelligence.
Over the years I study not only myself and what our coaches are doing, but I study what our most successful Mastery students are doing and what I realized is that a lot of people are not only developing and understanding the mechanics of real estate, but they’re also really improving their overall level of emotional intelligence.
Emotional intelligence is an awareness of other people’s feelings and what motivates other people. It’s being able to speak in the language that people want to hear or being able to speak to someone and influence them in a positive way that relates to them, their situation and their personality type. So it’s a very different type of intelligence in contrast to just general IQ. You’ve met people who are highly charismatic who you just want to be around and, generally, those people have a very high level of emotional intelligence. They know how to get you to feel a certain way, they know how to connect.
It really is a learned skill. It’s something you can improve and that’s a great thing. We don’t have a fixed mindset, we have a growth mindset and we understand that’s a very important thing, especially when you’re presenting offers to sellers who are a lot of times distrustful. They don’t know who you are and so having a high level of emotional intelligence can improve your closing ability, your closing percentages and the number of offers you can get accepted.
Another quick read if you want something on a plane or a short trip written by Michael Brooks is…
- Instant Rapport
It’s a great book about little short things you can do to create instant charisma, chemistry and 09:37.9 in your life. Obviously, this goes way beyond just getting more offers accepted.
I wanted to point out those three resources because they have been very influential in changing the way I think and in really developing this approach and this system that you’re about to learn. First, let’s talk about where I’m going with this so it makes sense and I can connect the dots in your head.
The first thing is I’m going to talk about a system and a process that you’re going to use every single time you meet with a seller. So you’re going to go through this series of steps no matter what type of offer you’re making. Whether you’re making a cash offer, a subject-to offer or an owner-financing offer it doesn’t matter, you’re going to follow the same process.
The only step that will change is when you make the offer, how you frame that offer, how you present that offer and how you handle the objections that may come from that type of offer. Everything else is going to be the same.Really, it’s just a couple steps at the end that are going to be different.
So what I’m going to go through is this process, then I’m going to talk about when you present a subject-to offer, here’s how it should be presented. When you present an owner-financing offer, here is how it should be presented. It’s going to really be an impactful training because you’re going to get a process and a system along with the variance, depending on the creative offer type.
Let’s talk about understanding the clients you’re going to meet with. We always tell Mastery students one of the keys of success when you’re getting started is you want to implement three to four consistent marketing campaigns that bring you opportunities you can make offers on. So if we’re talking about understanding sellers, we really need to understand who we are meeting with. If we’re going to get a good deal on a property we’re going to be meeting with different types of people, sothe first thing you need to knowis sellers don’t know you.
You may believe in what you’re doing, you may believe in your business, you may believe in your integrity and your ethics, but they have no idea who you areand so they’re very distrustful and so have to use language patterns and have a process for what you do. You have to be very organized, but at the same time you have to have good marketing materials, at the same time you have to absolutely build trust in a systematic way. I’m going to show you how to do that and why I do things following a system or a process because it creates the effect I want and that is a property under contract and a client who is happy.
Sellers who are motivated can also be very naive. This is something to also be aware of because it is somewhat easy for certain investors to take advantage of people in motivated situations. If they’re in pre-foreclosure, a lot of times they don’t have a lot of options and they are very trusting or sometimes too trusting. A lot of times you’re going to get both ends of the spectrum. You’re going to get someone that doesn’t trust anybody and, therefore, has put himself/herself in a bad situation. Then you’re going to get the other end of bell curve, somebody who trusts everybody and a lot of times that’s why they’re in the situation they’re in.
They can also be extremely naïve, so you can deal with the other end of the spectrum and you have to be cognizant of this. We do not take advantage of people in situations. You will meet with people who have no idea what their house is worth, that does mean you take advantage of them. I want you to be aware of the type of personalities that you may encounter when you’re meeting with motivated sellers, people that are willing to sell their property significantly under market value.
The other thing is they’re not always honest. This would correspond a lot of times with the distrustful type, but don’t assume what a seller is telling you is the truth. Nor should you ever assume, even if they’ve signed disclosures on the property, that you’re going to have the ability to hold them liable because a lot of times a motivated seller has no money or they’re in a very tough spot. If you were to ever try to sue them because they didn’t disclose something to you, good luck in ever getting anything out of that. So I want you to be aware of that. When you’re dealing with these types of individuals, you have to do your due diligence properly on the property itself.
The other thing is they often have multiple problems. They may tell you there’s one problem and that’s why they’re reaching out to you, but through this process you’ll uncover a lot skeletons in the closet. You’ll uncover not only is the seller behind on payments, but they’re getting a divorce or they went through bankruptcy not too long ago.
There are a multitude of things that could be thrown at you and when you have a process you’re going to uncover those. It’s important to a negotiation because negotiating and making creative offers, the only way to get them accepted is to have a good process to gather as much information as possible. In a negotiation the person who has the most information is always the one who is in the strongest position to negotiate a good offer and negotiate a good deal.
Here is the process and I want you to write these things down. We talked a little bit about why you need to understand the personality types and this goes without saying. A lot of you understand, okay, I get the personality types that I’m going to be meeting with and the categories. However, let’s talk about a process for success, so I want you to write this down.
- The first step is you always want to know the seller’s needs beforehand.
When we’re making offers, generally, we’re either dealing with the seller themselves, an agent, or an agent and the seller. You have to always know all the parties who are involved and you have to know am I dealing with a seller directly or does the seller have an agent. So you need to know who all the parties are that going to chime in on this offer or give their opinions about this offer.
We’re focusing on sellers because we’re talking a lot about getting our creative offers accepted and it’s always easier to get offers accepted when you’re dealing directly with a seller, especially if it’s a creative offer, a subject-to or an owner-financed offer.
Always find out their needs beforehand. So when I’m taking a lead from a seller or having an initial conversation with a seller over the phone and let’s say I haven’t seen the property at this time, they called off one of my bandit signs or they called off of a direct mail piece I sent to them and they’re giving me some basic information about the property, I want to know their situation. I want to know why they want to sell, I want to know how quickly they want to sell and I also want to know what is the predicament they’re in that may cause them to sell this property under market value.
At the same time, I want to find out why their other needs are besides money. Do they need moving assistance? Do they have other outside debts? How long have they lived in the property? Do they have a strong emotional attachment to the property? I want to know these things. I also want to know and you need to write this down right now, I want to know who else is looking at this property.
Every call with every seller I use a script. I ask a series of questions from the seller, which you guys have access to on the Mastery website. It’s a document we call our Seller Call-in Lead Interview Sheet. You could also take leads directly into Realeflow. If you guys are using Realeflow we’ve replicated that. It’s called the Complete Seller Form within Realeflow. It’s very similar to the Seller Lead and Interview Sheet, it’s just a little bit better because it has different property types you can dropdown if you’re looking at commercial properties or apartment buildings. It’s a more flexible solution and, obviously, that information is stored with Realeflow. I wanted to point that out because it’s a great resource for you guys.
The first thing is I always end the conversation withnow tell me, is anybody else looking at this property currently. Generally, it’s going to be one of two things. It’s going to be either another investor or a realtor has come out and looked at the property and possibly given the seller a CMA (competitive market analysis). You need to know this and you need to know the value that the competitive market analysis came in at. Although they may not have signed that Listing Agreement with the agent, you need to know what is influencing the seller and what value they may have stuck in their mind.