Archives For Negotiating

Expireds and cancelled listings are generally overpriced.

I knock on their doors for sub2, wraps, and lease option – lease purchase offers.

I act as a principal buyer.

If you can negotiate well, you can have sellers sell on terms versus sell on cash.

Let’s use an example of what we mean by that negotiate well.

Let’s say that Bob and Susan Johnson, live at 123 Frost Ave., in Des Moines Iowa. Let’s say that they bought at the top of the market. Could be 2005, 2006, or 2007. But say they bought FHA with 3 and 1/2 percent down. Let’s say their payoff amount is $200,000. Comparable Sales are $210,000. And market rent is $1200 a month, and their PITI payment is $1359 per month.

Bob and Susan tried to sell an agent for six months. They hired an agent for six months with no written offers. Because they had very little equity, they did not get their asking price of $210,000.

Enter into the situation Gary, who owns a “We Buy and Lease Houses” business.

Gary sends out postcards and yellow letters to houses that were purchased in 2007, 2008, and 2009.

Bob sees postcards and yellow letters come to his house over three months, and ignores all of them. But on the fourth mailing, he calls Gary and tries to get more information.

Note: It is important understand that when you market for motivated sellers, it takes a frequency of 4 to 6 times of the mailing to the same household to get them to call you, the real estate investor.

The conversation goes someone like this:

Bob: Hi, I got this postcard mail and I understand that you buy houses.

Gary: yes thanks so much for calling, I appreciate you giving us a ring, I would like you to just jot down a couple pieces of information on that marketing piece, do you have a pen handy, I’m happy to wait…

Bob: Uh, yeah sure just a second,… I have a pen, shoot.

Gary: Just for your information is what you write down my name, Brian Gibbons that’s G-I-B-B-O-N-S, and my cell phone number which is xxx xxx xxxx

This is important because if you like what I have to say then you’ll have a way to get a hold of me. So again that’s Brian Gibbons, xxx xxx xxxx

Bob: okay great, I got the number.

Gary: I’m sorry… your first name was?

Bob: yes my name is Bob.

Gary: thanks Bob, to put very simply, our company buys houses. If we like your house, the floorplan, etc…. we will give you a written offer. If it doesn’t suit what you and your wife were looking for, we will be able to tell you in less than 10 minutes.

However, if we love your house, we will write an offer on the spot. I assume you want to sell your house, otherwise you wouldn’t be calling me, right?

Bob: yeah, I guess so.

Gary: just one more thing, if we like the house we just need to look at your house file folder when you bought the house, there’s a legal description on the paperwork, if you could show that to us, then we could note the legal description and place that on the offer, is that a problem to have that file folder available so we can just look at the legal description?

Bob: sure, that is not a problem.

Gary: most of the people I talk to work 9 to 5 and it’s hard for us to see the house during daylight time, so we generally write offers on the weekends, do both you and your wife work 9 to 5?

Bob: yes by wife works 9 to 5, and so do I.

Gary: okay, I have two slots available on Saturday at 10:30 AM or is Sunday afternoon at 1 o’clock better for you?

Bob: I have to check with my wife but I imagine 1030 am would be better on Saturday.

Gary: let’s great, if you can do me a favor and contact your wife, I’m sorry her name was?

Bob: Susie

Gary: great so if you could call Susie and just ask if 1030 is okay, and to reassure you only take 10 minutes for us to say “yes” this is the house we want or “no” its not our kind house that we want to buy. I’ll be on time right at 1030, we have a busy day ahead of us. I’ll call you 30 minutes before to confirm and let you know that we will be on time. I look forward to your call confirming Susie says it’s okay at 1030.

Bob: okay I’ll call you right back.

Gary: thank you, I look forward to your call in a couple of minutes.

———-(end)———————–

This script helps you get into the house favorable basis to do lease option assignments. It also helps you make sure that both decision-makers are there in case you can bridge over from buying the house for cash to doing a lease option assignment.

PREVIEW OF NEGOTIATION

The negotiation training summary (for sellers) contains the following five steps:

1. The rapport step

2. the upfront agreement step

3. The motivation step

4. The money step

5. The “what if” step

1. The rapport step

Allowing them to get more

The rapport step number one, allows you to build rapport with seller, allowing them to get more emotionally while most all with involved with “liking who you are”, and “what you’re about”.

People want to do business with people that they like and they trust.

This step takes no more than five minutes, but is very important in the very beginning. The danger of doing this step poorly is that the will not be open to what you have to offer, which is a terms offer.

2. The upfront agreement step

The upfront agreement step is a vital part to having the seller understand that you are (1), in a business to make profit, and (2), you’re not there to waste anybody’s time, either the sellers time, or your time. If this step is done properly, you will avoid the objection “let me think it over.” If this step is not done properly you may have to keep coming back on your appointments, and you will not be able to do one step closes.

3. The motivation step

The motivation step takes a good amount of talent and execution by the real estate investor. Your purpose is to figure out what the real motivation is from the seller, and what their timeline is. We do this by using negative phrasing and NLP, which is neurolinguistic programming. People tell you the truth if you phrase your questions correctly. This motivation step takes sometimes 45 minutes to even two hours. You have to know what their motivation as if you are going to the design a terms offer that makes sense to them. In comparison, the first two steps only take a few minutes.

4. The money step

The money step has to do with the detail of the offer regarding financial terms. If you do a good job on step three above, the money step should be fairly easy.

5. The “what if” step

The “what if” step has to do with throwing out an idea and testing the waters. It does not make a commitment from the real estate investor’s perspective, but if the sellers say “yes they would be open to the idea”, then you can move further to go from general to specific terms. If you asked them a question, “Would you consider this solution?”

They can say no to that, and your dead as far as the negotiation is concerned.

But if you said something along the lines of,

“Bob and Susie, I don’t know if you would consider this a good idea, and you might probably hate it, and I would need to clear it with my business partner, but what if we could find a way to get you a payment every month that would match your PITI payment of $1359, and then pay off your mortgage of $200,000 down the road, would that be something you would even consider… or probably not?”

The “what if step” helps you never have to take a “no” and then pack up your bags because you couldn’t close.

Good luck!

Also market to FSBOs, landlords and other wholesalers.

Original article here

Imagine this situation: You are selling your home. After a few months of listing the property and countless open houses, you land a buyer. The buyer negotiates hard and you finally come to an agreement. Once beyond the inspection and attorney review periods, things move swiftly. The buyer gets his mortgage financing and you are prepared to close. As the closing approaches, the buyer asks if perhaps he can enter the property five days early to begin “cleaning up” the place. As you have already closed on your new home, you agree. Shortly before possession, the buyer moves into your property. While occupying the property, the buyer ignites a small fire in the yard and burns a neighbor’s child and part of the home. In addition, the buyer claims to be dissatisfied with the condition of the property and notifies you that he is backing out of the deal.

As a result, your former neighbor sues you for the damages done to his child and you are involved in a lawsuit over the buyer’s earnest money. Could this situation have been avoided?

POSSESSION IS NINE TENTHS OF THE LAW

Possession is a key issue in real estate transactions and possession does not always transfer at the time of closing. Standard real estate contracts generally provide separate provisions for the date of closing and the date of possession. Most attorneys shudder at the thought of turning over or holding possession of real estate without a formal agreement of the parties which provides adequate protection to the client. In almost all cases, once beyond the attorney review and inspection period, the party in possession of the property holds a severe advantage over the other party. This is because possession is the seller’s bargaining chip. Buyers trade money for possession.

There are two types of possession to be traded and both may be agreed upon contractually. First, pre-closing possession occurs when a purchaser takes possession to a property some time before the real estate closing. Post-closing possession occurs when a seller retains possession of property for some period of time after closing. There can be many reasons to justify pre and post closing possession for the parties. Although a pre or post closing transfer of possession is not the “ideal” situation, an attorney can provide additional contractual protections for sellers and buyers.

When a buyer and seller agree to a pre or post closing possession, one parties’ attorney will negotiate with the lawyer for the opposite side of the transaction to create an agreement which best protects the parties.

PRECLOSING POSSESSION

When a buyer is taking possession of property prior to a closing, the seller’s attorney will have three main concerns.

First, the purchaser will be asked to accept the property in the condition it was delivered in as of the possession date. Because possession of the property is out of the seller’s control, the seller does not want to be liable for acts done by the purchaser to damage the property. In addition, during the purchaser’s pre-possession, the purchaser may discover some “defect” or unacceptable condition, such as an item needing repair or even that the local traffic is too noisy, that was not raised during the inspection period and attempt to back out of the deal. Some purchasers might rather forfeit their earnest money than proceed with a closing after discovering an unacceptable condition.

Second, the purchaser will generally be asked to pay some amount of daily rental for use, occupancy and expenses. This amount is usually one thirtieth of the seller’s monthly mortgage and assesment payments. Normally, utilities,services and proratable items, including real estate taxes, are prorated as of the possession date.

Finally, the purchaser will be required to provide some financial protection to the seller in the form of insurance on the property. The purchaser will be required to provide the seller with a copy of a paid and in force insurance policy covering the value of the property and listing the seller as an “additional insured” on the policy.

POSTCLOSING POSSESSION

When a seller is holding possession beyond the closing date, the buyer’s attorney will have two main concerns.

First, the seller will be asked to pay a daily rate for use and occupancy of the property in the amount of the daily rate of the purchaser’s new mortgage payment plus taxes and insurance.

Second, the seller will be required to post a “possession escrow” or a certain amount of dollars to guarantee that the seller will actually move out. A common amount to be posted is two percent of the sale price. Many contracts call for a possession escrow which is used to pay the daily rental. This is generally not a good idea as there is no recourse against the seller once the escrow is echausted. A better provision would be to specify that the escrow is to be used as a penalty which is forfeited in full if the seller fails to deliver possession and which is paid in addition to the daily rental amount.

Negotiation Class – Frequently Asked Questions for Home Sellers Lease Purchase

Negotiation Class – Lt Columbo teaches you How To Negotiate With Home Sellers

Negotiation Class – Meeting With The Seller

Negotiation Class – Negotiation With The Seller   7 Pitfalls

Negotiation Class – Realtor.com – Figuring Net Proceeds from a Sale

Negotiation Class – Step 1 – Rapport Building

Negotiation Class – Step 2 the Upfront Agreement

Negotiation Class – Step 3 – Discovering Motivation

Negotiation Class – Step 4 The Money Step

Negotiation Class – Step 5 – What If Step