#1 Biggest mistake in real estate investing: ready, fire, aim
#2 biggest mistake: not understanding how to talk to sellers.
Here’s what I mean by ready, fire, aim.
You study all this marketing for motivated seller stuff, how to find motivated sellers, spending money on yellow letters, postcards, scouring the MLS, talking to agents, etc.
Then you get a phone call, and you choke.
You don’t know what to say,
you don’t know your marketplace,
you’re just trying to get a quick deal done.
So that’s the 2nd biggest mistake, not understanding how to talk to sellers.
Let’s talk about real estate agent’s listing appointment training:
How agents are trained to get the listing,
how excellent their marketing is,
how great their negotiating skills are,
how good their team is,
is is NOT necessarily to talk to sellers about terms deals.
Most sellers want:
the best possible financial result,
the most amount of net money from the sale of their house,
in the shortest possible time.
They do NOT want surprises,
they do not want buyers saying
fix this fix that,
pay for this pay for that,
they want the most amount of money from their house, and
they want speed without hassles.
Agents today cannot deliver because buyers that are cash qualified ask sellers for lots of things, ask sellers to pay for things that sellers don’t want to pay for.
And a lot of sellers are cash-strapped, so they can’t pay cash to fix the things of the house, and they don’t want repairs on credit cards.
So number 1 mistake ready fire aim.
This is what I do when I train new or experienced real estate investors:
I teach them to talk to sellers 1st, then I teach them the write out of letter of intent to purchase or lease real estate.
I love pretty houses that need no work that have little equity, because the sellers are stuck, and there’s 20 million low equity houses in the United States.
They can’t sell with an agent because the cost to sell are 10% to 15% of the value of the house.
So they can have 2 choices: rent it out or sell on terms.
But you can’t give them term solutions without interviewing them 1st.
I posted on biggerpockets.com an article called, “Be the Doctor with the Seller.”
Over 5 years ago I posted it. It is TIMELESS.
Here it is:
Be ‘The Doctor’ to Seller’s Problems – Unknown Author
If you want to really be successful as an investor, you must consider yourself as “The Doctor” to the Seller’s problems. Just like medical doctors, Sellers must see you as being professional, well-educated, acting in their “patient’s” best interest, and bound by a high code of ethics.
The medical process is the same everywhere. Whenever you go to a doctor, of any kind, for any condition, he will follow the three-part sequence of examination, diagnosis and prescription.
Unfortunately, most new investors do it backwards. They spend all of their time telling the Seller about their company, services, and how great they are, instead of finding out what the Seller wants or needs.
At the end of the conversation, they know all about the investor, but the truth is that the Seller DOESN’T CARE ABOUT THE INVESTOR! At best, if they haven’t fallen asleep or tuned the investor out, they have already made a decision. And that decision is to NEVER DO BUSINESS WITH AN INVESTOR THAT TAKES NO TIME TO UNDERSTAND THEM.
BEGIN WITH A THOROUGH EXAMINATION
Just as a medical professional would never think of treating you without following these three steps in order, you as a doctor of selling, would never allow a Seller to force you to sell without you going through your three stages as well. In the examination phase, you ask excellent questions, carefully prepared, in sequence, which are geared to give you a thorough knowledge of the Seller’s condition or situation.
The first thing they do is ask you to fill out a medical history form. They want to know about your ailments, illnesses and injuries.
Your family’s medical history. Are you allergic to any drugs? Have you seen other physicians? Who? When? This history form for investors would be the Seller’s Questionnaire which they fill out to help us determine what their real needs and wants are.
Then the doctor comes in, asks you lots of questions, and begins to examine you. He listens to your heart and lungs. Taps your knees and elbows with a rubber mallet to check your reflexes. He looks into your eyes and ears, and up your nose with a little flashlight. He makes you open your mouth, pushes down your tongue with a depressor, and makes you say AH, while he looks down your throat (and you start coughing).
For investors, this examination would be the inspection of the property, where you fill out everything you see right or wrong with the property and take notes of what the costs are for repairing, rehabbing, or minor fixing. Depending upon the answers to the questions and the results of the inspection, more questions will be asked to see what other things we need to know before prescribing a solution.
The Key Is To Find The Seller’s Pain
Investors often miss this important variable therefore they don’t really know what strategy to take when dealing with a Seller. If the Seller was not in “pain” they would have never called you, but they did call you because they knew that they had a problem that needed fixing. You’ve got to discover the financial impact or economic value of the problem. You’ve got to get the Seller to tell you how much it’s costing them or how much sleep they are losing because something isn’t right with their house situation.
DIAGNOSE THE SELLER’S NEEDS ACCURATELY
The second phase is that of diagnosis. In the diagnosis with a Seller, you would repeat the results of your examination and double check to be sure that the problems that you had detected were the real “pains” being experienced by the Seller. You would ask additional questions to confirm and corroborate. You and the Seller would mutually agree that this diagnosis seems to be an accurate description of the condition or problem.
MAKE THE RIGHT PRESCRIPTION
Once this mutual agreement has been reached, and you have identified the “pain” accurately, you can move on to phase three. This is the prescription phase, where you show the Seller that your service is the best available treatment, taking all the factors of the Seller’s situation into consideration for their pain. You show that, on balance, what you are suggesting is the best of all possible solutions.
Investors who sell the way that doctors treat patients find that their deals proceed far more smoothly and result in bigger and better profits in less time. Spend more time asking great questions, and less time talking about yourself and your company, and you’ll create more opportunities, close more sales, and make more money. By asking better questions, and being interested in the answers, you can discover what the Seller’s problems and issues are and then offer a solution. Most of the time, if they are not motivated, they will tell you straight out, right then and there. Hopefully, you did not make a trip for them to tell you this, but you learned this when you spoke to them on the phone using the Seller’s Questionnaire to gather information.
During each conversation, you should ask detailed and pointed questions about what the Seller is trying to accomplish; and what their goals and objectives are. A question I also like to ask is “What would you like to see happen?” And then I LISTEN and take detailed notes about everything the Seller is saying while filling out the Seller’s Questionnaire — even on appointments. It’s okay, they will respect that you are taking notes on how you can help them better.
Another good question I like to ask is, “What would you like our company to do to help you?” This question really allows me to find out what the Seller is thinking and exactly how I can help them. So I really don’t have to guess or pressure them because getting to their motivation is just a couple of questions away. And once I ask those key questions, I know I have a deal or not. And to seal the deal, the one question I use is: “When would you like our company to help you in your situation?”
If the Seller tells you that they have no real timeline, that they will just wait until the property sells, this is often a sign you are not dealing with a motivated Seller.
Make sure you protect your time by being willing to walk away if it becomes clear that there isn’t enough motivation.
No matter how the Seller responds, your main goal is to open a line of communication and develop a conversation about the property and the needs of the Seller. I know that some deals take 5-7 contacts before they close so an important aspect of our System is follow-up.
Even though they may not do business today, they certainly can call you back 3-9 months later because you keep sending postcards and letters and are constantly on their minds. Here is where you separate yourself even further from the other investors and buyers.
I used to get surprised if they called me after a meeting or a phone conversation I had with them a year ago, but by continuing to send them letters and postcards, they remember me and call me because I was first on their minds.
So, if you will treat your real estate business like a doctor’s by understanding and diagnosing a Seller’s problems, you will make just as much as doctor and even more.
Once you have this “heart to heart talk” with the seller, I then go through a 3 column method with the seller.
Column 1 Selling with an Agent, Paying the Costs to Sell
Column 2 Renting with a Property Manager, dealing with uncertainty of an unproven tenant
Column 3 Seller Financing – Helping a Buyer Buy Your Property at Full Price with Less Sales Costs
Here is a video for the 3 Column Method
There are 5 basic negotiation steps with the seller,
1. Rapport Building
2. Avoiding Let Me Think It Over
3. Uncovering how motivated they really are
4. Getting the lowest price (Wholesaling Only)
5. The “What If” Step Close