Many investors think that their interests as Buyers are diametrically opposed to the interests of Sellers—that Buyers simply want to pay the least, and Sellers simply want to get paid the most. But is this really true? And if Buyer and Seller have opposing interests, how do so many deals get done? Is every party disappointed at the end of every transaction? In this episode, Jeff discusses why Thoughtful Real Estate Entrepreneurs know that Buyer and Seller actually have interests that are truly aligned, which leads to win-win negotiations.
Let me just ask you straight up for your take on this question. Do you think buyer and seller have opposing interests? Well, I don’t necessarily and I understand why it seems like they might. But in this episode, I want to talk about why that seems like it’s true, but it actually really isn’t, and how that’s a really good thing for us. So let’s cue up the theme song. I’m gonna jump right into this with you.
Welcome to Racking Up Rentals, a show about how regular people, those of us without huge war chest of capital or insider connections, can build lasting wealth acquiring a portfolio of buy and hold real estate. But we don’t just go mainstream looking at what’s on the market and asking banks for loans, nor are we posting We Buy Houses signs are just looking for “motivated sellers” to make lowball offers to. You see, we are people-oriented deal makers, we sit down directly with sellers to work out win-win deals without agents or any other obstacles, and buy properties nobody else even knows are for sale. I’m Jeff from the Thoughtful Real Estate Entrepreneur. If you’re the kind of real estate investor who wants long term wealth, not get rich quick gimmicks or pictures of yourself holding fat checks on social media, this show is for you. Join me and quietly become the wealthiest person on your block. Now let’s go rack up a rental portfolio.
Hey, thank you for joining me for another episode of Racking Up Rentals. Show notes can be found at thoughtfulre.com/e168. Please do us a HUGE favor by hitting a subscribe or follow button in your podcast app, it really helps send a message back to those platforms that makes them want to share this show with other fellow Thoughtful Real Estate Entrepreneurs and helps us to connect with those people. Thank you so much; onward with today’s episode.
So as you might know, I’m pretty active on Facebook, in various groups, groups that I host, groups that other people host. I like to stimulate conversation and be a part of conversation, I really like to try to open people’s eyes to slightly different ways of seeing things. And I made a post recently. And one of the comments that came out of that post was somebody said, after a few other exchanges of comments, they said, look, it’s simple. Sellers always want to get the most money. And buyers always want to pay the least.
And I wanted to just chat about that with you because it’s an interesting comment. Actually, maybe it’s not interesting because we might just take it for granted as if it were just a simple truth. But I want to discuss this with you. Is this true? Do buyers always want to pay the least and sellers always want to get the most money? Well, I think on the surface of it. Yes. That seems sort of like saying what comes up must come down as well. Right? But it’s not quite as simple as maybe it seems on the surface.
And really what I think it does is it begs a bigger question, a deeper question that asks this, if buyer and seller have diametrically opposed interests like this person is suggesting? How do so many deals get done? I mean, there are lots and lots of transactions closing every day, there’s lots and lots of transactions being put in escrow every day. So if buyer and seller actually have diametrically opposed interests, one wants the most money the other one wants the least. How do so many deals get done? to extrapolate that even further? Does it mean that everybody is unhappy after every deal closes, feeling like they compromise on what they really wanted? Is every seller disappointed that they didn’t get the $5,000 more? Is every buyer disappointed that they didn’t get the $10,000 less? Do they feel like they compromised? Do they feel dissatisfied as a result? Well?
In my experience, the answer to that question is no. I tend to see a lot of very excited people on the day of closing, and I’m guessing you have seen a lot of those too. And you have been one of those people, many, many times as well. So you know, when you talk about the idea of is everybody unhappy after every deal closes because they didn’t get enough of what they wanted, they felt like they had to compromise. When we take that approach, we’re sort of saying this whole real estate negotiation thing is a zero sum game, you know?
What’s a zero sum game? A zero sum game is like when there’s only a certain amount of chips on the table. And in order for me to have more chips I means you have to have fewer chips, right? So one person is always sacrificing the other person is always gaining so Is that what’s really going on? I don’t think so. I don’t think so at all. So what is really going on, let me share three points with you that I think are really interesting as we walk around this topic.
The first one is super interesting when someone pointed this out to me a few years ago really stopped me in my tracks and went, wow. It really makes perfect sense. But it’s certainly not thought of this before. And here it is, in order to make a deal, the buyer and the seller must disagree. On value. Okay, let me say it again. And then we’ll talk about and explain it. In order to make a deal, buyer and seller must disagree. On value, okay, break it down. That sounds wacky when I say it like that, but break it down, it makes perfect sense.
Think about the buyer, the buyer is saying, I think this property is worth more than the money. I’m about to trade for it. Right. So the buyer says I’m about to give over $300,000. And I wouldn’t make this trade if I didn’t think the property was worth more to me than $300,000. At exactly the same moment, the seller is about to trade their property for $300,000. So the seller is saying, I think the $300,000 is more valuable to me than this property is. So buyers looking at it saying, yeah, the property is better than the money the seller is looking at it saying no, the money’s better than the property. And that’s how they make an agreement. In order to make a deal buyer and seller must disagree on value.
So what is the takeaway from that? Besides the fact that that’s probably if you’re a nerd at all, like me, you like, wow, that’s really super interesting. What is the takeaway, I think the lesson is this value is in the eye of the beholder. It’s a unique to that person. And it’s unique to that person in that moment. So to use my example, the buyer is about to trade $300,000 of their money or money, they’re borrowing from somebody else for that property, because they think the property is worth more than the $300,000. But I would say it’s because they think the property is worth more to them than the $300,000, it’s worth more to them in that moment, in the context of their vision for what they’re going to do with that particular property, another buyer might not have the same vision and would say I would not trade $300,000 for this property, I’d rather just keep my $300,000. And the seller is looking at their property and looking at the prospect of getting $300,000. And they’re saying to me, in this moment in time in my life, in the context of everything going on what I’m trying to accomplish in my life, everything else happening, I would rather have the $300,000 than the property.
So beauty of the money is in the eye of the beholder the seller in that particular moment. So buyer and seller must actually disagree on value in order to make a deal. Secondly, as I think this demonstrates what both buyer and seller are always doing anyway. And I do believe I’ve hit on this topic in this podcast before all a buyer is doing all a seller is doing is trading what they have for what they would rather have. Right? So that also is not just about the object to like, say a house, but they’re trading a current situation they have for a situation they would rather have, right. So seller says I have this situation. I own this property. There’s tenants in it, I talked to this tenants twice a month, I get a certain amount of rent, I have a certain amount of expense that all of that stuff. And a billion other details comprises their situation.
And they’re looking at their situation, and they’re saying you know what, the situation is fine. That is what it is. But there’s a better situation out there for me. And I believe I could trade my current situation for a different one that I would prefer more, I would prefer the situation where I don’t have this property and all the attributes of this property, but I do have a big old bank account right now stuffed with $300,000. And then I’m going to do XY and Z with that $300,000 and that situation is better for me. So I’ll trade my current situation for the situation I would prefer and the buyer simultaneously is doing exactly the same thing. They’re saying you know what, I have this situation I have this job I have this, this amount of money I have these goals. I would trade my current situation for different situation where one where I have less money, but I have this property instead and weren’t worried maybe I have less free time. But now I have these tenants who I talk to a couple times a month. But that’s a situation I prefer. So at the end of the day, every time anybody does anything, the buyer or the seller, all they’re really doing is trading, what they have for what they would rather have.
So really, and this brings me to the third point that really ties us together. Really, here’s what we’re doing. What we’re trying to do is see buy as buyer and seller, if we can both get more of what we would prefer to have. This is a trade where we both win, is it possible for us to both win? Yes, it is absolutely possible for us to both win. Because it’s not a zero sum game, the buyer is seeking more have something that they don’t have, the seller is seeking more of something that they don’t have, it is absolutely possible for the buyer to get more of what they want. And for the seller to get more of what they want, both by trading what they currently have, for what they would prefer to have. And what is that thing that they want more of, it’s not just money, it’s a whole situation. When we look at it just as money, we say, well, sure the buyer is trading what they what they have or what they’d prefer to have, but they’d really prefer to have this property at a lower price. And that’s really oversimplifying this is how when transactions happen, when the seller feels that their situation gets better by trading their property and everything that goes with it for something else, you know, money in this case, and what that money will allow them to do after it relieves them of the responsibility that property. And the buyer is treating their situation for more of what they would prefer to have. And those two things can absolutely align and intersect.
So that is really the conclusion that we have as Thoughtful Real Estate Entrepreneurs. We don’t see that buyer and seller have opposing interests at all. No way. Not at all. A buyer and seller actually have aligned interests, which is to get more of what each party wants. And to both be able to trade what they have for more of what they want. When the buyer says You know what I’d really like to trade what I have for more of what I’d want. And the seller says you know, I’d really like to trade more. But what I have for more of what I want, that’s the same statement by both buyer and seller. And that is how a deal comes together, even though they have to disagree on the value of something. That is how it brings them together. So as a Thoughtful Real Estate Entrepreneur, if you ever find yourself being pulled either in a conversation or just, you know, just sort of human nature pulls you in this direction of feeling a little bit of scarcity mentality, a little bit of zero sum game a little bit of like, in order for me to win the other person has to lose that doesn’t feel good, because I’m thoughtful. But it also feels like I’m losing in order for the other person to win whenever you feel pulled in that direction. Remember, buyer and seller do not have opposing interests. We actually have aligned interests because we’re both simply trying to trade what we have for what we would prefer to have instead.
And that is it for today’s episode of Racking Up Rentals. I hope you enjoyed this philosophical thought process that has a very practical side and element of how you put this into practice. Show notes again, can be found at thoughtfulre.com/e168. Please do us a big favor by hitting that subscribe button in your podcast app and rating and reviewing the show. Did you know that we have a Facebook group for Thoughtful Real Estate Entrepreneurs as well? It’s called Rental Portfolio Wealth Builders. We’d love to have you join us over there. You just need to go to group.thoughtfulre.com and the magic of the internet will take you right to that page within Facebook. If you liked this episode, I hope you do go ahead and take a screenshot of that on your phone and post that screenshot to Instagram and tag us. We are @thoughtfulrealestate. I’ll see you the next episode. Until then this is Jeff from the Thoughtful Real Estate Entrepreneur signing off.
Thanks for listening to Racking Up Rentals where we build long term wealth by being win-win dealmakers. Remember: solve the person to unlock the deal and solve the financing to unlock the profits.