SFREI #27: Key Insights to Uncover About the Seller In Order To Make a Winning Proposal
When the phone rings with a new lead, most average investors begin collecting INFORMATION about the PROPERTY. But as Thoughtful Real Estate Entrepreneurs, we know the most important thing to do is collect INSIGHTS about the SELLER. Gathering information about the property is easy. Getting to know our audience and who we are dealing with takes more skill, and will give us the best chance of being able to present a proposal that will resonate with them and be accepted. In this episode, we discuss the key insights we need to gather ABOUT the Seller in order to make a winning proposal to purchase their property.
References in this Episode
This is Jeff from the thoughtful real estate entrepreneur. Welcome to episode number 27 of sleaze free real estate investing show for those of us who have never felt at home in the We Buy Houses crowd in this We take a stand against what we call the lowbrow approach, the mainstream guru seminar distressed seller approach that ends up giving real estate investors a slimy reputation. And instead, we discussed the strategies, tactics and philosophies that we call the thoughtful way. And enlightened approach to real estate entrepreneurship that focuses on constantly sharpening the sophisticated real estate entrepreneurs three most critical capabilities, number one, seller relations skills number two deal architecture skills and number three, opportunity vision. When all three of these capabilities are successfully in motion, then you can create an excellent living today and build long term wealth while creating value for everybody that you touch along the way. Show Notes for today’s episode are at WWW dot thoughtful our E comm slash e two seven. Please do yourself a big favor do us a big favor as well by hitting the subscribe button in your podcast app. Right now before you forget. In the last episode, we discussed the difference between Marketing what you do and marketing how you do it. And we talked about how, how is so much more powerful, especially in your marketing, then what is. So go back and listen to that if you haven’t already, because that whole dynamic of marketing your how instead of your what really leads right into seller conversations and that is what we’re going to be talking about today. Because in this main course, today, we’re going to be talking about the key insights that we need to uncover about the seller in order to make them a winning proposal. But first, a little food for thought. After all, we are thoughtful real estate entrepreneurs, right. So we like to feed our minds with things to think about. And here’s what we’re thinking about today. My wife and I are getting ready to move pretty soon. We’ve lived at our house about 11 years and a move like that is is a lot of work because in 11 years, you accumulate a lot of stuff. And so it’s a great opportunity to do Major purging and major cleaning out really literally look at everything we have, and decide what gets to keep coming forward in life with us and what has to go. So as part of this, we’ve identified tons of stuff we’re just going to get rid of. And of course, there’s goodwill and places like that, that we can take our things that we want to just donate. There are local by nothing groups that we’re both part of on Facebook and things like that. But then there’s another category of stuff, which I feel are things that I would like to be able to get a little bit of money out of. And so, for these things, I’ve been either putting ads on Craigslist to sell them or on next door. And I’ve been observing something in myself as I do this. And while I’ve used Craigslist, I mean 1000 times more, literally, I’ve used Craigslist thousands of times more than I’ve ever used nextdoor.com or the app and well next door in many ways as a whole kind of drives me bananas. I find myself feeling more comfortable with the inquiries that I get from the people who respond to my ads via next door. And so I was asking myself the question Why? Why do I feel this more acceptance and openness to an inquiry from somebody via next door, then I feel a sense of skepticism, and keeping my guard up a little bit when somebody contacts me from Craigslist. It doesn’t really make sense, right? I mean, as all these people are strangers regardless, it’s all strangers, and it’s all strangers on the internet. And it could even be literally the same people who could see my ad on both platforms. So why am I kind of giving preference to one of the platforms versus the other? Well with next door, I know that these people live pretty close to me, or in a neighboring neighborhood, if not, actually right in my neighborhood. And I I tend to know the kinds of neighborhoods that are surrounding mine, and I feel comfortable with the kinds of neighborhoods that are surrounding mine and generally I make assumptions about the type of people who are living in those neighborhoods that I feel familiar with, and comfortable with. Those people feel less anonymous to me. And I feel like they’re likely to be less sketchy, and maybe more dependable and more likely to come at 7pm. When they say they’re going to come at 7pm, then someone from Craigslist. And that’s I’ve really kind of just dissected this for myself, I realized the lesson is that people are more comfortable with those that they feel are like them. And I have more of a sense of comfort, that the people I will meet through next door are likely to be more like me than the people I meet through Craigslist. Now whether this should be the case or not, is beside the point. The point is simply that natural human behavior is to trust those who feel like they’re similar to us in some way. So what’s the relevance of this for us? Why would I want to bring this up and a food for thought segment? Well think about your marketing. And think about the initial interactions that you have with a seller who responds to your marketing, the more you can do to show that seller, or to otherwise give them clues, that you have things in common with them, the more comfortable they’re going to be with you. You know, rapport building one on one says, of course, that if you show up to their house and you see, you know, a hat with their favorite sports team sitting on the table, and that’s your favorite sports team to that you say something and you you connect over that. That’s pretty obvious. But remember, you can actually start that process. Well, well, well in advance of that moment. In your letter that you’re sending, if you’re sending that letter to landlords, you might mention in the letter, that you’re a landlord. In your letter to people who happened to live in the same general neighborhood is where you live or maybe the property at least that you’re contacted. contacting them about is located in the neighborhood where you live, you might mention that neighborhood by name. Or you might mention that you to live in that neighborhood and you have for however long, people feel safer with people that they perceive to be more like them. So help them see who you are, and those possible commonalities and it will serve you well to that is today’s food for thought. Alright, we’re moving on to the main course of today’s episode. And so today’s topic on thoughtful real estate entrepreneurship is about the key insights that you need to uncover about the seller in order to make a winning proposal to that seller to buy their piece of real estate. And I want to thank friend and client Steven young podcast listener for the idea for this episode, he sent me a message and said, I think a great topic to discuss would be what information you need to gather and so I’ve put my own spin on that And I want to thank you, Steven, for the great idea. I think everybody’s gonna get a ton of value out of this. So our overall approach here, working with our sellers is about quality over quantity. Recently, I was having a conversation with someone who I’d met through, you know, my Facebook page and somebody who had downloaded something that I published, and he was kind of having a strategy session with me we’re discussing whether I would be a fit for him as a coach or not. He was telling me that he was trying to get his wholesaling business up and running so that he could ultimately quit his corporate job. And he told me as part of that, how he had subscribed to a lead generation service, kind of property information service he paid for a skip tracing service, he paid for some training etc. and had only really want done one deal so far and he was kind of feeling like his his burn rate, so to speak, was adding And so we needed to get some results more quickly. And He then told me that according to his calculations about his business model, right when he looked at his costs, when He looked at his closing rates, his expected margins on each deal that he did, he had determined how many offers he needed to make each day in order to make this model work. And he said, Yeah, so I figured that if I could just make 15 offers per day, my model will work great. And I almost sprayed the coffee out of my mouth across my office. And I said 15 offers. I was like, do you know how long it takes me to make 15 offers? it probably takes me two months to make 15 offers. Now I’m not saying that you have to go at exactly my pace, or you have to do things exactly the way I do them. But that was such an unbelievable illustration to me of a quantity over quality approach, whereas I take a quality over quantity approach. And I don’t even make a quote offer, until I already know what the seller is going to find acceptable. So let’s dive in. And let’s talk a little bit more about comparing and contrasting what most average investors do in what we do as trees. So most average investors and I don’t even want to say low brow investors, because I don’t think this is unique to just lowbrow investors is just mainstream. Education on real estate investing has kind of taught people to do this. So when the phone rings, most average investors focus on the property. They focus on the details of that property. They focus on the condition of that property. In other words, they focus on gathering information. It feels like they’re filling out a questionnaire, and they actually may literally be filling out a questionnaire, but even if they’re not, that’s the experience that the seller has, because it feels like a bit of an interrogation. Not a conversation. These average investors are looking quickly for, quote, motivation and motivation in their mind usually means some kind of distress or a need to sell a problem that has to be solved in a relatively quick or urgent manner. These average investors also kind of find themselves starting to sell themselves and what they can do. They’re giving information at the same time they’re receiving information. These average investors are asking about price they’re trying to get right to that point, they’re trying to cut to the chase, and they’re looking to get an offer together in their mind as quickly as possible. Or maybe more realistically, they’re just looking to ascertain whether this has got any likelihood of turning in to a deal for them. And I guess when you’re doing it this way, you can crank out volume, maybe you can do 15 offers per day when that’s your approach. If you had enough leads to do 15 offers per day that is, but that’s not what we do on Trees at all. Because gathering information about the property is easy, you can probably even get a lot of that information without even asking the seller. So why would you invest your critical face to face or ear to ear time with the seller, talking about commodity information about the property when you could be learning about them. So this is what we do as thoughtful real estate entrepreneurs. We focus on the person. You know, a few episodes ago, you might recall, I did a food for thought segment about a quote. And the quote said, I don’t play the odds. I play the man that was given in the context of poker. And this person who said that was saying, I’m not so worried about the cards in my hand. I am understanding who’s sitting across the poker table from me, and I am playing to them. And that’s really what this is, as well. Our goal is to get to know our audience. We’re gathering insights about our audience, and who they are, what their beliefs are, what their situation is. There is no more important question on our mind, especially as we initially get to know somebody, then who is our audience? Who are we dealing with? In the process of doing this, we’re building rapport, of course. And in fact, we’re almost playing a game where we’re trying to see how long we can delay talking to them about the actual property, because we’re just trying to see how long we can keep the conversation going between two humans, about life and about finding those commonalities between us. But ultimately, we are gathering insights, not information, we are gathering insights about the person, we are sharing as little as possible about ourselves. We are really trying to make this much more of a one way exchange of information where we are receiving information and they are the ones sharing insights will pick up information about the property as we can, but We focus on the insights about the person, we also focus on getting off the phone as reasonably quickly as possible in favor of getting face to face with them. We know that face to face is at the top of the pyramid in terms of environments for us interacting with our sellers, and Getting to Yes, getting to agreement, getting to understanding our audience. So we’ll get off the phone as quickly as we possibly can, without being awkward about it, of course, in favor of getting face to face. And ultimately, we’re not making offers at all. Ultimately, we’re not making offers at all we’re making proposals. What’s the difference? Well, an offer is really all about what works for you. And it sort of has this implied message of Take it or leave it. Here’s my offer what works for me, do you accept my offer? A proposal, on the other hand, is more of a suggestion. It’s an educated suggested approach. is designed to meet what both parties have indicated they need to accomplish. And a proposal invites feedback. It doesn’t imply Take it or leave it. So here’s an important point that I really want you to remember. The more we know who we are dealing with, the more we know our audience, the better job we can do presenting our proposition to them in a way that will have the highest likelihood of resonating with them. Right, we might know what offer or proposal we want to make. But until we really know who our audiences we will not know how to frame that message, how to present it, how to explain it in a way that aligns with what they are trying to accomplish, their worldview, who they are, and all of that, because those are the things that will get them to say yes. So the question for today, on our episode here now is what insights Do we need to have about our seller in order to make a great proposal? And why are those insights? so important? We’re not going to talk about how to ask those questions and get those insights today. That’s going to be in our next episode. So for today, we’re going to focus on what insights Do we need to have about our seller in order to make them a great proposal, ultimately, and why are those insights important? Okay, insight, number one that we’re looking for. Who is this person? What is their profile overall? Okay, are we talking about a widowed retiree? Are we talking about a married 40 year old with three young kids? See, those would be very different people, of course, Where do they live? How nice is their neighborhood? This is one of the first things I always do is I look up the address of the house where I sent the letter, because that’s where they live, and I want to see what is it Like, what does the tax records show that it’s worth? How nice is that house compared to the property that I reached out to them about? It just gives me context about who I’m dealing with? Does this person work? If so, what do they do in their work? You know, I have a seller right now, who was property, I just put in contract, and he is a business consultant. And knowing that right off the bat, actually gave me some good ways to create rapport with him, but also indicated that he was going to be an extremely analytical and detail oriented person which has absolutely played out. That’s such an important insight about him, so that I know how to present my propositions to him in a way that will match who he is and how he thinks. What other clues Do you see that are telling you something about them? Did they mention that they just got back from Palm Springs where they split time? Well, that’s going to tell you something about them and their financial situation and where They are in life. Are they saying they can’t even find really a time to talk to you, because they’re always at work and they work late hours. Or they work on a loud construction site, and they can’t really take a call during the day to chat with you. If you look them up on Google Street View or drive by the property where they live, is it a Prius parked in the driveway or as a huge truck with a gun rack and a Marines sticker on the back? Those things are going to tell you so much about who you’re talking to. Okay, number two, what is their perspective on their own property? This is such a big deal, because everybody looks at their own situation, but sees it from a different perspective. I bought a property from a seller a couple years ago. And in my first conversation with her on the phone, she was like, Man, this house is just it’s kind of a dump. You know, I had these renters in it. I just did not take care of it. And This and that it’s empty now, but I’m just, I don’t want to list it because it’s just it’s kind of embarrassing. And I just don’t want to have to do all the work to get it fixed up and Okay, so she, she absolutely set an expectation in my mind of what my experience was going to be like, when I got to this house to visit it and see it with her. And I roll up to the house, and it looks okay on the outside, whatever, but I get inside. And she’s like, see? Pretty bad, huh? And I’m looking around thinking, Oh my gosh, this is way way better condition than I thought I’m looking around seeing a $5,000 cosmetic, you know, polishing and buffing on the inside, not a $20,000 renovation like she was sort of implying was needed. And it’s really interesting to find out what is somebody’s perspective on their own property? Do they think it’s beautiful? Do they think that they this properties in the highest demand and neighborhood in town? How do they perceive its condition? What do they think that It’s worth. Do they think that they’re renting it at market rents? Do they think they’re not renting it at market rents? For instance, you know, somebody, a lot of sellers will say, Well, I’m renting it for 1500. But you know, I’m just a softy. So it should be 2100. They’ll say things like that, that will give you an idea of what their perspective on their own property is. Do they manage it themselves? Where’s their perspective coming from? Is it from boots on the ground, day to day management of their property and constantly looking at the comps? Or are they living in a state 1000 miles away with a property management company that’s handling it for them? What is their perspective on their own property? And how did they arrive at that perspective on their own property? Okay, the third question, the third set of insights we need to glean from our audience or about our audience is what is their self image? How do they see themselves I talked to a lot of people, especially in today’s current, strong seller’s market, low inventory seller’s market, who seemed to think that they’re geniuses for getting their name. On the title of this property, there’s almost a bit of an arrogance in their tone sometimes about well, you know, I own this property and obviously everybody wants to buy it. And there’s kind of that tone about their self image. And that’s a really important insight. Do they see themselves as an average Joe? Do they see themselves as knowing what they’re doing in this process? Do they see themselves as capable and confident as they contact you? Or do they see themselves as being new to this? Do they see themselves as not knowing what they’re doing? And as a side note, does it feel like maybe they’re sandbagging you so to speak? Does it feel like they are kind of playing dumb? My coach, Greg has got an expression that I do. Just love that I I see this a lot of times actually is their dumb is a fox. They’re they’re playing themselves up and portraying themselves as being unsophisticated when they’re actually more sophisticated. So the question here is, what is their self image? How do they see themselves? The fourth question is, what is their perspective on the world? That’s kind of a general question, but it’s not too difficult a lot of times to get some clues about how somebody thinks, maybe politically, for instance, what is their perspective on things like taxes? What is their perspective on things like a changing landlord tenant law type of marketplace? You know, if you have a seller who makes some comment about well, you know, I want to sell this property. But as you know, the last thing I want to do is give this administration more of my money to work with. Okay, well, now you know a lot about their worldview, as it relates to politics and as it relates maybe to you know, fiscal policy and things like that. And those are super, super valuable insights about the mindset of your seller that you can ultimately use to present your proposal in light of how they see the world. Number five, what is their perspective on the market? And the market can mean a few different things the market can mean what is their perspective on the real estate market as a whole? I mean, do they even have an opinion on that? How in tune do they seem to even be with what’s going on in the real estate sales market? Or what’s even going on in the real estate rental market? Do they indicate that they think it’s overheated? And it’s time to get out? Do they indicate that they think it’s just a continued rocketship? And it’s just going to continue to keep going where it is? What do they think is going on with the real estate market? Secondly, it kind of another sub component of what their perspective on the market could be is what’s their perspective on the world of real estate agents, for sale by owner approach their perspective on other investors, etc. You know, if they’re making comments about how most of the investors that they’ve talked to are just slimy sharks who are just looking to take them for a ride that tells you a lot about their mentality on the dynamics of the marketplace out there. If they say something along the lines of why in the world, would I ever pay a real estate agent, five or 6%, to do something I can do easily using the internet myself, that tells you a lot about their perspective on the marketplace. And that’s very, very valuable for you to know. Question number six, that is an insight that you need to glean about your seller is what is their level of experience and their level of sophistication. As I mentioned, there’s the dumb as a fox concept when they’re actually fairly sophisticated, but they’re portraying themselves as less so, but you’re going to want to know, do they own other properties? Do they own vacation homes for themselves? Do they own other rental properties? What are those other rental properties? Are we talking about 40,000 square foot commercial properties? We talking maybe they have one other single family home? What is their portfolio like? And is this conversation you’re having with them? Now? Is this the type of conversation they’ve had 1000 times before and they could do it in their sleep? Or is this kind of a new experience for them? You’re going to want to put your finger on the pulse of what their level of experience and their level of sophistication is. Number seven, you’re going to want to gain insights about why they are considering selling are their reasons their rationale does it does it seem to be coming from their head, more of a rational, logical kind of approach, whereas coming more from their heart, more of an emotional All type of motivation, you might say, in why they’re considering selling this property? Are they moving away from something in their life like a problem, or they moving towards something in their life like an opportunity, right? If somebody is selling a property because they just don’t want to deal with tenants anymore. They’re moving away from the situation. And that is a problem to them of tenants. Whereas if somebody says, we have to sell this house, because we’re going to buy our dream house, in the next town over, that’s something that they’re moving towards. That’s a completely different set of motivations about why they’re doing what they’re doing. But regardless, whatever situation they are considering moving towards, they somehow see it better than the situation they have now. So you need to understand what is it that that is going to be better for them than what they have got going on now? how committed are they to this idea of making this change? To a better situation, and why now, specifically, you know, why weren’t they pursuing this a year ago? Why not next year? Why is now the right time for this type of thing? I think on a very related note, the eighth sort of topic that you need to glean insights on is how does this property fit into their lives? Right? If you talk to somebody who says that they lived in this house themselves for 30 years, raised four kids there, and then they recently moved out to downsize and they’ve just been renting it out for the last couple years. That’s going to be a very different seller with a different set of emotional connections and whatnot, than somebody who says, Oh, you know, I’ve never even visited that town. I live a 500 miles away. And I just bought it as an investment because my buddy said, this was a good market to be in. Those are very different people. How the property fits into their lives is a big element is it just simply a income stream For them, is it a detached, rational investment for them? Do they manage it themselves? And they get to know their tenants and they take their tenants under their wing almost like their kids or nephews and nieces? Or is it an arm’s length thing where they barely even visit the property? Because they have a professional manager in place? How does this property fit into their lives both in a functional sense, and on a day to day sort of experiential sense. The next thing I want you to know this is number nine, you need to gain some insight about what matters to them. As they’re sifting through and sorting through this whole process. What are the things that make a difference to them? Do they care about who buys it? And how they feel about that person? There’s a lot of sellers who do they want to see their property go to good hands, but there are others who don’t care at all about that. Are there is your seller somebody who cares what happens to the property next? There are a lot of sellers, I think Men who are selling an old house and they say you’re not going to tear it down, are you and they wouldn’t sell me the property if they thought that that’s what I was going to do. So it’s really, really important to understand what matters to them. And how do they prioritize those things is what matters to them simply a practical function of like, facilitating their next move either a place that they want to move to personally, I once bought two houses from a guy at the same time, because he needed to 1031 exchange those two houses into one bigger property that he really, really wanted to have. But he couldn’t do that exchange unless I bought both of those properties. So that was the number one thing that mattered to him, was creating a situation where I could do both deals at the same time, rather than just one or the other. Thing number 10 that you’re going to want to try to ascertain about your seller in terms of insights is what are the D Sales of their ownership situation? In other words, how long have they owned this property? Is it owner occupied? Is it non owner occupied? How much if anything Do they owe on the property? What would their capital gains situation be like if they sold it? are they planning to do some kind of an exchange to avoid those capital gains or to defer those capital gains? Do they care about capital gains? Is this something that is a primary driver for them or not? And one of the reasons we need to really understand some of these questions about the length of their ownership, their owner occupancy are not how much debt they have on the property or not, is that those things play in so much to their tax situation, which plays in in turn so much to our ability to include some type of seller financing in our proposal ultimately. So we certainly want to have insights about the details of their ownership. situation. Number 11. We want to have insight into who the other players are, who are involved with this whole process for them? Do they have a spouse? That is going to be a big part of this? Do they have kids perhaps? Do they have you know, a friend or a neighbor? Do they have an advisor? Maybe it’s an attorney or a CPA, or somebody along those lines? Who are the other people whose opinions matter, as it relates to these decisions that they’re making. And category number 12. The final one that I’ll cover with you today of insights that you need to glean about your seller is what is their process going to be like? Do they even have a process? You know, what are their considerations for this? Are they getting three offers from three different folks? are they feeling it out with their heart to find somebody who they think is the right buyer? Are they looking for just the right type of proposal and is is they get that proposal? They’ll say, Yes. What’s their ideal timing? Some people want to move quickly. Some people want to move slowly. Some people just want to move at whatever speed is going to feel right to them based on the the unique buyer that they find. But what do they perceive their other alternative options to be? This is a big one. What do they think the other options are? Now we all know that you of course, you can just call a realtor and you can always list a property. And there’s no sense in trying to pretend like that’s not one of their options, but what do they perceive their reasonable options are this property I was telling you about that I just put in contract a couple days ago, I thought was really interesting. I’d never seen exactly a situation like this, where the seller was considering me, a guy sitting in his living room, having lengthy detailed, extremely tailored conversations about the precise proposal that would get him where he’s going Life. He was evaluating me and selling to Zillow or open door. I thought that was a really strange array of of options because those things are can be so different from each other that I thought there’s There is nothing like their experience of working with me that is it all like their experience of working with Zillow or open door. I imagine even the numbers are very different. But the point, the point is, what do they perceive as their other options to be because those are the things you’re really competing with. Whatever they consider to be an alternative to you, is your competition. So in summary for today’s episode, as you can see, getting to know our audience is an extensive, multifaceted and nuanced process. It’s not just about filling in a worksheet, but hopefully you’re also beginning to see how absolutely critical it can be to have these insights about Our audience in the process of creating a proposal. And if we go in with an offer a proposal in which we don’t know any of this stuff about these people, the chances of just randomly hitting the target in a way that’s going to work for them are really low. It’d be like grabbing a dart and putting on a blindfold and knowing just generally the direction of the dartboard to throw the dart. But if you know these things about them, then you’ve got the blindfold off and you’re looking right at the target, your chances of hitting that target with a proposal are so much better. So now that we know what insights we need to glean about our audience, and next question, of course, is, how do we go about gleaning those insights? How do we extract those insights from the seller while keeping it conversational? And without it sounding like an interrogation? And that of course, my friends is the subject of our next episode. So stay tuned for that. We’ll get tactical about specific things you can say and ask. That will get you the insights you are looking for. So thanks as always for listening to sleaze free real estate investing. As you know, next episode, we’re going to be continuing this conversation and giving you insights and information and ideas about how to go about getting this accomplished with your seller. Again, please do yourself a big favor do us a big favor to by hitting the subscribe button in the podcast app. Would you also please do me a favor just personally right now it just takes a second. If you would go to iTunes and rate and review the show. Just give your honest rating and your honest review of whatever you think about the show we would so appreciate it because a it gives us great feedback. But be it also tells iTunes that people are paying attention, which then encourages iTunes to share the show with more people like you who might be able to get some value out of it. Reminder there are show notes including a transcript for today’s episode at W ww dot thoughtful r e.com slash e 27. And until next time this is Jeff from the thoughtful real estate entrepreneur, signing off.