If you want to be more successful in your negotiations with Sellers, the answer is simple: SLOW DOWN. When you slow down and take more time in your negotiations, you get more of your proposals accepted. In this episode, we discuss the three major benefits to you as a Buyer of slowing way down in your negotiations directly with property Sellers.
Hey, thanks for joining me for another episode of Racking Up Rentals. Before we get started, remember that there will be show notes for today’s episode at www.thoughtfulre.com/e36. Please, if you would take a quick second and just do us a huge favor by hitting the subscribe button in your podcast app because that really helps other fellow thoughtful real estate entrepreneurs who are out there searching for their people like us to find us and join us onward with the episode. So in today’s episode, we’re going to talk about the great value that there is for you as the buyer when you slow down in your seller negotiation So let’s just step back for a second and ask ourselves the question, why is the common advice, the common training the common real estate, investing education, to move fast? And to get to a number as soon as possible? And to find out if there’s going to be a deal here for you? Well, the reasoning, which kind of makes sense if you think about it, is that if you’re ultimately going to get a no, if you are ultimately going to have a seller who is not reasonable about their price, that you might as well figure that out as soon as possible, so that you don’t waste time. And I can understand that mentality. But for the reasons we’re going to discuss today, I feel I feel that is extremely short sighted. As a matter of fact, I spend as much time as I possibly can before talking about the property at all, let alone a number and today we’re going to talk about three big reasons why you as the buyer benefit from actually slowing down and delaying that part of the conversation. The other day on Facebook, I saw a post into a group, not the thoughtful real estate entrepreneur group, but a different Real Estate Group, where somebody said something to the effect of when sending your offers via direct mail. What is a good offer to send 50 to 60% ARV. And I just stopped and I took a screenshot of that. And I just thought to myself, from my perspective as a thoughtful real estate entrepreneur for what we do what I am helping, you know, teach and spread in the world. There is so much wrong with that. With that statement. There’s so much wrong with that question even at all. We don’t send offers in direct mail. Do we send direct mail? Oh, yeah, heck yeah, we do that but we don’t send offers in direct mail. That’s number one. Number two, we don’t even make offers. We make proposals and proposals can really only be made. Once you know everything you need to know about your seller and the dynamics of the situation and the deal itself. And then the last one, where he says here, what’s a good offer to send? Is it 50 to 60%? ARV, I think is just so obnoxiously simplistic, and formulaic. And this is almost like just saying directly, all sellers are the same. All that matters is the property and the formula. And that’s just not how we work as thoughtful real estate entrepreneurs. I want to go through three different reasons why I think you will benefit so much from slowing way down and why I know I benefit from slowing way, way, way down myself. Reason number one is that when we slow down, it matches our brand position that we try so hard to establish as regular people buying properties from regular people. Okay, so number one, it matches our brand position as regular people buying properties from regular people. When regular people have conversations with other regular people about any topic, there’s no aggressive cut to the chase. Let’s just go ahead and get straight to the, the meat of the conversation type of thing. There’s a natural conversation that happens. There’s a natural build up, there is rapport building, there is sometimes small talk, whatever it is that kind of builds up to the ultimate question. I mean, to give you a crude example, and analogy, if you were single,
and you met somebody who you kind of liked and were attracted to, would you just walk right up to them? And the first thing you’d say, or within 30 seconds, you’d say, hey, how soon Are you thinking about getting married? That would not probably go very well yet. It’s entirely common in the real estate investing education world. But we’re trying really hard to position ourselves not as a property buying company or professional investors, we’re trying to position ourselves as regular people, because our buyers, our sellers are regular people as well. And regular people are not really usually intimidated by other regular people. So we want them to feel like we are regular people. And so when we go slowly, it matches the more natural dynamic of how a conversation normally happens between two regular people about any topic and there’s really two reasons that going slow changes this dynamic. Okay, the first reason is that when you go slowly, you demonstrate that you are not desperate, you’re not desperate to buy something. You’re not desperate to make a deal and make a bunch of money. You are not desperately looking for an easy get rich quick solution. It’s That you are not desperate. But the second thing and this might be even more important. When you go slowly, it shows that you know, the seller is not desperate. And I think if you were to go out and take a survey of people who are selling properties, the number one thing that puts their guard up that their wall goes up and they want to protect themselves against is if they feel like they look vulnerable. If they look like a distressed seller, if they look like a motivated seller, then their wall goes up. And they start to act like they have to protect themselves because they assume the other party is going to try to exploit their current bit of weakness. So when you go slowly, you demonstrate that you’re not desperate. You don’t need to make a deal. You don’t need anything you just sincerely want to and you know that they’re in the same position. You acknowledge that they’re not in a bind. They’re not desperate. And when you acknowledge that, you know, they’re not desperate, their guard tends to come down. I don’t know if you’ve ever had a seller phone call yet, but I’ll tell you a lot of the seller phone calls that I have, start with early in the conversation before the person is comfortable, they’ll very proactively say something along the lines of, hey, just so you know, I don’t need to sell. I’m not in a pinch. I’m not in a financial, you know, bind of any type I don’t need to sell. And so the best thing to do is to demonstrate that you understand that they don’t need to sell by just slowing down and mimicking mirroring the natural progression of a regular conversation between two people. So Reason number one that it benefits you as the buyer to slow down in your negotiation is that it matches and supports the brand position you are trying to establish as a regular person that’s buying a property From another regular person. Reason number two that you benefit from slowing down in your negotiations. And this might be the biggest and most broadest of my three reasons for you today.
Is that going slow?
going slowly opens up so many more possibilities. It’s almost hard to even articulate what I mean by this because the answer is so vast, but let me just tell you, that you learn new things about your seller, about the property, about this situation about all of the dynamics over time, okay, you’ll get an initial sense of what’s going on from some of your initial conversations with them. But I can assure you that if you are in, you know, contact twice a week with the seller over the course of three months, you’re going to know a heck of a lot more about all of the nuances of the day. dynamics of the situation, then you would if you have talked to them twice over the course of one week, you will learn new things over time and new insights and new things that you learn cannot possibly hurt you. They can only help you understand the situation better so that you can fine tune your own proposal to better match that situation. I can tell you also that things that might have been
On day one of your conversation can become at least possibly a yes. Over time as they get more comfortable with you. I can tell you about a time when I was buying a rental property and in my first one of my first conversations with the seller, I asked them a couple questions that explored the possibility of seller financing. And they said no, we’re not really interested in that. We have some very specific Things that we want to do with this money, we want to take these proceeds and we want to pay off a different property. Actually, I think it might have even been their primary residence. And so I said, Okay, that’s fine. And as we got to know each other more and more and talked more and more over time, and we slowed down. Ultimately, at the end, I gave them a proposal that matched exactly what they were asking me for. And I also chose to give them a second proposal. That was with seller financing. And when I presented that I said, hey, look, I know that you very clearly told me that this was not a deal structure that was gonna, you know, hit the target for you and try to get you where you’re trying to go here. But because I was already doing the thinking, I thought I would share this option with you also as free food for thought, feel free to say no, I know it doesn’t match what you told me that you wanted, but I thought I would at least put it out there anyway because I took the time to figure it out myself. So I thought I’d share it with you too. Lo and behold, over the course of that time of them getting more comfortable with me and us just discussing the situation from lots of different angles, they ultimately said yes, and I bought that property with seller financing, even when they originally said no on that, see a deal over time. A negotiation I should say over time, can get better. It’s kind of like wine. You know, they say that like a deal like a flip. For instance, if you buy a flip, and you you create your financial projections, it rarely gets better. More than more likely than anything, your costs are going to go up or your your sales price is going to go down. It doesn’t usually get better from that point on. But I’ll tell you in the negotiation from the time you meet them, to the time you sign the deal, that can really get better. Over time. With more time spent together Together, getting to know each other it’s almost like seasoning the relationship I’ve been talking to a guy about a couple rental properties that he has here in my hometown. And he and I were on the phone yesterday. And I asked him, you know, with with COVID, and things like that, I asked him the question, do you feel comfortable meeting up? And he said, Well, Jeff, you know, we’ve been having a three year conversation. And yeah, I think it’s about time now that we get together. And I was just so struck by that because I had to stop and think and I was like, Oh, my gosh, he’s right. We have literally been talking for three years, not every day, not every other day, not twice a week, but we’ve been staying in touch because the time wasn’t quite right for him. But I stayed in touch with him. I kept sincerely expressing my interest. And now that the time is becoming right for him. Now, the pace of our conversation in our negotiation is going to pick up a little bit, but it’s taken the better part of three years to get there. I’ll give you one more quick example of this to have a deal I just did. I put it in contracts a single family home in In January. And, of course, a couple months later COVID happened. And that kind of made everything in the world a little bit funny. But through our due diligence process, we found that the sewer line on this property was in a what they call a party line situation with the next door neighbor. And the party line situation means that the two sewers kind of come together before it goes back out to the street. So this is what they call my city a non conforming sewer line. And I felt like I wanted to get it back into conformance before I put my name on the title. Well, there were some complications that came with that. And even though the seller understood that and was receptive to it, we actually needed the cooperation of the next door neighbor whose sewer line was also part of this. And based on some of just the real specific details of you know, where this party line connection happened, it really meant that the other the other party, the neighbor is the one who is going to have to correct This situation, but that took months to get that seller to understand that and ultimately, I should say took months to get the neighbor to understand that and ultimately to accept that reality. And so my property here was in escrow for about six months. And over the course of that six months, you know, I talked with my seller a couple times a week as we were working through the sewer line situation, but
we really got to know each other and we really developed a whole nother level of rapport, I mean, dare I say even friendship to a certain extent. And when we came down to within a couple weeks of finally closing after the sewer line situation was resolved. My deal with him this is a seller finance transaction, but I needed to give him $60,000 down and he needed that $60,000 to do a different unrelated project. And I was feeling like at that point, The $60,000 down was a little bit more than I wanted to do. But at this point, you know, it’s been six months. I can’t really renegotiate that at this point. But what I went to him within a week or so of closing, I went to him and I said, Would you be willing to let me make my third my $60,000 downpayment in two chunks? I’ll give you $30,000 at the day of closing, and then another $30,000, within 60 days of closing, would you be comfortable with that? And he thought it over for a quick second ran it by his wife, and they said yes. And so I effectively cut my down payment in half the cash, I needed to close the deal in half, and then had another 60 days to figure out where the other $30,000 was coming from. Now, if I had asked him to do that, originally, I really don’t think there’s any chance he would have said yes, it didn’t make any sense. We didn’t have the relationship. We didn’t have the report, but because there was So much more time invested in our in our relationship as getting to know each other. That led him to feeling very comfortable with me and saying yes to that. So my purchase went from about 20% down to about 10% down with a lot more time to enable me to come together with the other $30,000. So Reason number two that you benefit as the buyer from slowing down in your negotiations, is it slowing down, opens up so many possibilities, untold possibilities, we can’t even predict what types of possibilities will be opened up over time, but they won’t be opened up. If there’s not a runway there have time to allow that to unfold. And the third and final reason I wanted to share with you today about how slowing down just helps you so much is that slowing down, makes the sellers want to stick with you instead of starting over Because they become comfortable with you over time. And the idea of starting over with somebody who they don’t have that level of comfort with can be really scary daunting and feel like a ton of work. So let’s go back to my example, I just shared with you about the house that was in escrow for six months, and the split downpayment topic that we negotiated. At this point, the property has been in escrow for six months. And I come to my seller and I nicely politely ask, would you be open to the idea of me breaking my down payment into two chunks? Now, he was very comfortable with me at this point. But the idea of him starting over after six months of escrow with somebody that he does not have that level of comfort with is not an attractive proposition for him, right? He’s inclined to just simply say yes, so that we can get this thing closed. You know, if you watch Football, it’s sort of like a football analogy. This seller has marched all the way down the field and is unlike the one yard line. Now, they’re on the one yard line. And now one little obstacle steps in front of them in the end zone. And that is saying yes to my proposal to split the down payment half and all he has to do is say yes, and he’s in the end zone. So the idea of being on the one yard line, and just doing what it takes to get in the end zone is usually a lot more favorable to people than the idea of going back and starting at, you know, the other end of the field and marching all the way down the field yet again. So the reason number three here that I wanted to share with you is that slowing down makes sellers much more inclined to stick with you their their burden hand, their comfort blanket that they already feel, you know good about much more than starting over. Now. If the seller has only known you for two weeks, and You know, something comes up and they have to the deal explodes. And they have to start over again. Well, they’ve only lost a couple weeks, but six months, and to be on a one yard line with somebody that you feel really good with,
there’s no way that they want to start over in that case. So to recap very quickly, the three big reasons that you benefit as the buyer so much from just slowing down in your negotiations with your sellers, is that, number one, it really matches and supports your brand position as a regular person trying to buy property from another regular person, it just changes the dynamic of the whole situation, because it shows that you aren’t desperate. And it also shows that you recognize and acknowledge that they are not desperate, and that helps them let their guard down. Number two, going slowly just opens up so many more possibilities that we can’t even predict what those will be. But there’s so many more by having more timeline and more runway. And number three, going slowly make sellers want to stick with you their burden hand the thing they’re comfortable with, rather than starting over. To put a simple bow on all of this, I would simply say that one of our most important skills maybe the most important skill as a thoughtful real estate entrepreneur, is the skill of seller relations. And simply put, the longer that your negotiation goes on, the more time you have for the magic of your seller relations to work on that relationship and move you closer to a deal that is going to be of maximum benefit and value to both you and your seller. So there you have it. That is it for today’s episode of Racking Up Rentals again shownotes are going to be at thoughtfulre.com/e36 for Episode 36 please do us a big favor by hitting that subscribe button in your podcast app. If you would like to go a step further, we would so appreciate if you would rate and review the show. Just give an honest take on what you think of what we’re doing here at Racking Up Rentals. If you liked this episode, you could also take a screenshot of it and just post it to Instagram and tag us. We are @thoughtfulrealestate on Instagram. I will see you in the next episode. And until then, this is Jeff from the Thoughtful Real Estate Entrepreneur signing off.