When was the last time you came across a seller that had completely unrealistic expectations about what their house should sell for?
If you are a real estate investor, it was probably the last time you looked at a house. A big part of becoming a successful real estate investor is learning how to change those expectations. The trick is to do this and have them still feel like they got what they wanted out of the negotiations.
One of the best skills you can develop and probably one of the hardest to learn is the skill of listening; really listening to what the seller has to say. And yes, sometimes it is a painful process. It usually involves at least 30 minutes of hearing about all of the history of this house and all of the past and current problems they and their family have encountered.
I can tell you from experience if you sit quietly and listen; you will get valuable clues about what is really important to them and what their true motivation is. They will simply tell you if you listen. There is always “something else”; something other than money that they want or need in addition from this negotiation.
Once you have this piece of information, your chances of putting together a deal that is a “win-win” for both of you increases dramatically.
How Do You Change the Seller’s Expectations?
I have found that I usually need to do this in stages. Most of the time, I am able to begin this process when I take that first phone call. After they have told me all the problems with the house, I simply repeat all of them back to the seller and comment that those repairs and updates will be costly.
The second time you will have an opportunity to “reset” their expectations is when you see the house. Again, it can be as simple as going over everything that the house needs. I usually bring up the comps for the area at that time and tell the seller that “this is what similar properties in this condition are selling for”.
The seller will very likely tell you at this point whether you are even close to meeting their expectations. This is another valuable piece of information that you hope to get during your visit to the property.
Making an Offer
Depending on the house and whether I have been successful at getting them to accept “the reality of their situation”, I may or may not make an offer at that time. You will need to decide each time when to make your offer.
Some real estate investors have a policy that they never leave the property without making an offer. I personally don’t think that is always the best thing to do. Often people need time to process what you have told them. They need time to become realistic about their particular situation. And by giving them this extra time, you may be able to quickly seal the deal the next day.
If I think we can strike a deal at my first visit to the property, I will certainly make an offer. However if I can tell that the seller and I are far apart in this negotiation, I will typically wait a day or even two to make the offer. There are inevitably those times where there is a bit more negotiation that will take place before you reach a compromise. Always leave a little “wiggle room” in your original offer. One thing that you never want to do is to get caught up in trying to “making a deal work”. Know when to walk away.