Knowing how to Negotiate with a Seller


It’s important to accumulate knowledge in various aspects of the fix and flip process. Lack of knowledge will teach you valuable, but often expensive lessons.

Gaining knowledge and experience in the following six topics should be a top priority.

In this article we will discuss topic #4 Knowing how to negotiate with a seller.

Knowing how to negotiate with a seller:

This article is for investors who buy directly from motivated sellers.

Rule #1: Never make an offer before you completely understand the seller’s motivation and needs from this sale.

The key to successfully buying houses from a motivated seller is to provide a win/win solution, one that meets the sellers needs and your needs. To do this you must understand what the seller’s needs are. You do this by asking questions. Developing the skill to ask questions that uncover what the true problem the seller is trying to solve is critical. Money often isn’t the most important need that the seller is trying to get resolved. The seller may want to leave town by a certain date, avoid having to make another loan payments, get away from bad memories, just want to walk away without making any repairs, wants to avoid having stranger walk through their house, or avoid tarnishing their credit. Some or their reasons you hear may seem irrational to you but are critical to the seller. Understanding their needs may help you get an offer with less cash, but more intangibles, accepted.    

Using the questioning process, you also build rapport with the seller. They need to like you and feel confident that you can deliver.  To learn more about building rapport, Some investors like to have a credibility kit that they can provide to the seller with your background, showing a track record of success in closing deals and completing projects.  

Once you have established rapport and understand the seller’s needs/motivation, it’s time to make the offer. Often, I found that it’s best to have two or more offers to present at the same time. With one offer, its yes or no, with multiple offers, people are compelled to pick one of the above.  Make sure you have few or ideally zero contingencies in your offer. This helps the seller feel confident that the deal will close.  

“No” today may not be “No” tomorrow.

Sometimes hearing “no” from the seller is a good thing. If you are miles apart with your offer and the seller has expectations that you can’t meet profitably, its best to move on. Instead of deep 6’ing that file, you should put it in your follow up system. Three months down the road, the sellers’ circumstances may have changed significantly and your offer my be acceptable. Some of the best deals I did as an investor were agreed to 6 to 12 months after the first “no”.  Perseverance pays off, especially when it comes to high profit real estate deals.  If you know there is a good deal there, and you haven’t followed up 2 or 3 times after the initial “no”, you are leaving money on the table.         

Future issues of this blog will talk about the other 2 areas of knowledge including my favorite, how to finance your deals.

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