Despite what appears to be logic and common sense, many real estate investors continue to be amazed when their offers are shot down by ‘unrealistic’ and ‘crazy’ homeowners. It appears as if the art of real estate negotiating is completely lost on some individuals. So how can real estate investors save these situations and close more deals? What can be done on the investor’s side to revive what seems like a lost hope?
Many investors want to know how they can get sellers to understand the ‘real value’ of their homes. How do they convince more property owners to sell for the price the investor wants to buy for? What are the best methods of making offers?
New real estate investors frequently look for answers among metrics – like what percentages above or below asking price are good ceilings and floors for acceptable purchase offers to make. Subsequently, they want to know specific formulas for convincing owners of the current ‘value.’ However, is this even possible?
Sales and real estate veterans know that value is fluid. Market value, in particular, is completely dependent on situational factors. There is the comparable sales approach, income approach, cost approach, and actual market value to each individual or company in the process. For example; any given individual homeowner might be willing to take half of what an investor thinks it is worth given the right circumstances. In another scenario, a property owner might demand 25% above any evaluation by an investor, and harsh terms with it. Some sellers and real estate agents purposefully list properties low to get higher offers, while others will openly invite “any offer.” To make it more complicated, these ‘values’ are fluid over time, and can move independently of comparables. This makes the battle of making better purchase offers and getting more offers accepted more about prequalifying sellers and agents, knowing their trigger points, and mastering the offer making process.
Moguls and those that desire to build dominating real estate brands understand the need to train and dominate the thought process before sellers even think about selling. This might be too much for some real estate investors and property start-ups to comprehend. However, all should be prequalifying sellers and deals before making offers. Once a good system is installed for making offers, the process can be automated and ratios of accepted offer may be less important. Yet, it is only wise to minimize wasted time and energy by only spending time on viewing properties, making offers, and negotiating where the odds of winning are high. Sun Tzu, the author credited for bringing us The Art of War, would even say the battle should be won before walking on the field. Essentially, this is a mindset you need to adopt. Investors should know who their sellers and agents are, what their tipping points and motivations are and what the seller is likely to take before making an offer.
The good news is that, in the majority of cases, most deals will have a chance of being revived or shocked back to life. This may mean going back to uncover a seller or agent’s real desires and fears, having someone else make the offer, making a hard, strong offer even if previously told the seller would like more anyway. Regardless of the situation, find out what you can do to peak interest once again. There is usually an underlying prerogative that just needs help coming to the surface. Once you have it, take advantage of it. Use it to revive the current deal, if at all possible.