Not every transaction is going to be easy. In spite of what you may see on TV or hear from fellow investors, closing deals is a process. That process starts with getting the seller to agree to sell, and at the number you desire. With all of the information – and misinformation – out there, sellers feel they know more about their property and the value than ever before. As an investor, one of your jobs is to show the seller exactly what they have and exactly the situation they are currently in. This process requires patience and persistence, but if you can get the property at your price, you are ahead of the game. Do whatever you can when working with a difficult seller, it may just be what closes the deal.
Being a good investor often requires you to wear many different hats. On top of that, you need to be able to assess every situation with a critical eye in a relatively short period of time. Talking to a potential seller on a new deal requires you to find out their motivation, timeframe and expectations as quickly as possible. Motivated sellers in real estate are of the utmost importance to investors. If you know what the seller wants from the initial meeting you can either adjust your offer or allocate your time to other sellers who are more motivated. It is very rare that a seller will sign a contract at the initial meeting. With every new deal, you should be prepared to dig in and roll up your sleeves.
Even distressed sellers can have a distorted view of their situation and the property. It is your job to let them know exactly what they have and what their options are. Most sellers have a friend that is a realtor or have done a quick internet search of their home’s value. You need to know more about the market and their property than they do. If they feel they can sell their house for say $200,000, and you feel it’s worth $150,000, you need to have hard data to support your price. Zillow or another home valuation site may have a higher amount, but that doesn’t mean their house would sell for this price. It may take a meeting or two to have this reality sink in. The more market data you have and better prepared you are, the better.
The truth can be upsetting, especially when your seller is expecting things to go differently. You need to be careful with how you present yourself. You are not a lawyer trying to get someone convicted. You are trying to get the homeowner to sell. If you push too hard you will irritate them to the point that they won’t sell to you even if you are right. Show the comparable sales, current listings and subtly point out the deficiencies of their property. Also point out the risk you are taking and how you will finance the property. Many sellers will ask what you intend to do with the property if they sell to you. Don’t run from the fact that you will try to make money on it or will keep it in your portfolio. The more sincere you are at this point, the more likely they will want to sell to you. Numbers will work with bank owned sellers, but with traditional homeowners you need to use your personality.
In addition to motivation, you should highlight the benefits of selling at your price and in your timeframe. Ideally, you will find out how they got in their current situation and why they want to sell in the initial meeting. They could be facing foreclosure, had their home on the market for months or are facing another potential hardship that will lead them to sell. If they are months late on their mortgage and foreclosure is eminent, you should point out how difficult it is to establish future credit with a foreclosure on your credit report. If there is some equity, you can point out how a quick, cash closing can get them a secure deal without any headaches or having to wait for lender approval. Whatever their benefit is, you have to hammer the point home and use it as your focal point.
Even on seemingly easy deals, there is a large degree of selling that goes on with every purchase. You are either selling yourself, the price or the benefit to the seller. You need to be prepared with market information, foreclosure data and specific details of the property. If you just show up with an offer and expect your seller to sign, you will be greatly disappointed. Even distressed sellers have options and they can always file bankruptcy as a last ditch effort to stay in the house. It may take two, three or four meetings before your seller begrudgingly acknowledges that you are right and considers selling. If you don’t put the work in or don’t have the patience to follow up, you will end up losing a deal that another investor will get.
The more you can educate the seller and provide value to them, the more deals you will get. Some sellers may take months before they finally see it your way at your price. This is the nature of sellers – especially in this current market. If you treat every seller like a potential deal and do your homework, your conversion rate will increase. Deals won’t just fall on your lap and there will be many difficult sellers, but that is the nature of the business. Most investors can close the easy deals. It is the difficult ones that separate the good investors from the great ones.