The “Secret Sauce” for Shopping for Rental Properties BELOW Market Worth

Ashley:
Negotiating underlies so many elements of actual property.

Tony:
Studying methods to negotiate can remodel the way you shut offers and make offers work on your technique. Good negotiators aren’t good

J:
Salespeople. They are surely individuals which can be simply good at constructing relationships, rapport and gathering data, getting that information is energy.

Ashley:
That is the Actual Property Rookie podcast. And I’m Ashley Kehr.

Tony:
And I’m Tony J Robinson, and we need to give a really, very heat welcome to none apart from J Scott. Jay, thanks for becoming a member of us right this moment, man.

J:
Hey, thanks. I like being on the present with you guys, so thanks for having me again.

Ashley:
Yeah, Jay, why don’t you begin off with telling us a bit of bit about your expertise with negotiation?

J:
Yeah, so I’ve been negotiating for a very long time. I began out within the company world. I did tech for some time, really spent a lot of my profession at Microsoft and so they despatched us to some actually good negotiation programs when it got here to enterprise negotiation. So I sort of obtained my begin lengthy earlier than actual property after which 2008 jumped into actual property. We flipped about 500 homes. So while you try this, you’ve got a few thousand negotiations. You have got a negotiation on the purchase aspect, you’ve got a negotiation on the promote aspect that doesn’t embody the 1000’s of negotiations with contractors and brokers and attorneys and title corporations and appraisers and all people else concerned within the transactions. So yeah, I noticed early on that with the ability to negotiate nicely actually could make a giant distinction in your backside line. Even when imply, when you save 100 {dollars} on a transaction and also you’re doing 20 or 30 transactions a yr that provides as much as 1000’s or tens of 1000’s of {dollars} over a profession, you possibly can actually make or lose tens of millions of {dollars} by being an excellent negotiator or conversely, not being an excellent negotiator

Ashley:
For rookies which can be simply beginning out possibly moreover simply buying a deal, who’re another those who for our rookie buyers, ought to primarily be centered on studying methods to negotiate with?

J:
Yeah, so in the case of negotiation and all of the stuff I’m going to speak about right this moment for essentially the most half is relevant to purchasing actual property, promoting actual property, negotiating with contractors, negotiating with different distributors that you just’re going to make use of and even negotiating exterior of actual property. These are simply common negotiation methods, strategies, no matter you need to name them that’s going to make you a greater negotiator. The factor that each negotiation primarily boils all the way down to, nicely, two issues that each negotiation primarily boils all the way down to. Primary is rapport. So having an excellent rapport with the individual or individuals on the opposite aspect of the transaction and two data, there’s a saying that he who has essentially the most data goes to win the negotiation, and I discovered that that’s very a lot true. Info is energy, and the extra data you may get, the higher you’re going to carry out in that negotiation when it comes to giving the opposite celebration what they need and also you getting what you need. So we will discuss these, but it surely principally boils all the way down to rapport and knowledge and there’s a number of methods exterior of that, however these are the 2 huge ones.

Tony:
Jay, let me ask one factor simply to sort of set the desk. I don’t need to lose half of our viewers right here earlier than we even get began, however in your perspective, do you are feeling that it’s worthwhile to be an extrovert to be good at negotiation?

J:
That’s an amazing query and I most likely ought to have began with that. I began negotiating once more within the company world, however on the time I did, it was actually, actually troublesome for me. I’m an introvert. I’m a former engineer. I spent my first profession as an engineer. I don’t like speaking to individuals I don’t like I doing a podcast like this. I’m used to doing it and I’m sort of placing on a courageous face and appearing right here a bit of bit as a result of that is powerful for me. I’m an introvert and speaking to individuals and negotiating, and I’m not a gross sales man. Asking individuals for stuff is admittedly laborious for me. And so it has taken some effort and time and power to get good at it, however very a lot negotiation is sort of a muscle. The extra you employ it, the stronger it will get and the extra issues begin to come naturally. And what you understand is sweet negotiators aren’t good salespeople. They are surely individuals which can be simply good at constructing relationships, rapport and gathering data. Getting that information is energy, and so it doesn’t matter when you’re an extrovert, it doesn’t matter when you’re an introvert, so long as you’re good at constructing relationships and so long as you’re good at gathering data.

Ashley:
Jay, let’s get into it then. What are a few of the issues {that a} rookie investor ought to do throughout a negotiation? What are a few of the techniques?

J:
Yeah. Properly, first let’s discuss a bit of bit about why negotiation is so essential in actual property. And I discussed that negotiation is sort of common and we’ll use it in all the pieces we do. However in the case of shopping for and promoting actual property, there’s just a few issues that make negotiation and good negotiation way more essential than a number of issues that we’re going to do. Primary, the sum of money concerned while you’re shopping for or promoting a home, you’re spending what’s probably the most important funding of your life. Extra importantly, the individual on the opposite aspect of the transaction is probably negotiating with the most important sum of money they’ve ever negotiated with. And they also’re clearly going to be extra on guard. They’re going to be extra conscious of the negotiation and extra severe in regards to the negotiation than in the event that they have been negotiating a trinket in a retailer.
So the sum of money concerned simply makes all people a bit of bit extra on edge, all people a bit of bit extra astute and attuned to what’s occurring. Quantity two is simply the timeline. If I stroll right into a automotive dealership, I would spend just a few hours, possibly even I come again for over the course of a pair days to barter a automotive, or I am going right into a retailer out of the country and I negotiate over a trinket or some product. These negotiations final minutes or hours, possibly at most a day or two. However in the case of actual property, we’re speaking a few negotiation that lasts actually 30, 60, even 90 days if we’re doing a giant transaction, which suggests there’s lots that may go unsuitable. Simply since you and I come to an settlement right this moment doesn’t imply that one among us isn’t going to alter our thoughts per week from now, or some circumstance goes to occur per week from now that causes us to must renegotiate.
And so once more, constructing that relationship, having that rapport, constructing belief between the events is tremendous essential as a result of we’re speaking about actually weeks or months of holding the negotiation collectively. Quantity three, I simply talked about the renegotiation factors in actual property. We have now a number of completely different conditions the place we may have to come back again to the desk even after we’ve come to an settlement. So for instance, we get our inspection report again and we discover that the inspection comes again with some issues that we’re not completely satisfied about. Properly, we would have some contingencies that permit us to now reopen negotiation and negotiate repairs or negotiate value concessions. If that negotiation and that unique settlement wasn’t sturdy, it’s straightforward for the negotiation to crumble at that time. Numerous causes we could must renegotiate. And if we don’t have a robust relationship with the opposite celebration, it’s very straightforward for the negotiations to crumble in the course of the first, second, third, or fourth negotiation within the course of.
After which lastly, there’s this, realistically, there are going to be a number of intermediaries in each actual property transaction. It could be nice if all the pieces concerned simply the customer or vendor, however a number of actual property negotiations and transactions contain brokers, not only one agent, however possibly an agent on either side, title attorneys or title brokers, attorneys, lenders, appraisers, inspectors, all of those individuals sort of on one aspect or the opposite which can be going to affect the negotiation. And so in the case of actual property negotiations, it’s much more difficult. It’s lots longer course of, much more issues can go unsuitable, and because of this it’s so essential to be good at negotiating actual property. Now, that didn’t reply your query. Your query was what are some methods and techniques we will use? Properly, I discussed the primary, and the primary actually is the power to construct rapport.
If I’m going to persuade someone to do the most important transaction of their life, the very best priced negotiation of their life, I’m going to need them to belief me When someone trusts me. It’s lots simpler to come back to an settlement than when someone sort of appears at me like an adversary. And too usually after we go right into a negotiation, we take this perspective, I imply, we watch The Apprentice or we watch no matter TV present talks about these excessive value company negotiations, and we see these sharks coming collectively and utilizing these methods to outwit one another. In actuality, the very best negotiations are two those who belief one another and like one another and need the opposite individual to get an excellent deal on the similar time that they get an excellent deal. We don’t must be using these complicated methods or these hard-nosed techniques that attempt to trick the opposite aspect or attempt to undermine the opposite aspect.
Ultimately, what we wish is we wish the 2 sides to come back collectively and mutually attempt to discover options to the issues. And so how can we try this? We construct a relationship, we discuss to the opposite aspect. We don’t go in on day one with the, okay, right here’s my provide. You go in on day one with, Hey, inform me about your self. Inform me about your loved ones. Inform me about why you’re promoting this home. Inform me what you’re going to do subsequent. My spouse, who I actually, she’s the one which must be doing this present proper now as a result of she wrote the ebook with me, the ebook on negotiating actual property. And in our enterprise, she does a number of the negotiation. She is going to by no means present up at a vendor’s home or assembly a purchaser with out espresso, with out donuts, with out bagels, simply principally one thing to construct that relationship, construct that rapport, and open up the strains of communication.
And it is perhaps a half hour, an hour, three hours earlier than it goes from sitting down and having a cup of espresso to really speaking in regards to the negotiation. As a result of once more, it’s all about constructing a relationship in order that by the point you do begin speaking about cash, the opposite aspect’s like, I like this individual. I belief this individual. I’m okay doing this cope with this individual. I’m okay with this individual getting a half million {dollars} for his or her property, or them giving me a half million {dollars} for my property as a result of I like them. And so once more, constructing rapport data is the second piece that I talked about. And knowledge is essential as a result of in the case of actual property, too many individuals suppose that everyone needs the identical factor. And that is a part of the rationale why most actual property negotiations fail. If I make a proposal on 100 properties tomorrow, it’s seemingly that 95% of them aren’t going to go anyplace.
And the rationale for that’s as a result of either side seemingly have the identical targets, and that purpose is cash. If Ashley, I’m negotiating a cope with you and all you care about is getting essentially the most cash, and as a purchaser all I care about is getting the very best deal and paying the least sum of money, we’re by no means going to come back to an settlement. There’s no approach you can obtain essentially the most cash and I pays the least cash on the similar time. And so the best way these negotiations work, the profitable ones, is we determine what’s it moreover cash that the opposite individual needs. And there’s not all the time that the opposite aspect needs one thing apart from cash. As an investor, a number of occasions it truly is simply in regards to the cash, however in lots of circumstances, we will discover one thing apart from cash that motivates the opposite aspect. And if we will discover that factor fairly often, we will get a greater deal as a result of the opposite aspect’s keen to surrender cash to get that factor that they really need or that they actually need.

Tony:
Jerry, what a refreshing tackle negotiation as a result of I believe for lots of people once they hear negotiation, they do suppose sort of old skool gross sales techniques, excessive stress conditions, however the best way that you just’re taking a J the place it’s a deal with, Hey, what are your motivations? What are you attempting to get out of this and the way can we strategy this? So it’s a win for each of us. I believe it’s such a refreshing take and it takes away a few of that stress that rookies would possibly really feel when they consider negotiating.

J:
Yeah, I believe one among my favourite tales about negotiate, most likely again in 2010 or 2011, my spouse and I, one Sunday morning, we get a name from our closing legal professional who stated, my spouse and I have been strolling round our neighborhood and so they’re doing this property sale. Apparently a lady died in the home and so they’re promoting a bunch of stuff, and I don’t know in the event that they’re seeking to promote the home or not, however simply wished to let you understand that there’s a home in our neighborhood that they’re doing an property sale and I don’t know what’s occurring. And so my spouse and I have been like, nicely, we have been mates with our legal professional and we stated, we haven’t seen you guys shortly. We’re going to come back up and say hello, however we’re additionally going to make use of it, a chance to cease by the home and see what we will find out about it.
So we get to the home, my spouse finds the girl that’s working the property sale. It seems it was the daughter of the girl that handed away who owned the home. And my spouse is speaking to her and principally stated, Hey, are you seeking to promote this home After some time? She stated, are you planning to promote the home? And the girl was like, possibly in some unspecified time in the future, however I’m not prepared to consider that but. And my spouse’s like, no downside. Simply let you understand we’re buyers. Should you’re ever all in favour of promoting or I’m an agent, I’m a dealer. Should you simply need data or if there’s something I may also help you with simply sincerely attempting to be good, simply let me know. And the one was like, thanks. I actually admire that. They exchanged data. A pair months later, I believe my spouse dropped a card in her mailbox, didn’t hear something in return, we added her to our Christmas card checklist. It was about 18 months later that apparently my spouse simply despatched her a Christmas card, and it was someplace across the two yr anniversary that the girl’s mom had died. And my spouse was similar to, I hope you’re doing okay at this difficult time.
Simply merry Christmas and simply left it. At that time, we had resigned ourselves. This lady’s not going to promote the home. We weren’t seeking to purchase the home at this level, my spouse had simply made a good friend and was being good. And a pair weeks later, the telephone rings and it’s the girl. And he or she’s like, it’s been two years since my mother died. You’re actually the one one which reached out and even talked about it to me and requested how I used to be doing, and I don’t even know you. And I simply thought it was the sweetest factor, and it made me understand that it’s most likely time for me to promote this home. Are you continue to all in favour of shopping for it? And we ended up shopping for that home, and my spouse and that lady ended up being mates for a very long time, but it surely actually was, we have been not within the mindset of this can be a negotiation that we’re attempting to get an excellent deal on this home was at this level, we have now a relationship with this individual. We’re sustaining that relationship. And simply naturally out of that relationship got here this chance. And so what we discovered is the very best alternatives that we’ve gotten over time have simply come from these relationships the place there was no expectation that we have been attempting to purchase one thing or promote one thing.

Tony:
What an unimaginable story, Jay. And I believe it simply goes to indicate that while you put the connection over the income, good issues are likely to occur. So I like listening to that story. So we’re going to take a fast quick break right here, and after we get again, we’re going to ask Jay what he’s doing in right this moment’s market to have a aggressive edge when negotiating offers. Now whereas we’re on the quick break, we wish you guys to move over to your BiggerPockets profile, go to your settings and activate notifications for the Rookie e-newsletter. Sure, that’s proper. We now have a weekly e-newsletter devoted to rookies to offer you extra data on investing in actual property. We’ll be proper again after this fast break. Alright guys, we’re again from our quick break with Jay Scott once more, the writer of the ebook on Negotiating Actual Property from BiggerPockets. You will discover his ebook at biggerpockets.com/bookstore. So Jay, what are a few of the issues that Ricky’s may do right this moment to essentially sharpen their negotiation abilities? We all know that after we’re underwriting properties, we will follow by simply analyzing a bunch of offers. What’s the equal to that in negotiating actual property? How are you going to follow to attempt to get higher?

J:
So primary, negotiate all the pieces. This was most likely the most important lesson I realized after I took that top value negotiating course that Microsoft paid for after I was working there. Our homework task, it was a multi-day class, and our homework task every single day was principally go cease someplace after the category and negotiate whether or not that’s McDonald’s, that’s Goal, someplace the place you by no means think about you can presumably negotiate one thing and go in and attempt to negotiate one thing. Like when you’ve by no means walked into McDonald’s and tried to barter down the worth of a Massive Mac, it actually forces you to get out of your consolation zone and also you will not be profitable. However what you understand is that no one’s going to take out a gun and shoot you only for suggesting that you just would possibly get a reduction on one thing and it makes you comfy with the thought of studying to ask.

Ashley:
I’m terrified already considering of that.

J:
Lemme inform you one thing, I’m nonetheless frightened of considering it, however I’ll do it now as a result of I’ve performed it earlier than and I’ve performed it sufficient occasions simply to follow and simply to indicate different those who it really works in the case of simply constructing that confidence that it takes to have the ability to ask for what you need. However most likely the most important lesson I’ve realized over time on this enterprise is that too usually we don’t get issues as a result of we simply are too scared to ask for them. And oftentimes persons are completely satisfied to say sure, and even when they’re not completely satisfied to say sure, oftentimes individuals will say sure simply out of obligation as a result of they owe you one thing or as a result of they’re too uncomfortable saying no. And I’m not saying we must always essentially make the most of individuals, however I’ve no downside asking someone one thing. And if they arrive again to me and so they say, Hey, yeah, I assume I’ll try this.
And I do know that they’re little uncomfortable, however they’re doing it simply because I requested, nice. If I hadn’t have requested, they wouldn’t have performed it. And so the very first thing that I might say to all people is don’t be afraid to ask. I do know individuals that can go and take a look at 100 homes and make affords on 5 of them as a result of the opposite 95, they really feel like I’d have to supply so low that I’m not going to insult them. Properly go insult them. What’s the worst that may occur? Go provide 25% of the checklist value on this home. The worst that’s going to occur is that they’re going to say no. And lemme inform you one thing. You do {that a} hundred or 200 or 500 occasions, it solely takes one individual to come back again and say, nicely, possibly we will make this work and it’ll make all these occasions they stated no price it since you’ll make sufficient cash on that one deal. So the most important piece of recommendation I’ve to all people is get used to asking, get used to throwing it on the market as a result of the worst someone can say is not any. And extra usually than you anticipate, they’re going to say sure or they’re going to open up a negotiation.

Ashley:
And there’s additionally going to be that one individual completely satisfied that you just threw in that low ball provide. I’ve a property now that’s been sitting for 2 months. It’s had a ton of showings, however zero affords. Actually. If somebody supplied me a low value, I might promote it. It’s been a vacant property, we by no means did something with it and go forward and make a proposal. I’ll most likely say sure and I will likely be completely satisfied about it regardless that it’s approach lower than what it’s listed at.

J:
Yeah, Ashley, you and I have been speaking about this earlier than the present began, a narrative that I’ve informed earlier than. I inform it within the ebook, and I believe it’s a extremely essential story of a home that we have been and the girl that we went to speak to and he or she wished to promote the home, we made a proposal, it was a low provide and he or she didn’t need to take it. And we requested if anyone else had supplied on the home and he or she was like, yeah, we’ve had lots of people take a look at it, lots of people make affords. And we’re like, nicely, has anyone supplied near what you need? Yeah, a pair individuals have supplied near what we wish. And we began digging in like, nicely, if persons are providing the sum of money you need, why haven’t you agreed to promote it to them?
And after actually digging in and asking open-ended questions and attempting to get to the basis of what was occurring, what we realized was this lady had lived on this home for about 70 years. She was born in the home, she grew up in the home, her children grew up in the home, her grandkids grew up in the home, and he or she was lastly, after some 70 years of dwelling on this home prepared to maneuver. She didn’t know methods to transfer. She didn’t know the method of getting her stuff from the place it was in that home to the place she wished to maneuver, which was in together with her children in one other state. And as soon as we realized that, we realized this has nothing to do with the cash. She’s completely satisfied to promote this home to us for nicely beneath what she’s asking if we will clear up her actual downside, which is her concern of attempting to determine methods to transfer.
And on the finish of the day, what we informed her was, look, we’ll handle this for you. We’ll rent a good firm. We’ll allow you to decide the corporate to rent. We can have them come. They’ll pack up your stuff. They’ll put it in a truck, they’ll drive the truck to your child’s home, they’ll unload it on the opposite aspect. You don’t have anything that you just’ll must do. And after we stated that her response was, oh, nicely yeah, let’s do that, as a result of we had solved her actual downside. Her actual downside wasn’t that we weren’t providing sufficient cash. Her actual downside was she was scared to undergo this technique of transferring. And so as soon as we obtained to the idea of what the issue was, we knew we may clear up that downside. And that’s how actual property negotiations or any negotiations are profitable, you determine what downside the opposite aspect has apart from cash and also you clear up that downside. And if you are able to do that, you possibly can usually get the factor you need for much less cash than you in any other case may.

Tony:
Jay, I believe the most important problem or false impression that Ricky’s have is that they don’t perceive the facility of looking for a no in negotiations. They’re so afraid of listening to the phrase know that they shut themselves off to alternatives. And I used to be actually simply speaking with some rookie buyers, I believe it was earlier this week, however they arrive to me, they stated, Tony, we’ve been searching for offers. We will’t discover any good offers, and right here’s a property that we’d like, however they’re simply asking an excessive amount of. I stated, nicely simply provide no matter quantity makes essentially the most sense for you. Who cares what they’re asking for? Simply provide it your quantity. The itemizing value was half one million bucks. They supplied at $400,000. The sellers countered, I believe at 4 70. The patrons recounted, I believe at like 4 20, the vendor recounted 4 35 and now they’re beneath contracted 4 35. The one approach that they get there’s if they’ve the braveness to submit a proposal that’s so low that the vendor goes to reject it within the first place. However so many individuals have been afraid of that first. No, they by no means get there.

J:
And the loopy factor is that patrons most likely sitting there considering, wow, I ought to have began at three 50 and I most likely may have gotten it for 400 regardless that. And in order that’s a part of the difficulty that a number of us have is not only that we’re scared to barter, however after we do negotiate, we’re afraid of insulting the opposite aspect. I usually get requested the query, if I’m going to make a proposal on a property, the place do I begin? How do I decide that first quantity? And my reply is, you need to decide the quantity that’s as little as potential that gained’t have the opposite aspect stroll away. If someone’s promoting one thing for $500,000, and I believe if I provide them $300,000, they’re going to stroll away. But when I provide them $301,000, they’re going to be insulted, however they’re going to begin to negotiate, then $301,000 is my beginning place. I need that quantity the place I don’t care in the event that they’re insulted so long as they don’t stroll away. And it may be troublesome to seek out that quantity. However let me offer you a secret. That is how you discover what that quantity usually is. You determine how a lot they owe on their mortgage,
You determine that quantity that when you pay them this quantity, they gained’t have to come back to the closing desk with any cash out of pocket. Usually, that’s the lowest level the place you’ll most likely nonetheless insult them, however they’re not going to stroll away since you haven’t requested them to really put up any further cash to promote this property. And so one of many issues that we do after we’re seeking to purchase a property is we do as a lot analysis as we presumably can to attempt to determine how a lot they owe on the property. And a number of occasions that simply includes going and searching in public data saying they obtained a property 4 years in the past at 7% rate of interest at this amortization. And you then stick that in a calculator and also you say, okay, right this moment they most likely owe 8,000 lower than that. That’s my beginning quantity. And also you’d be shocked the variety of sellers that we make a proposal to, and so they’re like, wow, that’s principally precisely what I owe on the property. And I’m similar to, oh, wow, that’s superb. However that’s usually that lowest quantity you can begin with the place they is perhaps insulted, however they’re not going to stroll away. And that’s the quantity that I need

Ashley:
With that discovering the mortgage quantity or estimating it, there’s sources too, like prop stream.com is one the place they’ll really estimate it for you primarily based on once they obtained their mortgage, what number of years it’s been, what their month-to-month fee is just too. So you should use completely different web sites like that to assist together with the county data.

J:
And you’ll simply ask the vendor. I imply, it’s not unreasonable to say, Hey, appears such as you’ve been on this home for 15 years and the way a lot they purchased it for, as a result of you possibly can most likely look on Zillow or in public data to see what they purchased it for, and also you simply say, have you ever refinanced all of it within the final 15 years? If they are saying no, nicely, they most likely purchased it for 80% of, or they obtained a mortgage for 80% of no matter they purchased it for. And you’ll determine what the rate of interest was 15 years in the past and you’ll ballpark it your self. You’ll be able to usually get fairly shut. However yeah, there are many instruments on the market that can aid you with that as nicely. However

Tony:
Yeah, I believe the essential factor of what you’ve stated right here, which I don’t need to get misplaced in our rookies, is that being curious as you’re going by way of the negotiation part might be one of the essential issues you can deal with. Much more so than like, Hey, what’s the one method to actually persuade somebody? It’s similar to when you can ask questions and take heed to responses and ask extra open and knit questions and get deeper into their motivations, that’s how you actually construct a few of that connection and that rapport and provides your self a chance to barter in the appropriate approach.

J:
There’s an individual in the actual property world, his title is Pete Fordo, and a number of youthful of us or newer of us within the enterprise most likely have by no means heard of him, however for anyone that’s been round for some time, he was, let’s see, what’s the very best analogy? He was the Grant Cardone or the Brandon Turner of the Seventies actual property. Everyone knew who he was. He was the individual all people listened to and all people would go to his seminars and watch him converse. And he’s nonetheless round, doesn’t dwell too removed from me, however he was sort of just like the king of inventive deal making for the final 30, 40, 50 years. And he has a saying when he walks right into a home, he’ll go searching, get a giant smile on his face and say, why would you be promoting a property as good as this? Principally sending the message to the opposite aspect that that is nice.
That is superior. Why would anyone need to be eliminating this? You’re now opening the door to the opposite aspect, principally telling you their life story, however in a approach that you just didn’t insult them saying, oh yeah, okay, nice. Why are you promoting? No person needs to listen to, why are you promoting, however why are you promoting a ravishing home like this? Oh, nicely, thanks for saying that. Let me inform you what’s occurring. And so lots of people use that as a joke now once they see Pete, why would you promote a ravishing home like this? However the actuality is, you probably have no higher opening line, it’s a incredible one.

Tony:
Now Jay, we’ve obtained to take our final app break right here and Ricky’s, earlier than we do, we need to just remember to guys have the chance to get the very best low cost on BP Con 2025 tickets in Las Vegas. Look, even Jay’s negotiating techniques gained’t get you something cheaper than what the costs are at proper now. So head over to get biggerpockets.com/convention to safe your tickets to come back study with like-minded buyers, and we’ll be proper again after this. All proper guys, welcome again. We’re right here with Jay. So Jay, one factor that I need to simply drill down on actually shortly in sort of a tactical sense for the rookies, how precisely can I discover the motivations of the vendor? I do know we talked about curiosity. I do know we talked about sort of peeling again these layers, however possibly what particular questions can I ask to raised perceive what’s really driving this individual to promote their dwelling?

Ashley:
And Jay too, when you may sort of contact on when you’re not even in touch with the vendor, when you’re utilizing an agent, what are a few of the methods to sort of determine this out too by way of someone else?

J:
So let me begin with the primary query as a result of the second, Ashley’s query’s a bit of bit more durable, however let me begin, Tony along with your query. Should you’re speaking on to the vendor, and after you have that rapport, and also you’re not going to insult them with this query, my favourite query is actually saying, what do you propose to do with the cash that you just’re going to get out of your sale? Which is a a lot completely different query than the place are you transferring or what’s your subsequent home going to be? Since you’re going to get a number of completely different solutions that you just won’t anticipate. It is perhaps, nicely, my daughter’s getting married subsequent month, and I don’t know if you understand something about weddings, however they’re fairly costly now. Okay, they’re planning to make use of that cash for a marriage. Or possibly they’re utilizing that cash to place their youngster by way of faculty, or possibly they are saying, haven’t fairly figured it out.
We’re going to lease for just a few months, and so most likely simply going to throw it in a financial savings account for just a few months till we determine the place we need to transfer. Properly, all of a sudden now you understand that they don’t have anything higher to do with that cash, and possibly you’ve now opened up the door to a vendor financing provide. Oh, nice, you’re going to throw that right into a financial savings account making 1%. What if I may aid you make seven or 8% on that cash? Would that be one thing that’s engaging to you? And in the event that they go, oh, wow, I could make seven or 8% on my cash. Yeah, let’s discuss it. And now you’ve probably opened up the chance for a vendor financing deal. So yeah, so asking the query, what do you propose to do with the cash is a good way to determine what their motivation is as a result of that’s principally going to inform you precisely what they want the cash for.

Ashley:
Jay, while you ask that, how many individuals have stated to you, that’s none of your corporation?

J:
I’ve had just a few. I’m not going to lie. However that is the rationale why constructing that relationship first is admittedly essential as a result of that query can come off lots in a different way when you’re speaking to someone that you just’re in an adversarial negotiation with and someone who you’ve despatched the message, I’m right here attempting that will help you. You’re attempting to promote your own home, I’m attempting to purchase your own home. Let’s determine methods to make this work as a result of I do know you don’t need to be right here any longer than it’s important to, and I actually would love to purchase this home. So I imply, what do you propose to make use of the cash for when if we will get this deal performed? That didn’t sound as unhealthy as, okay, guidelines, what are you planning to make use of the cash for an, you stated

Ashley:
It’s solely been just a few that you just’re not offending nearly all of individuals while you’re

J:
Precisely. And most people which have principally refused to reply that query, they haven’t been impolite about it as a result of the best way I ask it isn’t in a approach that’s accusatory or being impolite within the first place. Once more, it’s a part of that complete dialogue, Hey, I do know you need to promote. I’d actually love to purchase. Are you able to give me an concept of what do you propose to do with the cash? And actually if it comes off that approach, it doesn’t sound unhealthy and it’s not going to set off a unfavorable response.

Ashley:
So now what’s the very best strategy in case you are utilizing an actual property agent or going by way of someone else, and even worse, you’ve got two brokers. You’re telling your agent, they’re telling the opposite agent and the agent, and also you’re principally paying phone by way of this complete course of. What’s sort of the very best technique there?

J:
And that may be actually, actually troublesome. It’s really one of many the reason why I all the time suggest that when you’re going to do that enterprise full-time over an extended time period, take into account getting your actual property license or having a partner get an actual property license or having a companion get an actual property license as a result of it actually does offer you much more management. Everyone thinks that getting an actual property license is nice since you make more cash. I don’t must pay the three% on the gross sales aspect, or I get 3% after I purchase. The fact is that my spouse is a dealer, I’m licensed, and we nonetheless pay someone to checklist our properties and we nonetheless pay someone to characterize us after we’re shopping for a property. We don’t care in regards to the 3% on the purchase aspect or the promote aspect, however the truth that we’re licensed implies that we will discuss to the opposite agent ourself, we will discuss to the inspector, we will discuss to the appraiser, we will discuss to the lender.
And there’s nothing unsuitable with that as a result of we’re licensed, we’re representing ourselves. Shopping for or promoting this property doesn’t imply we essentially can discuss to the vendor if they’ve an agent. And I do know individuals disagree right here. I’ve no concern with going to the vendor’s agent and saying, Hey, do you thoughts if I’ve a telephone name along with your vendor or on the opposite aspect? Do you thoughts if I’ve a telephone name along with your purchaser? A variety of occasions they’re going to say, no, I’m not comfy with that. Generally they’ll say, nicely, let me ask my vendor or my purchaser. Generally they’ll say, I’m okay with that so long as I’m there. And it’s important to be a bit of bit extra cautious with what that dialog entails. Once more, you don’t need it to sound such as you’re negotiating instantly, but when they are saying sure in any capability, it offers you the chance to ask these questions.
Even when they are saying no, nothing unsuitable with saying to the agent, Hey, are you able to give me an concept of why they’re promoting now? Looks like a bizarre time to be promoting on this market, and we’re simply curious what their motivation is. A superb agent’s going to say, I’m not going to ask and I don’t care. However loads of brokers on the market will likely be like, I’ll ask. I’ll let you understand what they are saying. So once more, can’t harm to ask. The opposite factor is I’ve seen lots of people who will write letters to the vendor or to the customer, and most of these occasions, these letters undergo. Now in a sizzling market, all people’s writing letters, Hey, my household would like to dwell in your own home. We’ve obtained three children. One goes to this college, one performs the piano, please decide us. Okay? I imply, when you’re doing a kind of issues, you’re most likely not going to get picked.
However I imply, there are alternatives so that you can principally ship a letter saying, Hey, let me inform you a bit of bit extra about what we’re going to do along with your property. Let me inform you a bit of bit about how we may also help you. If there’s some explicit downside that you just’re seeking to clear up and cash’s not going to resolve it, come again and let’s discuss it. Once more, it’s opening up the strains of communications. And a number of occasions you are able to do that even with one other agent obtainable by simply saying, Hey, are you able to go this letter on to your vendor, to your purchaser? And a number of occasions they are going to.

Ashley:
I really had someone write me a card asking to purchase a duplex, and on the time, I had owned it in my private title, and it was proper sort of when the rookie podcast began and the individual stated, we love the podcast. So are you interested by promoting your duplex? And it was an image of him and his girlfriend and their canine, and I ended up assembly them a number of years later at a BiggerPockets convention. Nevertheless it was a memorable second that if I have been to promote, I might keep in mind them. Out of the texts I get, the chilly calls I get from factor was that non-public contact.

J:
Should you obtained two equal affords and one among them was for a half, a % much less, a thousand {dollars} much less, $2,000 much less, however someone despatched a be aware like that, you’d most likely take their provide regardless that they have been much less. So one thing like that may actually make a distinction. And that goes again to what I used to be saying originally, it’s constructing rapport, it’s constructing belief, it’s constructing a relationship. It’s making you are feeling like we’re not simply two adversaries in a negotiation. We’re two individuals which can be attempting to assist one another clear up our issues.

Ashley:
So Jake, sort of a follow-up query right here so far as that being one among your methods, a private contact, what are some issues that you’re doing to have a aggressive edge going into the 2025 market?

J:
Yeah, it’s a troublesome, powerful query. Sadly, today, a number of it’s a numbers sport as a result of there are such a lot of individuals on the market which can be competing for a similar properties, however that is the place you’ve got the chance to face out. I do know individuals which have been very profitable with door knocking as a result of once more, they’re going to be lots of people who when you present up at their door and someone’s randomly knocking on their door, they’re not going to be completely satisfied. They’ll name the police, they’ll stroll out with a gun. However there are different people who find themselves similar to they’re starred for consideration. They love the concept someone’s knocking on their door, they’ve someone to speak to, and that’s a private contact that you just’re not going to get from sending a letter or making a chilly name or placing up a bandit signal.
And I do know lots of people which can be very profitable with door knocking as a result of when you discover the appropriate individual, an older one that’s lonely, who’s simply searching for someone to speak to, it’s possible you’ll discover that needle on a haystack and have a bonus over different individuals. The opposite factor is admittedly simply constructing long-term relationships. So too many people, after we take into consideration a negotiation, we take into consideration a one-time factor. We predict, okay, how do I get this home with out eager about the truth that even when I can’t purchase your own home right this moment, even when there’s no approach this transaction’s going to work out, there’s nonetheless a ton of worth in us persevering with to construct this relationship. Tony, if I am going and also you’re promoting a home and I say, Hey, I’ll offer you 300,000 on your $400,000 home, and also you’re like, yeah, no matter. I’m certain I can discover someone to offer me greater than 400,000.
Thanks anyway. If I stroll away and I say, no downside, I perceive I’m an investor. I understand that you just don’t must promote to an investor. I figured I’d give it a shot, however do me a favor when you meet anyone or you probably have any mates that need to promote a distressed property that they actually would profit by having an investor, let ’em know that I’m right here as a result of I’m all the time completely satisfied to speak to ’em. And so now in your thoughts, I’ve now seated, Hey, if I ever talked to anyone that’s searching for an investor, this Jay man appeared very nice. He low-balled me, however on the finish of the day, he was trustworthy. He stated, Hey, it’s not going to work out. After which he left his card. It’s possible you’ll refer me when you try this. I’ll not hear from you Tony subsequent yr or the yr after, however who is aware of, 5 years from now, it’s possible you’ll discover someone that I’m the proper match for. And if I left that relationship on an excellent be aware, if I left the door open to working collectively in some capability sooner or later, you try this sufficient occasions and there’s going to be sufficient open doorways that persons are going to be strolling by way of ’em on a regular basis.

Tony:
Jay, this anecdote you shared sort of makes me consider one other query since you stated like, Hey, you supplied your quantity. They stated no. You sort of shake your fingers and stroll away. I assume, when do you that it’s time to really finish a negotiation? Is there a marker or a degree the place you’re like, Hey, this isn’t going anyplace. How have you learnt when to maintain pushing versus pulling again?

J:
And a number of occasions it’s apparent. Once more, when you can’t decide a motivating issue apart from cash and the bottom value that they’re going to throw out there’s greater than you possibly can pay, there’s no cause to proceed. If Tony, you principally say to me, I don’t must promote this home. I simply see a chance to promote as a result of it’s an amazing market. I really feel like I can get greater than what it’s realistically price, and all I care about is making essentially the most cash, and I consider you, I consider there’s no different motivating elements for you. At that time, I’m going to say, okay, what’s the bottom you’ll promote it to me for? And if that quantity is just too excessive, we’re not going to come back to an settlement as a result of all we each care about is cash. And after we each need the identical factor, there’s not a number of wiggle, wiggle room.
However once more, if you will discover one other motivating issue, if you will discover one thing else that they care about. So possibly it’s, Hey, I’d actually like to promote my home right this moment, and I is perhaps keen to promote it for a bit of bit much less, but when I promote you my home for lower than 400,000, I’m not going to have the ability to discover one other place to dwell as a result of each different home I need to purchase goes to price me 400,000. Okay, nice. Promote it to me for 3 50 and I’ll allow you to dwell right here free for the subsequent yr. That offers you a yr to seek out one other place. Perhaps costs will drop, however you now have your $350,000 you can go begin doing what you need, and also you don’t have to fret about the place to dwell for the subsequent yr. You don’t have to fret about transferring.
You don’t have to fret about taking your children and placing ’em in a distinct college. You’d be shocked how usually the I’ll purchase your own home for lower than you need to promote it for, however I’m going to allow you to dwell there without spending a dime for some time period works. And it might in the end lead to on the finish of that time period you say you don’t need to transfer, nice. I would like a renter for this property. Anyway, let’s discuss you renting again the property that you just’ve been in for the final 10 years, and also you don’t have to depart in any respect. So there are alternatives to get inventive, however once more, it’s principally going to work when the difficulty is not only cash.

Ashley:
Properly, Jay, thanks a lot for becoming a member of us right this moment to have the ability to give everybody this superb information to negotiating actual property. Are you able to let everybody know the place they will attain out to you and discover out extra details about you?

J:
Yeah, completely. Should you go to j scott.com, the letter J-S-C-O-T t.com, that’ll hyperlink you out to my e-mail tackle and all the pieces else I’ve occurring and would love to listen to from you.

Ashley:
Jay additionally wrote the ebook co-authored along with his spouse Carol, the ebook on negotiating actual property that you will discover within the BiggerPockets Bookstore. And in addition if you wish to study extra about negotiation techniques, we’re going to have our keynote speaker for BiggerPockets Convention this yr will likely be Chris Foss, writer of By no means Cut up The Distinction. So head on over to biggerpockets.com/convention, and you may as well discover Jay on the Drunk realestate Podcast too, one among my favourite podcasts to take heed to. So when you’re all in favour of studying extra about economics, market updates and actual property investing, be sure that to take a look at his podcast. I’m Ashley. And he’s Tony. And this has been an episode of Actual Property Rookie.