Michael Mergell, Managing Broker RE/MAX Ability Plus (317) 645-8717
I guess I will start a little line about negotiating your deals. I know a lot of people out there are starting out and there are some things that you should know and learn.
First is empathy, and rapport. These are essential to establishing the reason that someone will buy from you. No matter what you offer, or even if two people offer the same amount the seller is going to sell to the buyer they have a level of rapport with. The person they "like" will win every time.
So let's talk about rapport. In a drawn out way let me give you a story on rapport. When I was a restaurant manager, I had a waiter that consistently sold more than everyone else working, every night. He was a big guy and used to play college football, so I naturally thought he scared them to death until they bought whatever he told them to. He never seemed to get in the weeds like everyone else in the store and could handle as many table as I dared to give him. One night I had a conversation with him about this, and he allowed me to follow him all night and explained a few things. First he said that the key was to identify with them, next was to put yourself on their level, and never stand over them looking down. After that he said you must lead them to what you want for them. Now let's apply that to houses.
The rapport starts with the phone call, when you receive it you must start building this rapport. You must identify with them by sharing something that is similar to what they are going through. Don't rush them off the phone take your time. Usually, when people call us (investors) they are in trouble, so in a lot of situations part of your job is to listen. They just want to vent some of it to someone that will not judge and we are perfect, they probably will not ever see us again. Ask open ended questions like "tell me about your house" and "it sounds nice why would you want to sell it". This is to get them talking about their situation so that you can establish the level of motivation, and connect on a emotional side as well. Once you get that rapport built, the next thing to do is set the appointment to go out and look. It is important to note here that if it is in the area that you like to buy in, I did not say "how much equity do you have". Doesn't matter, if they are motivated enough they will make it happen and so will you, but beyond that you have to realize that this is part of the reputation that you are building.
So let's go there now; most investors get a call screen because of equity, and then determine that they cannot make a deal and don't call back or follow up with the potential client. If they do go out, even on a call that has some equity, they have their numbers down and usually within the first 30 seconds with the seller they are trying to make a low ball offer. Then afterward, everyone wonders why didn't they get the house, and why do people think investors are bad. Go figure!
So for you as an investor, you should think enough of your marketing, and enough of your clients to go out and meet with them. There is no sense in doing heavy screening if it is in an area that you will buy in ( or you have a buyer that will buy in) just go and meet the seller. You go and meet them and pick up where you left off on the rapport building. Sit down and ask them about their house, and how they got in the situation they are in. How did they hear about you? Wow, I notice you are in to hunting, me to, what do you hunt? That type of thing. Establish a medium between you and the seller so that they understand you can identify with them. Also this is the part of the meeting where you plant seeds. Talk about the market and how hard it is to sell, or how much of a problem that buyers are having getting financing. Also you need to mention basic fees involved in selling a house such as sales commissions, closing costs, holding costs, insurance, and the fix up of the house. I usually let them give me some numbers here, like "how much you think that roof will cost to replace". You know your numbers, so if theirs are higher use theirs.
Once this is established you can then go and check out the house. Take a notebook or clip board to write notes on. It is important to note here that it does not help or even do you any good to bash someone's house. You should not say "crap this room is ugly" or "wow your house is a piece of crap". In most cases this is where they have raised their kids, spent Christmas, thanksgiving, and other family times. It will not help you to bash that. In fact you may want to stress that you understand that specifically by saying something like "I understand that you have raised your family here, but please understand that for me as an investor I could never make an offer that would do justice to the memories you have made here". That being said you can also let them know that you have to make an offer that make business sense to you. These types of hints start to plant the seed about what you are going to offer. What is acceptable to do for conveying the stuff that you will work on is to make a "hmmmmm" noise, or just touch the spot without saying anything. Make a noticeable attempt to write down the defect. This puts a spot in their head regarding the defect, without you saying "damn lady you sleep here". Believe me they know what is wrong with their house, you do not have to tell them.
So once you have made your pass around the house and looked at everything it is time to prep them a little more. Let them know that you are going to work the numbers out and see what the offer will be, but want to cover a couple of things. Cover everything that you have done and talked about, mention everything before, and then go to the car to figure your numbers. This gives separation between you and the seller, long enough for you to think and work out your numbers, but also to allow them time to mull over the offer that you are about to make them. You can even get the in the "ballpark" before you go out to the car with something like "so let be clear here, we think this house will be worth xxx when it is fixed, and we got at least xxx in repairs, but I will figure those numbers out, so if I can be around xxxx are we going to be able to do business?" Then go figure out what exactly your offer will be, but take at least 8-10 minutes on it. When you go back in you can go through your blank contract to let them know about it. I like to be able to paraphrase it for them, and then when you are done you write the amount in the price line and push it in front of them and say "I can offer you xxxxx" and be quiet. Don't say a word until they do. The first one that talks looses.
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