As any seasoned investor can tell you, the most difficult part of investing can be the part where you convince a seller to think creatively. Most sellers start out with a simple premise in mind - sell the property in the traditional manner. To make matters worse, most Realtors do not provide sellers with any other option, primarily because the traditional method is the one they, themselves, are most familiar with. So, it becomes your job to sell creativity.
Begin by making sure your offers include the RIGHT TO BE PRESENT clause, to insure that you can be there to talk with the seller. The next step is to be gentle, and subtle. I start out not by presenting creativity, but by presenting my desire to give the greatest benefit to the seller. I let him know that, as an investor, I have a need to make sure the seller's needs are satisfied because if I do anything less, word will get around and I won't be an investor for long. (This is true, so take it to heart!)
I go on to explain to the seller that the best way for me to make sure the he wins is for me to know what his actual needs are. I try to make him understand that, while most sellers believe they know what they need, many are not aware of the benefits and/or consequences that can come about when selling a home. Then, I will give him an example (usually one that is based on the type of creativity I am interested in using for that property).
Here is an example: Let's say your seller is a retired "empty-nester", and he just wants to sell the big family home that no longer has any mortgage on it (you discover these things by getting the seller talking, even before you bring up the subject of creativity). You have decided that you would like to use a Contract for Deed. You might then tell the seller that, depending on his tax situation and any exclusions he might be entitled to, getting a large lump sum at closing could incur a terrible tax situation in which he could lose a lot of the proceeds. In such cases, it might be better to take payments for a period of time, reducing the tax liability and spreading it out over a period of time.
In yet another case, the seller might be planning to invest some of his proceeds into CD's, to supplement his Social (in)Security benefits. You point out that by taking payments for a period of time, he supplements his income and he does not have to wait for CD's to mature in order to collect- his payments come in monthly, automatically. You also explain the the interest earned on a mortgage to you would exceed the interest paid on CD's.
If you plan to offer an "sweat" option, you would describe how the option can provide certain benefits that some sellers need. For example, if you are planning to double escrow the property before the option expires, you could point out that the property never comes off the market, even if your option is exclusive. Point out that you will be fixing up the place (if it is vacant) in order to create a profit for your efforts. Hence, if you fail to exercise the option, the seller ends up with a more valuable property to sell. Or, you can point out that with all the money and work you are investing, you certainly are not about to walk away from it - that you will, indeed, come to closing.
In short, if you explain to the seller that the more you know about his actual needs and situation, the more you can benefit him with an offer designed to suit his specific needs then you have just succeeded in getting him to accept the benefits of creative thinking, and you may have well earned his trust. And that, my friend, is the biggest hurdle.
The secret lies in three things:
1) You must gain the seller's trust, by letting him know that meeting his best interests is in your best interests. By acting friendly and professional at all times, you further ggain his trust.. Let him talk while you listen. Let him know by your questions that you truly care about him and his future.
2) Know the benefits of the creative techniques, and know which of those will benefit your seller, and show him how they will benefit him.
3) Know what the seller REALLY needs and wants, not just what he says, or thinks, he needs and wants.
This last point is important, and not as simple as it might first appear. You need to learn how to listen to what the seller means when he is telling you what he wants. This is extremely important for success. For example, the seller might tell you he plans on investing some of the proceeds into CD's. Sounds simple enough. But that is not what he is really saying. He is actually saying that he wants to supplement his income, or he wants to make money with his cash. Your job, then, is to show him that he can earn more cash from holding a second mortgage than by investing in CD's. If he is retired, he wants to supplement his income. So, you would show him that, while a CD can only be collected on every 6 months to a year, a second mortgage pays regularly, every month. And while a CD only earns 1-3% interest,a second mortgage can earn 6-7% interest. And if safety is the issue, point out that the second mortgage is backed by real estate.
The point is, you need to ask questions, and listen intently. And don't just listen to what he is saying - listen to what he is meaning.Then your job of getting what you want becomes much easier, because you can then show him how to get what he wants in a way that benefits you, resulting in a sale.
As a final point, be sure you play up what you stand to lose if you fail to close. For example, if you are using the "special" option detailed in "The Simple Man's Guide to Real Estate", you might point out that if you fail to exercise the option you stand to lose:
- the cash you put into repairs
- the work you put into those repairs
- the equity you would create from your investment
If you plan to put $2000 into materials, and many hours of work, and you expect to create an equity profit for yourself, point that out to the seller. Show him that, as an investor, you will do whatever it takes to protect your profits, which is the best assurance a seller can have that you will, indeed, close. Make sure he understands exactly how much you stand to lose - and what he stands to gain - if you do not close.
Practice - I stand out on my porch in the evening, cup of coffee in hand, and I imagine I am talking with a seller. I try to imagine any objection he may come up with, and try to find a way to turn it around. I seek out benefits to the seller, and practice describing them in simple terms. Then, when I face a seller who makes any of those objections, I can come back with an immediate reply that shows even greater benefit to the seller. In this way, he will soon feel he is dealing not only with a pro, but with someone who has given serious thought to filling the needs of the seller.
Infomercial Gurus like Than Merrill, Carlton Sheets or Dave Lindahl will not teach you these important factors for successful investing. But they are an integral part of "The Simple Man's Guide to Real Estate".
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