Epic Real Estate Investing - 6 Indisputable Truths to Getting More of Your Low Ball Offers Accepted | Episode 137

Episode Date: December 22, 2014

A common challenge among new investors is the difficulty they face when trying to sell their wholesale properties.  More often than not, the reason for this is that the property is overpriced.  By learning how to negotiate discounted offers, you will have more success with less frustration in this business.   Matt wraps up the episode by describing exactly how he responds when a seller seems shocked or insulted by his lowball offer.  Enjoy! ------- The free course is new and improved!  To access to the two fastest and easiest strategies to a paycheck in real estate, go to FreeRealEstateInvestingCourse.com or text “FreeCourse” to 55678. What interests you most? E ducation P roperties I ncome C oaching Learn more about your ad choices. Visit megaphone.fm/adchoices

from Terrio Studios in Glendale, California. It's time for Epic Real Estate Investing with Matt Terrio. What's up? Hello, and welcome. Welcome to episode 137 of the Epic Real Estate Investing podcast, the place where I show people, everyday people, how to escape the rat race, that everyday rat race that affects all of us using real estate.

So today, let's discuss a fear that gets in the way of a lot of people and prevents them from actually getting out of the rat race. I believe this fear, it actually cripples investors, and a lot of them aren't really conscious of it, and they don't even know it's there. But before we get there, let's just back up a bit. You know, I've mentioned before that if you don't have a buyer's list, you can borrow mine until you do, okay?

Or you can just add my buyer's list to part of your exit strategy. It could be a potential, just another buyer on your buyer's list, provided that your deal fits the criteria that I have posted over at epic wholesalers.com. I mean, it's right there in plain view. I also mentioned the criteria in the video on the homepage, and then I mentioned it again in the training video on the inside, and I believe I mentioned it again in the email that you receive when you sign up as an epic wholesaler. And you know, it's amazing that how many property submissions we get to be distributed through our buyer's list to our buyer's list that completely ignore what's been shared there as far as the criteria goes. And then not only does it get ignored, the person gets, and this is multiple. I mean, this is a good percentage.

This is why I'm bringing it up because I think it's a good indication of what the mindset is out there of investors. And I think it's all just fear-based. But they proceed to get all upset that nobody on my buyer's list will buy their property. And then they're even more upset that I won't buy their property. And I've said this before on the show more than once that if you haven't sold your deal in 14 to 21 days, guess what? it ain't a deal. Nobody wants it. You know, if you follow the basic procedures of marketing a property

and you haven't sold it in 21 days, it ain't a deal. Plain and simple. The deal you have under contract, it just ain't a deal. And the reason it ain't a deal is because you probably, no, not probably. The reason it ain't a deal is you paid too much for it. That's what it comes down to. You paid too much for it. You ignored the criteria.

You ignored the demand of the market. you ignored the demand of your buyers list, and you just paid more than what someone else is willing to pay you for it while leaving you some profit left over. Okay, you can pay too much for it. And the reason most investors pay too much is because they either, they just didn't start low enough in their negotiating

and or were unable to justify a lower price while they were negotiating. And that's, I want to address that today. And the reason is because I hear this all the time that investors don't want to submit a low enough offer to where they actually would have a deal because they either think there's no chance the seller would accept it. Do you get that?

They don't submit the offer because they don't think the seller would accept it. But they never gave the seller the opportunity to accept it. They're almost negotiating for the seller inside of their own head. They're having this little negotiation going on buyer's seller in their head before

the actual seller, the real seller even gets to participate in that negotiation. Okay, so that's one. They think there's no chance the seller would accept it and or they're afraid, I hear this all the time, they're afraid of insulting the seller with a low ball offer. They're afraid they're going to hurt the seller's feelings.

So in exchange, they offer more than what they should be offering for, and it's their feelings that now get hurt. That's not a good trade, right? So today I want to discuss six indisputable truths that you need to know that will get more of your lowball offers accepted. Okay? And we're going to cover those in 30 seconds right after this. Attention, attention.

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Okay, so there you stand. There you are. It's the moment of truth. just you and the seller. And you've detected some motivation. They do need to sell. All you have to do is put your offer together and present it. And you know, you know you're probably going to have to get this property at half price

if you ever expect to wholesale it while leaving enough there for you to get a decent profit for yourself. And what I mean by that is with the basic formula, you take 70% a fair market value, then subtract the repairs and then subtract your profits and your offers. going to end up right there somewhere between 40 to 55% of fair market value. Just about every market it ends up right around there somewhere. So that's where you got to go. But when you look at that actual end up, or most people, when they look at that actual number, they're like, wow, this is really low. I don't know if they're even going to accept this. I don't want to insult them, they think, right? And so you see that number and you're hoping and praying that the seller will

take it because you know if they do, you know you've done it right and you'll have no problem wholesaling the property and you'll carve out a great profit for yourself. You'll have a great story to tell. You can go home and tell the wife and kids how you succeeded and you brought home a big paycheck today. But you still hesitate because you don't think the seller will take your offer. Or you think it will insult them. So you rationalize in your head that, okay, this 40, 55 percent, that's kind of, I might be overstepping my bounds, but, you know, if I got it at 60 percent or 70 percent off fair market value, that would still be a good deal. That would still be a good deal. discount, that would be good enough. So you go with that. But in reality, it's not a good discount. It's not

good enough because you're ignoring reality. Okay, so let's go through this. Here's what I mean. Whether you go into fix and flip the property or you're going to wholesale it to someone that will, the rehab process is going to take two to three months. Okay? And the rehab amount is going to probably, I don't know, take 10 to 20% in the rehab, depending on how big it is. So that's going to eat up 10 to 20% of the spread that you created. And so just right there with that alone, now you're sitting somewhere between 80% and 90% of fair market value. If you decided that I'm going to go in at 70% because that would be a good enough deal,

then you got to repair it. Now you've only got 80% and 90% left of fair market value. Then if you're going to go for full market value, I mean, you want to sell retail, you're likely going to have to have some realtor fees in there. You're going to have to have the realtor fee or the realtor to give you maximum exposure to get maximum value. So there's 6% for sure, right? And then you're going to have your closing cost.

There's another 2 to 3%. So now, right there with all that, you're almost at 100% of fair market value. Certainly somewhere between 90 and 95%, but the margin undoubtedly and inarguably is getting thin, isn't it? then most likely you're not even going to be able to sell it for full market value. You're going to have to discount it a little bit. That's just how the negotiation process works. So you probably have to drop it down three, four, five points off a fair market value. So now you are definitely at 100% of fair market value or even higher than fair market value.

And guess what? With all of those expenses factored in, everything taken into consideration. Not the two to three months it took to repair, the two to three months it took to repair, the two to three months took on the average days on market, you haven't even factored in your own profit yet. There's nothing left over. Not for you if you're going to flip and not for you as a wholesaler

or anything left for the flipper that you're going to wholesale the property too. That's why you're not selling your deals. So now you can see while you're unable to find a buyer for your 70% on the dollar deal. See, it looks like a good deal. 70% on the dollar. That's a discount.

Seems like a deal. But you know, the people you're selling to, there are no dummies most of the time. They're no dummies. They're running their numbers. And a 70% discount just ain't enough most of the time. So the answer is, you've got to buy lower. You've got to start your offers lower.

And you have to be unapologetic to the seller. You have to go in there with confidence and be able to support that low ball offer with cold, hard facts. No trickery, no fast talking. and no smoke and mirrors. Just use the facts, just like I shared with you. So here's how it should go, or more of how it should go. I mean, there are definitely more ways to skin this cat.

But here's one way, and it's enough, as long as you get the skin off the cat, right? Cool. So you've got this $100,000 house. We'll just start with it, make the numbers easy. You've got a $100,000 house, and you submit an offer to the seller for $50,000. You ran your calculation, and it came out to $50,000.

And the seller looks at you like, first of all, like you're crazy, and they're thinking, or they say, if I sell this house to you for $50,000, you're going to sell it for $100,000. You're going to make $50,000 on this house? No way. That's what the seller says. Something in that context, something to that spirit. And you'd say something like, Mr. Seller, I know it may appear that way.

But allow me to share the unpleasant facts of my business. In order for me to get full market value for your property, I'm going to be a lot. have to do some work on it. I'm going to have to rehab. I'm going to have to fix it up. We're going to have to fix some stuff over there in the kitchen. We're going to have to put paint the inside, the outside. We're going to put some new floors. We've got a thing in the roof and this thing in the electrical. I mean, we're looking at $10,000 to $15,000. As well, it's going to take me two to three months to complete that rehab. And then the average days on market right now in the area, right around two to three months. And then I'm going to end up selling the property, probably

somewhere between 94 and 97 percent of fair market value. So I'm not even really going to sell it at 100,000. And in order for me to have a shot at that, I'm going to need maximum exposure, of which translates to listing the property with the realtor and getting it up on the MLS. And then the average realtor commission that you probably already know is 6%. And then there's the closing cost that I'm going to have to pay another 1 to 2%, something like that. And so as you can see, I mean, there might be somewhere between $15,000 to $20,000 left over for me after it's all said and done. And it's going to take me on the short side, four months, on the long size six, seven months to actually collect that money. And by that time, I mean, you'll be settled in

at your next location, getting on with your life. You'll have forgot all about this, but I'll still be here with your house trying to pull all of this together. And there's still a chance that I might not sell it. So I'm not going to try to convince you that I don't do well for myself when everything goes right. I do. I earn a good living and I'm able to support my family. But it is a lot of work. it is a lot of time, and it comes with all of the risk, too. I mean, remember in 2007 when the market turned upside down overnight? Remember that? I mean, most people doing what I do for a living, they lost everything when that happens.

So there's always that risk on long-term projects like this. But, you know, this is still your house, and you could probably do everything that I just laid out that I'll have to do. So, I don't know, you tell me, can you afford to put your life on hold for four to six months and do all of this yourself? or would you just rather have me do it? See, something like that. And that's not scripted. That's just haven't said this a bunch of times, but that's the reality.

I'm very much in touch with the reality, and I want you to be in touch with the reality too, because now when you're in touch with that reality, you know how low you have to come in to make it all work for you. So it would sound something like that. Now, I understand why I'm sharing this with you. What I just shared with you is not a full-proof silver bowl.

bullet magic objection handling technique, not at all. It was just explaining the facts to the seller. I mean, you still need seller motivation in the mix to get deeply discounted properties like this. A speech like that is not going to work every time. But more importantly, I'm sharing this with you because

that's the reality of the whole thing. That's what you will have to take on, and that's why you need the discount that you're asking for. You know, and it's perfectly okay to explain to the seller why you need that discount. It's because the market says I need that discount.

That's the reality. It's not my opinion. This is what the market is saying. It's what the market is dictating. Those are the market conditions. And you should not be embarrassed or fearful of insulting the seller with your low ball offer. Because in reality, it's not a low ball offer once you do the math, is it? No, we just ran down the math.

That's not a low ball offer. That's six months of hard work and all the risk. And you've got to make 15, 20 grand. You deserve to make that 15 to 20 grand. You worked hard for it. You waited for it. And you took all the risk because you still might not get it. You know your reality.

You've got sweat, time, and risk involved. So don't be afraid to share the reality with the seller. You've got to bring them into reality. You've got to bring them out of la la land. You've got to know how to do that because you're going to frequently have to. So in a nutshell, it's just a math equation. It's always a math equation based off the market. conditions. I mean, there's no room for feelings here. There's no room for emotions here.

This is business. Do the math. Write it up and present it with confidence. And because you're now buying lower, your profits will increase accordingly. No doubt, right? But just as important is that you won't be banging your head against the wall, running around town and posting on Craigslist trying to sell your non-deals. Yeah, you're going to get less fewer offers except than when you go do that. But look at all the time and frustration and headache you saved yourself that you don't have that one property under contract that you can't sell.

What is that? That's time that you'll never get back. All right? So I'll be back to say goodbye in 30 seconds. Does your money work for you as hard as you do for it? If not, no worries. You do not have a money problem. You merely have an idea problem.

We're cash flow savvy.com. And we'd like to share a new idea with you around income real estate that can transform your financial future and accelerate its arrival. Go to cashflow savvy.com and download a free investors package. Cashflow savvy.com. You do not have a money problem. Merely an idea problem. Cashflow savvy.com.

More ideas, less worries. Cashflow savvy.com. Okay, that's it for today, and I'll see you this Thursday for another compelling episode of Third Degree Thursday. I'm Matt Tario, Living the Dream. You've been listening to Epic. Real Estate Investing, the world's foremost authority on separating the facts from the BS in real estate investing education. If you enjoyed this show, please take a minute to visit iTunes

and share your thoughts. Thanks for listening. We'll see you next time here at Epic Real Estate Investing with Matt Terrio. This podcast is a part of the C-Suite Radio Network. For more top business podcasts, visit c-sweetradio.com. Thank you.