The Science of Flipping - Episodes 190: How To Negotiate With A Seller When Uncertain On Value

Episode Date: March 12, 2021

Episodes 190: How To Negotiate With A Seller When Uncertain On Value

Like, you know why I sell so many freaking deals? It's because I'm so good with people. I'm so good with my buyers. Yeah, yeah. I shop for them, essentially. Like, yeah, I'm negotiating the deal, but then I go and say, hey, what do you want it for? Let me go try to get it for you at that number. So first of all, there's a lot to unpack because I could take this in a bunch of different

ways. So the actual underlying question is how do you renegotiate with the seller? Yeah, basically, fundamentally. Yeah. Okay. So what's your best practices in going about facilitating that conversation successfully? Okay. But I don't, let's, let's write down, we need to talk about your buyers and how to approach them on specific deals. Yeah. On the backend. And I think part of that is reflecting on one, really auditing the quality of buyer pool that i have in my buyers list and making sure this is a list of people worth sending deals to they're not a bunch of the more deals i send and the more radio signs i get i'm finding there's

just more and more on the fence newbies that are on this list and maybe aren't the type of buyers that you're you know when you send them an opportunity, they're genuinely going to entertain it. Right. Or, or you try, they're not just like, Oh, give me on your mailer. And then every time you send them something, they're like, Oh, I'm not ready right now. I'm not ready. Yeah. So let's talk about that in a second. But so one of the ways, the best way to kind of go back to a seller is first of all, you need to start by leaving it hanging when you contract the deal. Right. If you give over certainty, Oh, I got this. I'm going to close at this price. This is great done deal. And then you don't wholesale it. Then you're going to really be climbing uphill. So I'm always leaving the, Hey, um, my money guy approved it. Um, here's what ultimately happens. We have kind of a,

you know, cross-check verification all the way through the process. I have a money partner and I have a contractor partner. And while the contractor partner believes he's going to be able to get this done, he didn't have, you know, everything he needed to green light the construction bid here. So money guy's good. We're good here. But I'm going to need my team and several people probably to have to go through this and to figure out if we're on budget based around the budget I gave him and the budget that he confirmed without walking the property. Fair enough, Mr. Seller. Great. Great. Let's contract this, but just be aware. I still have to work with my contractor to make sure that we stay on budget.

Okay. So I leave that like cliffhanger because ultimately when you go back, you're going to have to blame the construction side. Yeah. Right. And so this works really well for everything except for like new homes. Like if you were going in and buying a 2014 home. Yeah. Really hard to get away with that one.

Right. Yeah. And so now I have this out every time. Now you have an out to back out of the deal. Hey, I couldn't, you know, based around, you know, everything I've seen and whatever, whatever we can't afford, but you also have an out to renegotiate and you say, Hey, Mr. Seller, um, man, my construction guy, regardless of whether he's seen it or not, just took on a property right down the road from you guys. And we went over budget big and it was a very similar home, blah, blah, blah, blah.

He is uncomfortable at this scope of work and it's out of budget. And now my money guy is basically saying, well, if we're out of budget, then we can't move forward. Can we sharpen our pencils here? Like I'm close, but we went so far out of budget. And now my money guy is basically saying, well, if we're out of budget, then we can't move forward. Can we sharpen our pencils here? Like I'm close, but we went so far out of budget that he just is not confident that we're going to hit the budget that I gave him. You know, I know we agreed at 200. Where can we be? I mean, is there any room at all? And that, by the way, Mr. Seller, it's okay if there's not. It was out of my control. Ultimately, I'm not the end-all be-all decision maker. It really comes down to my construction team and my money partner to have confidence to do it. They don't right now. So if this is not going to work for you, all good. We don't have to move forward. But if it can work for you, you know, where can we be? You know, and then I shut up right after I say that, but let me tell you the psychology of why I framed it this way. I don't want the pressure on them. So I'm playing indifferent. I call it a boomerang effect, right? Like, Hey, it's okay. If I, if we can't move forward, if you need that 200 and that's where you need to be, it's all good.

I'm not the right buyer for you. I couldn't get there. It's going to take a lot more work. So I'm super sorry. And kind of going negative. I'm so sorry. I'm the bad guy, me, me, me. Right. But also like, I'm just not the right buyer. Yeah. The psychology of you pushing them away. And I know you're married and all that, but the same thing when you're dating, like when you're indifferent with girls, they seem to want you. It's the same reason why like my wife jokes around all the time. She's like, Oh, now that you're married, you're going to get even more girls. Right. I'm like, why do you mean? Because girls love married guys, right? Like they're unattainable, they're safe, they're whatever. And then they don't want the single girl. So when the single girl can, can't have it, they want it. Same idea, right?

Like when you aren't the right buyer for their home, they homeowners almost get defensive. Like, what do you mean? My home is great. Yeah. You got to do a rehab, but like, why don't you want it? So they almost want to come at you more. Well, can you get to one 90? Can you get to one 95 and you, they'll start negotiating against themselves. So that's the psychology is playing on indifference and using a boomerang effect that which i just created as a name because the harder you throw a boomerang the faster it comes back right and so you better trademark that shit right now better dog i already have sales trainers like john and steve train and just people that are like

using the terms so yeah which is so i like i like that because um it doesn't you're not giving them an ultimatum you're not you're not saying like listen we can't make this deal so we don't want it anymore it's more you're more so saying like i'm going to give you you know we're good either way but if the decisions on you rather than us come to you say hey seller this deal's dead we can't deal. Right. We can't make it work or whatever. Yeah. I give them the, I give them the ball again. And by the way, by me giving them the ball again, what am I doing? I'm keeping control of the conversation, right? When I give someone control, that means I'm really in control. Follow me? So when you do that and you have to go back to them,

and then the key, like always, is just be quiet once you say that. Hey, I might not be the right buyer for you. That's totally okay. It's ultimately the decision is going to be around the construction crew, making sure my money partner feels good about the all money in. And I like using that, my contractor, like kind of out. It allows you to play a little good cop, bad cop to a degree. Like as, as the face-to-face person, you're like, you know, Hey, you know, I really, you know, I'm really trying to make this work. I want the DI person, but

unfortunately there's other components in this approval. And that's, that's literally how you, but that framing should really be throughout all conversations. It's really, you know, Hey, I think we're good at 200 just to let you know. You know, I have a money guy. I have one of those guys that exactly what you think, you know, small little glasses in the back room. He approves everything in and out. Ultimately all is his call on whether he feels comfortable, but how he feels comfortable is based around the bid I give him in our contracting partner agreeing with that bid that that we're in the right ballpark. And so really it's kind of like, yeah, I can make the decision, but these guys are really kind of pulling the real string.

So we just need to make sure I wasn't too far off. I don't think I am. I'm usually not, you know, and so we'll be able to move forward in that 14 days and we'll go from there. But now I've layered that in already. So now when I go back, Hey, remember I was telling you about this contracting partner? Well, shoot, we just did a property right down the street from you guys, same square footage. We just went way over budget. There was just so much unforeseen stuff that we didn't account for. Um, he does not feel comfortable at the budget I gave him anymore. Now it's not crazy. It's not like it's a double the budget, but it's enough that it scared off my money partner to say he's not comfortable. So with that said, I might not be the right buyer

for you. I'm totally sorry about that. I feel awful. I always try to do good business and help out. And you know, if I'm not the right buyer, that's okay. It's totally okay. It's my fault. I'm so sorry. I feel awful. Where would you like to take the conversation? Yeah. And then put it on them. And I have to shut up at that moment. And I literally just wait. And there's times where a seller said, well, all right, we're done here. That's it. You pissed me off. Like, okay okay and then I try to let them cool off and come back to it and all that kind of other stuff um and then there's other times where they just immediately start negotiating against themselves yeah in an effort to keep it

alive that's right because they're already they're already bought into selling they're like contracted it it's done their psychology is like oh I'm moving out March 20th. Right. And so now they start to negotiate. Well, I mean a couple grand, maybe like one 95, one 95. Like, you know, like I said, it was a pretty big oversight on this last deal down the street. I don't think that's going to fly. And maybe I'm just not the right buyer. I think that's okay. I just, I feel bad,

but I think it's got to be more than just a 5,000. And maybe you can't do that. And you know, that's okay if you can't. And it's my fault. I'm sorry. And then be quiet again. I didn't renegotiate yet. I didn't give them a number yet.

Yeah. Then they might say something into the effect. Well, where do you need to be? And then if you kind of know, but this is, so let's go back to the buyer now. Now, when you are getting crickets or you're getting buyers that say based around that budget, I could like get a number out of them. Yeah. Every time. So one thing I'll do if I'm uncertain about a property and where someone like I did this yesterday on the deal, it was a newer home. And because it didn't need a big old rehab, you kind of like, shoot, where would someone pay for this?

Right. So we pinged a couple of buyers, literally three. And we said, hey, where would you be on this property? Right. And they all gave us a number. I'd buy this. And now I know how to either renegotiate, specifically yesterday was negotiate, but now I know how to renegotiate or not. And so I leveraged kind of going back to this buyers, you really need to have a good buyers

group. Like I have roughly, well, it's 110 on the list, but there's 47 people that buy from me consistently in Phoenix. I will ping a handful of them anytime that I'm, where does this have to be? And before I negotiate, before I even get in the negotiation with the seller, I'm like, Hey dude, where would you need to be on this? I'm like, and then I use, I'm negotiating with them. They're tough. It's a hard negotiation. I'm trying to get to a reasonable number. Where would you need to be? And then they'll say, hey, if you can get it at 180, I'm in.

So I know there's always a little, that's their perfect world. So if I go back to them and say, hey, can you get to 190? Most times they'll be like, yeah, I could do 190. Because they want it at 180, right? Yeah. So I do that a they want it at 180. Right. Yeah. But I do that a lot. I mean, a lot. And that's kind of goes back to even what we talked about before, like my sphere of influence.

Like, you know why I sell so many fricking deals is because I'm so good with people. I'm so good with my buyers. Yeah. Yeah. I shop for them essentially. Like, yeah, but then I go and say, hey, what do you want it for? Let me go try to get it for you at that number. Right, which is a great way to do it.

And that's, and so one thing I'm, over the next 60 days that I need to really put an emphasis on is not expanding necessarily in a volume standpoint, but expanding in a depth of quality standpoint. My buyers are so that I can have those five, six, seven, eight guys or whatever that I know I can hang with any deal. And they're going to be there. They're looking for an opportunity. They're looking for the next, right.

Because like I told you, the buyers I have right now, there's maybe three guys on there that are that way. And that's not a deep enough buyers pool to like, to know you have somebody, a locked in buyer every single time. And unfortunately the fall off between that first year and the rest of it is they're just, they're all a bunch of radio sounds. And so the more I kind of monitor and audit that, I'm just realizing how many of these guys were just like, you know,

the guys in the local investor Facebook page, like, Oh, I'd love to be on your wholesale list. And then they buy one house a year. Maybe. No, you got to keep working on your viruses dude one thing i'll tell you is agents bro agents have moved my needle like big since covid um and they always really have auditing looking back but think about what's happening for the last four years and most specifically in the last 14 months, no one can find a deal. There's nothing on the market.

Unless it's dry. So what are agents doing? They got to find their investor clients a deal somewhere. So guess what? Get more agents involved. Outro Music