The Science of Flipping - What To Do When A Seller Wants A Retail Price

Starting point is 00:00:00 Yo, yo, what is up everybody? What is up? Welcome back to the Science of Flipping podcast. I'm your host, Justin Colby, and today we're going to go over how you talk to a seller that really just wants a retail number, how to talk them down. So here is how you have a conversation with a seller that actually wants closer to a retail number. Now, if you have not yet subscribed to my YouTube channel, make sure you do that. This is a video that is live right now on my YouTube. Go to youtube.com forward slash Justin Colby. And if you're listening to this on iTunes, make sure you give me a five-star review.

Starting point is 00:00:56 I'd greatly appreciate that. Now, this happens to all of us. This is not a you thing. It's a Justin thing. It is in every investor thing, which is homeowners want top dollar right now. So let's talk about the strategy that you want to bring to that conversation. Some minor changes if you're physically in front of the person or if you're virtual, but you still are going to have the same uh you know points that you're really going to bring up so the first point of a homeowner who wants top dollar and then usually they want top dollar because they're either looking at zillow or a neighbor down the road sold for that number is going to say something of the nature of have you actually seen the home that you are comparing against, your neighbor that sold for that $215,000? Have you actually seen it? Now, by the time you're

Starting point is 00:01:53 actually having this conversation about numbers, you probably have had some analysis of the home. You've looked around, you've seen what's sold, what hasn't sold, or what's active, I should say. So by the time you're talking numbers, you should really probably have some level of understanding here. Now, more than often, these sellers will say, yes, you know, I know my neighbor, they sold for $215. That's why I want $200 because I need a little bit of work done. So where you want to go with that conversation is saying something to the likes of, does your home look similar to the property

Starting point is 00:02:31 that was sold your neighbor? And they might say something of the respects of like, well, sort of, my home is really beautiful. And then I will then go into asking what makes their home so beautiful because everyone has pride in their own home. So I'd go into asking something about, you know, when was the last time you've done a full remodel to your kitchen? And then I'll let them answer. More often than not, the answer is never. And then I'll say, okay, have you updated your bathrooms recently? Major updates, not just maybe some paint.

Starting point is 00:03:06 Usually never. Have you redone the roof or had to replace any major items like an air conditioning unit? Usually they will say no. So now I'm getting to this point of helping them realize that their neighbor that sold is a fully remodeled home with brand new kitchen white

Starting point is 00:03:27 cabinets maybe they have an island maybe they have like a waterfall granite that's going over the island um you know they will start to come to this realization that maybe their home isn't the same price point so then we have a conversation of, well, I'm an investor, so I'm likely going to be doing a lot of these things. If you want the number 200, why wouldn't you yourself actually do that? And then they're going to answer. And usually it's because they don't have the money to do it. They just to get rid of it so then we talk about some numbers and you know I would say so why do you think your home is worth that 200 and then comes a little usually of the real motivation behind why they say that number which is well I saw you know my neighbor sold or

Starting point is 00:04:20 Zillow and you know I need you know another 50K or so for the move, buy my new home for my move. So now we have the real understanding. Now, it doesn't mean you're gonna get the deal, right? And all these things that I'm telling you doesn't guarantee you're gonna get the deal, or at least at the number that you would need it at. But what it does is help you understand

Starting point is 00:04:42 and fish out the real reason they want that number. And so now you have a reason. Now they say, okay, I want 50 grand. Say, let me walk you through a little exercise, Mrs. Seller. Even if you were to put your home on the market and list it for $200,000, you're going to pay two real estate agents roughly 3% each. So that's 6% off top. You're then going to likely have to fix up your home. Usually it's anywhere between 1% to 3% of the sales price. Usually is what I see over the years, right? So then you're looking at, let's just say it's 3% because it's usually the higher number. So 3% is going to be another 3 or 6K. So then you're going to have some closing costs mix in there. And why don't we round this up

Starting point is 00:05:33 to about a 10% cost to sell your property? That's pretty accurate. And they'll kind of agree with you and you say, okay, well, what's 10% of 200? It's going to be 20 and then you're going to actually have 180 grand left. Now, you're also going to have the mortgage that you're going to continue paying while you list it. You're also going to have, you know, obviously taxes, utilities, everything else that's insurance on the home that's accumulating. And so really you're needing more and more money to make this next move because you're not netting quite as much, right? Now, also to get that 200, we just talked about,

Starting point is 00:06:12 you're likely gonna have to do the work. So you're likely gonna have to redo the kitchen and the bathrooms, you know, based around your home being 1500 square feet, you're looking at probably, you know, $30 a square foot for a remodel. You're right there at 45K. You subtract the 10% of sale, which is 20 grand, which brings you to 180, and you want to do the remodel, 45K, that's $65,000 off of that price. So we're down to $140,000 or so.

Starting point is 00:06:47 Now that is probably a lot closer to the number I would need to be. However, I also have to make some money. So I can't be there. So my number is probably somewhere between $100,000 and $130,000. How does that sound? Now that is if all things go great. That would be the streamlined conversation there. Now I would tell you most people are not going to accept that number. That's the reality. The best of the best real estate investors, myself included, and the ones

Starting point is 00:07:21 that you're all aware of, we're seeing that roughly 1%, 1% of the leads that we bring into our business convert into an actual deal, right? So that means for every 100 homeowners that we speak to, one, one becomes an actual deal. Now, that is because a lot of different things. A, the economy has been incredible for the last, you know, 15 years or so, give or take. You know, the interest rates have been incredibly low. And yes, as I record this right now, I am very aware that the Fed just did a increase in interest rates. I'm very aware of that, but it's still a supply and demand issue, right? People have had great employment over the years. So there's just this issue that homeowners know that they can get top dollar. They don't need to take a discount. Now, the people that take a discount, that is who we're looking for we're looking to find the people motivated enough to take that

Starting point is 00:08:26 discount but nonetheless this conversation i just had the example i just had is what we do pretty much every single day multiple times a day is try to educate the homeowner on really what's going to be in their pocket if they decide to list it, what they're going to have to do to the home to get the number they actually want, right? And then that becomes an education process. Now, someone who's motivated, such as some people are, then the education process can go pretty smoothly if they could understand. Those that maybe aren't that motivated, those that they would like to sell for top dollar and keep as much money as possible, these conversations don't quite go smoothly because they just don't need to take that type of discount. And that's

Starting point is 00:09:17 okay. But this is what you want to try to do. Now, as you're educating, the key here to find a way to get a discount is to really try to pull out some need, pull out some motivation. And quite Hey, you know, I had this tragedy happen in my life. I had this issue happen. I have this situation financially. Something will, you know, be said sometimes. Other times they're going to guard that and they're just going to say, well, you know, I really just need to move. Now's a good time for me to move. And then you just need to ask the proper questions. Why is now a good time to move? You know, what makes this the, you know, best time to sell? Why haven't you put it on the MLS? Do you need to, you know, close pretty quickly? Those are the questions that happen as you are educating these individuals. And then again, 99% of the time, they're just going to shut the door on you. The conversation's over, they're done, and you're going to have to move on.

Starting point is 00:10:27 So that's how you have a conversation with someone who basically wants retail price. All right, guys, I hope that helped. This has been a blast for me. This is common for all of us. Make sure you are giving a thumbs up on YouTube if you're watching this, and make sure you give me that five-star review on iTunes. I'd greatly appreciate it. I will see you on the next podcast.

Starting point is 00:10:48 Peace.

The Science of Flipping - What To Do When A Seller Wants A Retail Price

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