Here is an introduction to the course about negotiating with sellers and the seven steps that our guest presenter Mike McKenzie uses.
Frank: Welcome to MyOpenPath.com, your one-stop shop for all things real-estate and financial freedom. Today we’re going to have a special teacher for you. He’s been investing for the past 14 years, full-time for the past 5 years with a focus in the Carolinas and the Charlotte market. He’s an expert in wholesaling, fix and flips, buy and holds. He also happens to be a coach here at MyOpenPath.com, his name is Mike McKenzie, and it’s our great pleasure to bring him on today to teach you all about how to negotiate with your sellers.
Mike, are you there?
Mike: I am. I am. Thanks for having me on today.
Frank: Absolutely. We’re so excited to have you on. I know you have a lot to cover today. I know that’s why people are here to listen. With my great pleasure, let’s you go ahead and take it away and teach us on how to negotiate with sellers.
Mike: Okay. Great. Before we get into negotiating with sellers, I want to first identify the different types of sellers that you may end up running into. First of all, I have an emotional seller. Now an emotional seller has some sort of connection with the property. It may be their first home or a late family member’s home. Somewhere down the line they’ve attached a lot of emotion to that house and may not rationally see numbers. Secondly, we’ve got investors. You may very well run into other fellow investors who’s trying to sell properties, and that’s not necessarily a bad thing. You can actually work deals with them as well.
Traditional home owners, that’s another one. These are the typical house sellers, the ones that either sell “For Sale by Owner” or they list with an agent. They’re either upgrading houses or downsizing, whatever their case may be. And lastly, one that you may run into is out of state home owners. Out of state home owners live in a different state than obviously the home that they own. Many times they may be utilizing the property as an income producing property, maybe a situation where they inherited the property and they just need rid of it. Many times a seller will show you signs of frustration just because it’s so difficult to deal with it remotely. They could be thousands of miles away or just a state over. Either way it’s been difficult for them to deal with that particular property.
I want to talk to you about the seven steps of selling. This can be used on all types of sellers, and what we’re talking about how we’re going to lead down the road the seller to sell you their property. First of all, you want to build a rapport. You want to make them feel comfortable, find some sort of common ground with them. Get personal with them if there’s something that you connect on. If they are in a particular bad situation or something such as an emotional seller may be, you may want to try to find a way to show empathy to that situation.
Another thing that we’ll utilize a lot with out of state sellers and traditional owner/sellers are compliment them. If they say something about it, if there’s something particular about the house that’s really nice, compliment them on it. That goes a long way with building rapport. Basically you need to use any resource available, any connection that you can make with them in order to build a trust. That’s what you’re trying to do.
Another big one that we use, especially in our office, is we try to utilize the word help as much as we can instead of sell or buy, because essentially you are helping these folks out of situations. They’re needing to sell their home for whatever reason that may be, and you’re there to buy it to help them out. And they’re helping you the same way you’re helping them. So definitely try to use that word as much as you can. A couple examples of that is, “I think I can help you with your situation. If we do this would it be helpful to you or your situation?” Things like that.
Secondly, you want to qualify them, and this again with all types of sellers, you can change or reset their selling criteria. Whatever reasons they may have for selling the house, you may have to reset for them. Have you ever heard the phrase “prescription without diagnosis is malpractice”? You may say, “What in the world does that mean in the world of real estate?” Well, basically what that means is if you don’t have a diagnosis as to why they really need to sell the property and how badly they need to sell it, you can’t do anything. But once you get that diagnosis, then you can prescribe or develop a strategy, if you will, for buying that property at a good deal from them.
Another thing in qualifying them is using the takeaway, and we’ll talk about takeaways a little bit more later on, but that’s like what if anything should we be doing to make it like that you don’t necessarily have to have their house. Make them want you to take their property. Let them feel that if you don’t take their property, then they’re the ones that’s losing out on a good deal.
Next is building value. Again all types of sellers, let them know your experience in real estate. Let them know if you’ve done deals, if you’re just starting out, whatever. Be honest with them and let them know what experience level you have in real estate. Show them what you know. You also may have to educate them by telling them about the market, their neighborhood, comps, especially the neighborhood and things with out-of-state sellers is very important because they may have not been in that neighborhood for several years and they could’ve taken the change for the worst, you never know. You can point out comps that have sold in their house to show them the exact pricing of the house.
The next thing I want to talk about is overcoming objections, and I promise you, you will have objections from all sellers. The better you qualify them, the less objections you’re going to have though. You need to isolate those objections. Not all objections are necessarily a bad thing. What you do is you take that isolated objection and you turn it into a sale for you. You sell them on how you’re going to overcome that objection for them.
Next is closing the sale. Again all types of sellers. Never go in and say, “If you sell,” or, “When you close.” Always assume that you have it. “When we close this deal,” or, “When we buy this property,” is, “What’s a good date for you for us to close?” Things like that. “I’m glad I can help you with this problem.” You’re assuming that you already have the house even though they may have not given you an answer. You may be way off on numbers, but you go ahead and plant that psychological seed in their mind that they’re selling that property to you. Another thing is make them feel they have a moral obligation to sell. It’s the risk reversal. You’re the one that’s going to assume all this risk and helping them by buying this property. Let them think, “Well, this is the right thing to do. I’m getting rid of a problem. This person is willing to take it on and it’s a win-win for both of us.”
Lastly is follow-up. And you ask, “What is follow-up?” Follow up is that time from when you actually get that contract signed to when you go to closing. As you may know, depending on the situation, that could be a week, it could be two weeks, it could be a month, it could be 60 days, just depending on the terms of your contract. What you want to do is stay in touch with them. I personally try to touch base at least a minimum of once a week. I want them to keep me fresh in their mind. You can even send them a card or something, a gift card, just a sign of thank you for working with you. Just keep with your bond that you’ve built through all these steps very strong with them. Keep them excited about working with you and getting out of the situation they’re in because they may get cold or maybe want to cancel. You have what you call a seller’s remorse. They may get and think about this thing and think, “Well, I’m leaving a lot of money on the table.”
You may have to hold their hand through this process all the way up into the closing table. Just remember, they may not have been through this process like you, and I’m guilty of that a lot. I deal with folks and it’s second nature to real estate investors to what comes next, but to someone that doesn’t do this, they have no idea what comes next, so you’ve got to make that conscious with yourself that you need to always tell them what the next step is. Let them know where you are as far as the timeline in closing, things like that. These seven steps basically cover how you lead that home owner down that path to sell you their home. I think if you use most of them, they will definitely come in very handy for you. I wish you the best on that part of it.
