The “Secret Sauce” for Shopping for Rental Properties BELOW Market Worth

Ashley:
Negotiating underlies so many facets of actual property.

Tony:
Studying the best way to negotiate can remodel the way you shut offers and make offers work on your technique. Good negotiators aren’t good

J:
Salespeople. They are surely folks which can be simply good at constructing relationships, rapport and gathering data, getting that data is energy.

Ashley:
That is the Actual Property Rookie podcast. And I’m Ashley Kehr.

Tony:
And I’m Tony J Robinson, and we need to give a really, very heat welcome to none apart from J Scott. Jay, thanks for becoming a member of us right now, man.

J:
Hey, thanks. I really like being on the present with you guys, so thanks for having me again.

Ashley:
Yeah, Jay, why don’t you begin off with telling us a bit bit about your expertise with negotiation?

J:
Yeah, so I’ve been negotiating for a very long time. I began out within the company world. I did tech for some time, truly spent a lot of my profession at Microsoft and so they despatched us to some actually good negotiation programs when it got here to enterprise negotiation. So I type of bought my begin lengthy earlier than actual property after which 2008 jumped into actual property. We flipped about 500 homes. So if you try this, you’ve gotten a few thousand negotiations. You’ve a negotiation on the purchase aspect, you’ve gotten a negotiation on the promote aspect that doesn’t embrace the hundreds of negotiations with contractors and brokers and attorneys and title firms and appraisers and everyone else concerned within the transactions. So yeah, I spotted early on that with the ability to negotiate nicely actually could make an enormous distinction in your backside line. Even when imply, if you happen to save 100 {dollars} on a transaction and also you’re doing 20 or 30 transactions a yr that provides as much as hundreds or tens of hundreds of {dollars} over a profession, you’ll be able to actually make or lose thousands and thousands of {dollars} by being negotiator or conversely, not being negotiator

Ashley:
For rookies which can be simply beginning out perhaps in addition to simply buying a deal, who’re another those that for our rookie traders, ought to primarily be centered on studying the best way to negotiate with?

J:
Yeah, so relating to negotiation and all of the stuff I’m going to speak about right now for essentially the most half is relevant to purchasing actual property, promoting actual property, negotiating with contractors, negotiating with different distributors that you simply’re going to make use of and even negotiating outdoors of actual property. These are simply common negotiation methods, methods, no matter you need to name them that’s going to make you a greater negotiator. The factor that each negotiation primarily boils right down to, nicely, two issues that each negotiation primarily boils right down to. Primary is rapport. So having rapport with the individual or folks on the opposite aspect of the transaction and two data, there’s a saying that he who has essentially the most data goes to win the negotiation, and I discovered that that’s very a lot true. Data is energy, and the extra data you will get, the higher you’re going to carry out in that negotiation by way of giving the opposite celebration what they need and also you getting what you need. So we will discuss these, however it principally boils right down to rapport and data and there’s numerous methods outdoors of that, however these are the 2 huge ones.

Tony:
Jay, let me ask one factor simply to type of set the desk. I don’t need to lose half of our viewers right here earlier than we even get began, however in your perspective, do you are feeling that you should be an extrovert to be good at negotiation?

J:
That’s an awesome query and I in all probability ought to have began with that. I began negotiating once more within the company world, however on the time I did, it was actually, actually troublesome for me. I’m an introvert. I’m a former engineer. I spent my first profession as an engineer. I don’t like speaking to folks I don’t like I doing a podcast like this. I’m used to doing it and I’m type of placing on a courageous face and performing right here a bit bit as a result of that is robust for me. I’m an introvert and speaking to folks and negotiating, and I’m not a gross sales man. Asking folks for stuff is basically arduous for me. And so it has taken some effort and time and vitality to get good at it, however very a lot negotiation is sort of a muscle. The extra you utilize it, the stronger it will get and the extra issues begin to come naturally. And what you notice is sweet negotiators aren’t good salespeople. They are surely folks which can be simply good at constructing relationships, rapport and gathering data. Getting that data is energy, and so it doesn’t matter if you happen to’re an extrovert, it doesn’t matter if you happen to’re an introvert, so long as you’re good at constructing relationships and so long as you’re good at gathering data.

Ashley:
Jay, let’s get into it then. What are a few of the issues {that a} rookie investor ought to do throughout a negotiation? What are a few of the techniques?

J:
Yeah. Properly, first let’s speak a bit bit about why negotiation is so vital in actual property. And I discussed that negotiation is type of common and we’ll use it in all the things we do. However relating to shopping for and promoting actual property, there’s a couple of issues that make negotiation and good negotiation rather more vital than numerous issues that we’re going to do. Primary, the sum of money concerned if you’re shopping for or promoting a home, you’re spending what’s probably the most important funding of your life. Extra importantly, the individual on the opposite aspect of the transaction is probably negotiating with the most important sum of money they’ve ever negotiated with. And they also’re clearly going to be extra on guard. They’re going to be extra conscious of the negotiation and extra critical in regards to the negotiation than in the event that they have been negotiating a trinket in a retailer.
So the sum of money concerned simply makes everyone a bit bit extra on edge, everyone a bit bit extra astute and attuned to what’s occurring. Quantity two is simply the timeline. If I stroll right into a automobile dealership, I would spend a couple of hours, perhaps even I come again for over the course of a pair days to barter a automobile, or I am going right into a retailer in another country and I negotiate over a trinket or some product. These negotiations final minutes or hours, perhaps at most a day or two. However relating to actual property, we’re speaking a few negotiation that lasts actually 30, 60, even 90 days if we’re doing an enormous transaction, which implies there’s so much that may go mistaken. Simply since you and I come to an settlement right now doesn’t imply that considered one of us isn’t going to vary our thoughts per week from now, or some circumstance goes to occur per week from now that causes us to must renegotiate.
And so once more, constructing that relationship, having that rapport, constructing belief between the events is tremendous vital as a result of we’re speaking about actually weeks or months of holding the negotiation collectively. Quantity three, I simply talked about the renegotiation factors in actual property. We’ve numerous completely different conditions the place we might have to return again to the desk even after we’ve come to an settlement. So for example, we get our inspection report again and we discover that the inspection comes again with some issues that we’re not pleased about. Properly, we’d have some contingencies that permit us to now reopen negotiation and negotiate repairs or negotiate value concessions. If that negotiation and that unique settlement wasn’t robust, it’s simple for the negotiation to crumble at that time. Numerous causes we might have to renegotiate. And if we don’t have a robust relationship with the opposite celebration, it’s very simple for the negotiations to crumble in the course of the first, second, third, or fourth negotiation within the course of.
After which lastly, there’s this, realistically, there are going to be a number of intermediaries in each actual property transaction. It might be nice if all the things concerned simply the client or vendor, however numerous actual property negotiations and transactions contain brokers, not only one agent, however perhaps an agent on either side, title attorneys or title brokers, attorneys, lenders, appraisers, inspectors, all of those folks type of on one aspect or the opposite which can be going to affect the negotiation. And so relating to actual property negotiations, it’s much more sophisticated. It’s so much longer course of, much more issues can go mistaken, and because of this it’s so vital to be good at negotiating actual property. Now, that didn’t reply your query. Your query was what are some methods and techniques we will use? Properly, I discussed the primary, and the primary actually is the flexibility to construct rapport.
If I’m going to persuade any person to do the most important transaction of their life, the very best priced negotiation of their life, I’m going to need them to belief me When any person trusts me. It’s so much simpler to return to an settlement than when any person type of appears at me like an adversary. And too typically after we go right into a negotiation, we take this angle, I imply, we watch The Apprentice or we watch no matter TV present talks about these excessive value company negotiations, and we see these sharks coming collectively and utilizing these methods to outwit one another. In actuality, one of the best negotiations are two those that belief one another and like one another and need the opposite individual to get deal on the identical time that they get deal. We don’t should be using these complicated methods or these hard-nosed techniques that attempt to trick the opposite aspect or attempt to undermine the opposite aspect.
Ultimately, what we would like is we would like the 2 sides to return collectively and mutually attempt to discover options to the issues. And so how will we try this? We construct a relationship, we speak to the opposite aspect. We don’t go in on day one with the, okay, right here’s my supply. You go in on day one with, Hey, inform me about your self. Inform me about your loved ones. Inform me about why you’re promoting this home. Inform me what you’re going to do subsequent. My spouse, who I actually, she’s the one which ought to be doing this present proper now as a result of she wrote the e book with me, the e book on negotiating actual property. And in our enterprise, she does numerous the negotiation. She’s going to by no means present up at a vendor’s home or assembly a purchaser with out espresso, with out donuts, with out bagels, simply principally one thing to construct that relationship, construct that rapport, and open up the strains of communication.
And it is perhaps a half hour, an hour, three hours earlier than it goes from sitting down and having a cup of espresso to truly speaking in regards to the negotiation. As a result of once more, it’s all about constructing a relationship in order that by the point you do begin speaking about cash, the opposite aspect’s like, I like this individual. I belief this individual. I’m okay doing this cope with this individual. I’m okay with this individual getting a half million {dollars} for his or her property, or them giving me a half million {dollars} for my property as a result of I like them. And so once more, constructing rapport data is the second piece that I talked about. And knowledge is vital as a result of relating to actual property, too many individuals suppose that everyone desires the identical factor. And that is a part of the rationale why most actual property negotiations fail. If I make a suggestion on 100 properties tomorrow, it’s possible that 95% of them aren’t going to go wherever.
And the rationale for that’s as a result of either side possible have the identical targets, and that objective is cash. If Ashley, I’m negotiating a cope with you and all you care about is getting essentially the most cash, and as a purchaser all I care about is getting one of the best deal and paying the least sum of money, we’re by no means going to return to an settlement. There’s no method you can obtain essentially the most cash and I pays the least cash on the identical time. And so the way in which these negotiations work, the profitable ones, is we determine what’s it in addition to cash that the opposite individual desires. And there’s not all the time that the opposite aspect desires one thing apart from cash. As an investor, numerous occasions it truly is simply in regards to the cash, however in lots of circumstances, we will discover one thing apart from cash that motivates the opposite aspect. And if we will discover that factor fairly often, we will get a greater deal as a result of the opposite aspect’s prepared to surrender cash to get that factor that they actually need or that they actually need.

Tony:
Jerry, what a refreshing tackle negotiation as a result of I believe for lots of people once they hear negotiation, they do suppose type of old skool gross sales techniques, excessive strain conditions, however the way in which that you simply’re taking a J the place it’s a deal with, Hey, what are your motivations? What are you making an attempt to get out of this and the way can we method this? So it’s a win for each of us. I believe it’s such a refreshing take and it takes away a few of that stress that rookies may really feel when they consider negotiating.

J:
Yeah, I believe considered one of my favourite tales about negotiate, in all probability again in 2010 or 2011, my spouse and I, one Sunday morning, we get a name from our closing lawyer who stated, my spouse and I have been strolling round our neighborhood and so they’re doing this property sale. Apparently a girl died in the home and so they’re promoting a bunch of stuff, and I don’t know in the event that they’re trying to promote the home or not, however simply wished to let you already know that there’s a home in our neighborhood that they’re doing an property sale and I don’t know what’s occurring. And so my spouse and I have been like, nicely, we have been associates with our lawyer and we stated, we haven’t seen you guys shortly. We’re going to return up and say hello, however we’re additionally going to make use of it, a possibility to cease by the home and see what we will find out about it.
So we get to the home, my spouse finds the girl that’s operating the property sale. It seems it was the daughter of the girl that handed away who owned the home. And my spouse is speaking to her and principally stated, Hey, are you trying to promote this home After some time? She stated, are you planning to promote the home? And the girl was like, perhaps in some unspecified time in the future, however I’m not prepared to consider that but. And my spouse’s like, no downside. Simply let you already know we’re traders. For those who’re ever curious about promoting or I’m an agent, I’m a dealer. For those who simply need data or if there’s something I might help you with simply sincerely making an attempt to be good, simply let me know. And the one was like, thanks. I actually recognize that. They exchanged data. A pair months later, I believe my spouse dropped a card in her mailbox, didn’t hear something in return, we added her to our Christmas card checklist. It was about 18 months later that apparently my spouse simply despatched her a Christmas card, and it was someplace across the two yr anniversary that the girl’s mom had died. And my spouse was identical to, I hope you’re doing okay at this difficult time.
Simply merry Christmas and simply left it. At that time, we had resigned ourselves. This girl’s not going to promote the home. We weren’t trying to purchase the home at this level, my spouse had simply made a good friend and was being good. And a pair weeks later, the cellphone rings and it’s the girl. And she or he’s like, it’s been two years since my mother died. You’re actually the one one which reached out and even talked about it to me and requested how I used to be doing, and I don’t even know you. And I simply thought it was the sweetest factor, and it made me notice that it’s in all probability time for me to promote this home. Are you continue to curious about shopping for it? And we ended up shopping for that home, and my spouse and that girl ended up being associates for a very long time, however it actually was, we have been not within the mindset of it is a negotiation that we’re making an attempt to get deal on this home was at this level, we’ve got a relationship with this individual. We’re sustaining that relationship. And simply naturally out of that relationship got here this chance. And so what we discovered is one of the best alternatives that we’ve gotten through the years have simply come from these relationships the place there was no expectation that we have been making an attempt to purchase one thing or promote one thing.

Tony:
What an unbelievable story, Jay. And I believe it simply goes to point out that if you put the connection over the income, good issues are inclined to occur. So I really like listening to that story. So we’re going to take a fast brief break right here, and after we get again, we’re going to ask Jay what he’s doing in right now’s market to have a aggressive edge when negotiating offers. Now whereas we’re on the brief break, we would like you guys to move over to your BiggerPockets profile, go to your settings and activate notifications for the Rookie publication. Sure, that’s proper. We now have a weekly publication devoted to rookies to present you extra data on investing in actual property. We’ll be proper again after this fast break. Alright guys, we’re again from our brief break with Jay Scott once more, the writer of the e book on Negotiating Actual Property from BiggerPockets. You will discover his e book at biggerpockets.com/bookstore. So Jay, what are a few of the issues that Ricky’s may do right now to essentially sharpen their negotiation abilities? We all know that after we’re underwriting properties, we will apply by simply analyzing a bunch of offers. What’s the equal to that in negotiating actual property? How will you apply to attempt to get higher?

J:
So primary, negotiate all the things. This was in all probability the most important lesson I realized once I took that prime value negotiating course that Microsoft paid for once I was working there. Our homework project, it was a multi-day class, and our homework project every single day was principally go cease someplace after the category and negotiate whether or not that’s McDonald’s, that’s Goal, someplace the place you by no means think about you may probably negotiate one thing and go in and attempt to negotiate one thing. Like if you happen to’ve by no means walked into McDonald’s and tried to barter down the worth of a Huge Mac, it actually forces you to get out of your consolation zone and also you is probably not profitable. However what you notice is that no one’s going to take out a gun and shoot you only for suggesting that you simply may get a reduction on one thing and it makes you snug with the thought of studying to ask.

Ashley:
I’m terrified already considering of that.

J:
Lemme let you know one thing, I’m nonetheless fearful of considering it, however I’ll do it now as a result of I’ve carried out it earlier than and I’ve carried out it sufficient occasions simply to apply and simply to point out different those that it truly works relating to simply constructing that confidence that it takes to have the ability to ask for what you need. However in all probability the most important lesson I’ve realized through the years on this enterprise is that too typically we don’t get issues as a result of we simply are too scared to ask for them. And oftentimes individuals are pleased to say sure, and even when they’re not pleased to say sure, oftentimes folks will say sure simply out of obligation as a result of they owe you one thing or as a result of they’re too uncomfortable saying no. And I’m not saying we must always essentially benefit from folks, however I’ve no downside asking any person one thing. And if they arrive again to me and so they say, Hey, yeah, I suppose I’ll try this.
And I do know that they’re little uncomfortable, however they’re doing it simply because I requested, nice. If I hadn’t have requested, they wouldn’t have carried out it. And so the very first thing that I might say to everyone is don’t be afraid to ask. I do know folks that can go and take a look at 100 homes and make gives on 5 of them as a result of the opposite 95, they really feel like I’d have to supply so low that I’m not going to insult them. Properly go insult them. What’s the worst that may occur? Go supply 25% of the checklist value on this home. The worst that’s going to occur is that they’re going to say no. And lemme let you know one thing. You do {that a} hundred or 200 or 500 occasions, it solely takes one individual to return again and say, nicely, perhaps we will make this work and it’ll make all these occasions they stated no price it since you’ll make sufficient cash on that one deal. So the most important piece of recommendation I’ve to everyone is get used to asking, get used to throwing it on the market as a result of the worst any person can say is not any. And extra typically than you anticipate, they’re going to say sure or they’re going to open up a negotiation.

Ashley:
And there’s additionally going to be that one individual pleased that you simply threw in that low ball supply. I’ve a property now that’s been sitting for 2 months. It’s had a ton of showings, however zero gives. Actually. If somebody provided me a low value, I might promote it. It’s been a vacant property, we by no means did something with it and go forward and make a suggestion. I’ll in all probability say sure and I will probably be pleased about it despite the fact that it’s method lower than what it’s listed at.

J:
Yeah, Ashley, you and I have been speaking about this earlier than the present began, a narrative that I’ve instructed earlier than. I inform it within the e book, and I believe it’s a very vital story of a home that we have been taking a look at and the girl that we went to speak to and he or she wished to promote the home, we made a suggestion, it was a low supply and he or she didn’t need to take it. And we requested if anyone else had provided on the home and he or she was like, yeah, we’ve had lots of people take a look at it, lots of people make gives. And we’re like, nicely, has anyone provided near what you need? Yeah, a pair folks have provided near what we would like. And we began digging in like, nicely, if individuals are providing the sum of money you need, why haven’t you agreed to promote it to them?
And after actually digging in and asking open-ended questions and making an attempt to get to the foundation of what was occurring, what we realized was this girl had lived on this home for about 70 years. She was born in the home, she grew up in the home, her children grew up in the home, her grandkids grew up in the home, and he or she was lastly, after some 70 years of dwelling on this home prepared to maneuver. She didn’t know the best way to transfer. She didn’t know the method of getting her stuff from the place it was in that home to the place she wished to maneuver, which was in together with her children in one other state. And as soon as we realized that, we realized this has nothing to do with the cash. She’s pleased to promote this home to us for nicely under what she’s asking if we will clear up her actual downside, which is her concern of making an attempt to determine the best way to transfer.
And on the finish of the day, what we instructed her was, look, we’ll deal with this for you. We’ll rent a good firm. We’ll allow you to decide the corporate to rent. We can have them come. They’ll pack up your stuff. They’ll put it in a truck, they’ll drive the truck to your child’s home, they’ll unload it on the opposite aspect. You don’t have anything that you simply’ll have to do. And after we stated that her response was, oh, nicely yeah, let’s do that, as a result of we had solved her actual downside. Her actual downside wasn’t that we weren’t providing sufficient cash. Her actual downside was she was scared to undergo this means of transferring. And so as soon as we bought to the premise of what the issue was, we knew we may clear up that downside. And that’s how actual property negotiations or any negotiations are profitable, you determine what downside the opposite aspect has apart from cash and also you clear up that downside. And if you are able to do that, you’ll be able to typically get the factor you need for much less cash than you in any other case may.

Tony:
Jay, I believe the most important problem or false impression that Ricky’s have is that they don’t perceive the ability of looking for a no in negotiations. They’re so afraid of listening to the phrase know that they shut themselves off to alternatives. And I used to be actually simply speaking with some rookie traders, I believe it was earlier this week, however they arrive to me, they stated, Tony, we’ve been searching for offers. We will’t discover any good offers, and right here’s a property that we’d like, however they’re simply asking an excessive amount of. I stated, nicely simply supply no matter quantity makes essentially the most sense for you. Who cares what they’re asking for? Simply supply it your quantity. The itemizing value was half 1,000,000 bucks. They provided at $400,000. The sellers countered, I believe at 4 70. The patrons recounted, I believe at like 4 20, the vendor recounted 4 35 and now they’re beneath contracted 4 35. The one method that they get there’s if they’ve the braveness to submit a suggestion that’s so low that the vendor goes to reject it within the first place. However so many individuals have been afraid of that first. No, they by no means get there.

J:
And the loopy factor is that patrons in all probability sitting there considering, wow, I ought to have began at three 50 and I in all probability may have gotten it for 400 despite the fact that. And in order that’s a part of the problem that numerous us have is not only that we’re scared to barter, however after we do negotiate, we’re fearful of insulting the opposite aspect. I typically get requested the query, if I’m going to make a suggestion on a property, the place do I begin? How do I decide that first quantity? And my reply is, you must decide the quantity that’s as little as doable that received’t have the opposite aspect stroll away. If any person’s promoting one thing for $500,000, and I believe if I supply them $300,000, they’re going to stroll away. But when I supply them $301,000, they’re going to be insulted, however they’re going to begin to negotiate, then $301,000 is my beginning place. I need that quantity the place I don’t care in the event that they’re insulted so long as they don’t stroll away. And it may be troublesome to seek out that quantity. However let me provide you with a secret. That is how you discover what that quantity typically is. You determine how a lot they owe on their mortgage,
You determine that quantity that if you happen to pay them this quantity, they received’t have to return to the closing desk with any cash out of pocket. Usually, that’s the lowest level the place you’ll in all probability nonetheless insult them, however they’re not going to stroll away since you haven’t requested them to truly put up any further cash to promote this property. And so one of many issues that we do after we’re trying to purchase a property is we do as a lot analysis as we probably can to attempt to determine how a lot they owe on the property. And numerous occasions that simply entails going and searching in public data saying they bought a property 4 years in the past at 7% rate of interest at this amortization. And then you definitely stick that in a calculator and also you say, okay, right now they in all probability owe 8,000 lower than that. That’s my beginning quantity. And also you’d be stunned the variety of sellers that we make a suggestion to, and so they’re like, wow, that’s principally precisely what I owe on the property. And I’m identical to, oh, wow, that’s wonderful. However that’s typically that lowest quantity you can begin with the place they is perhaps insulted, however they’re not going to stroll away. And that’s the quantity that I need

Ashley:
With that discovering the mortgage quantity or estimating it, there’s sources too, like prop stream.com is one the place they’ll truly estimate it for you primarily based on once they bought their mortgage, what number of years it’s been, what their month-to-month cost is simply too. So you should use completely different web sites like that to assist together with the county data.

J:
And you may simply ask the vendor. I imply, it’s not unreasonable to say, Hey, appears such as you’ve been on this home for 15 years and the way a lot they purchased it for, as a result of you’ll be able to in all probability look on Zillow or in public data to see what they purchased it for, and also you simply say, have you ever refinanced all of it within the final 15 years? If they are saying no, nicely, they in all probability purchased it for 80% of, or they bought a mortgage for 80% of no matter they purchased it for. And you may determine what the rate of interest was 15 years in the past and you may ballpark it your self. You may typically get fairly shut. However yeah, there are many instruments on the market that can make it easier to with that as nicely. However

Tony:
Yeah, I believe the vital factor of what you’ve stated right here, which I don’t need to get misplaced in our rookies, is that being curious as you’re going by means of the negotiation part might be one of the crucial vital issues you can deal with. Much more so than like, Hey, what’s the one strategy to actually persuade somebody? It’s identical to if you happen to can ask questions and take heed to responses and ask extra open and knit questions and get deeper into their motivations, that’s how you actually construct a few of that connection and that rapport and provides your self a possibility to barter in the fitting method.

J:
There’s an individual in the actual property world, his title is Pete Fordo, and numerous youthful people or newer people within the enterprise in all probability have by no means heard of him, however for anyone that’s been round for some time, he was, let’s see, what’s one of the best analogy? He was the Grant Cardone or the Brandon Turner of the Seventies actual property. All people knew who he was. He was the individual everyone listened to and everyone would go to his seminars and watch him communicate. And he’s nonetheless round, doesn’t stay too removed from me, however he was type of just like the king of inventive deal making for the final 30, 40, 50 years. And he has a saying when he walks right into a home, he’ll go searching, get an enormous smile on his face and say, why would you be promoting a property as good as this? Principally sending the message to the opposite aspect that that is nice.
That is superior. Why would anyone need to be eliminating this? You’re now opening the door to the opposite aspect, principally telling you their life story, however in a method that you simply didn’t insult them saying, oh yeah, okay, nice. Why are you promoting? No one desires to listen to, why are you promoting, however why are you promoting a ravishing home like this? Oh, nicely, thanks for saying that. Let me let you know what’s occurring. And so lots of people use that as a joke now once they see Pete, why would you promote a ravishing home like this? However the actuality is, if in case you have no higher opening line, it’s a unbelievable one.

Tony:
Now Jay, we’ve bought to take our final app break right here and Ricky’s, earlier than we do, we need to just be sure you guys have the chance to get one of the best low cost on BP Con 2025 tickets in Las Vegas. Look, even Jay’s negotiating techniques received’t get you something cheaper than what the costs are at proper now. So head over to get biggerpockets.com/convention to safe your tickets to return be taught with like-minded traders, and we’ll be proper again after this. All proper guys, welcome again. We’re right here with Jay. So Jay, one factor that I need to simply drill down on actually rapidly in type of a tactical sense for the rookies, how precisely can I discover the motivations of the vendor? I do know we talked about curiosity. I do know we talked about type of peeling again these layers, however perhaps what particular questions can I ask to higher perceive what’s truly driving this individual to promote their house?

Ashley:
And Jay too, if you happen to may type of contact on if you happen to’re not even involved with the vendor, if you happen to’re utilizing an agent, what are a few of the methods to type of determine this out too by means of any person else?

J:
So let me begin with the primary query as a result of the second, Ashley’s query’s a bit bit harder, however let me begin, Tony together with your query. For those who’re speaking on to the vendor, and upon getting that rapport, and also you’re not going to insult them with this query, my favourite query is actually saying, what do you propose to do with the cash that you simply’re going to get out of your sale? Which is a a lot completely different query than the place are you transferring or what’s your subsequent home going to be? Since you’re going to get numerous completely different solutions that you simply won’t anticipate. It is perhaps, nicely, my daughter’s getting married subsequent month, and I don’t know if you already know something about weddings, however they’re fairly costly now. Okay, they’re planning to make use of that cash for a marriage. Or perhaps they’re utilizing that cash to place their baby by means of faculty, or perhaps they are saying, haven’t fairly figured it out.
We’re going to hire for a couple of months, and so in all probability simply going to throw it in a financial savings account for a couple of months till we determine the place we need to transfer. Properly, all of the sudden now you already know that they don’t have anything higher to do with that cash, and perhaps you’ve now opened up the door to a vendor financing supply. Oh, nice, you’re going to throw that right into a financial savings account making 1%. What if I may make it easier to make seven or 8% on that cash? Would that be one thing that’s enticing to you? And in the event that they go, oh, wow, I could make seven or 8% on my cash. Yeah, let’s discuss it. And now you’ve probably opened up the chance for a vendor financing deal. So yeah, so asking the query, what do you propose to do with the cash is a good way to determine what their motivation is as a result of that’s principally going to let you know precisely what they want the cash for.

Ashley:
Jay, if you ask that, how many individuals have stated to you, that’s none of your corporation?

J:
I’ve had a couple of. I’m not going to lie. However that is the rationale why constructing that relationship first is basically vital as a result of that query can come off so much in another way if you happen to’re speaking to any person that you simply’re in an adversarial negotiation with and any person who you’ve despatched the message, I’m right here making an attempt that can assist you. You’re making an attempt to promote your home, I’m making an attempt to purchase your home. Let’s determine the best way to make this work as a result of I do know you don’t need to be right here any longer than you must, and I actually would love to purchase this home. So I imply, what do you propose to make use of the cash for when if we will get this deal carried out? That didn’t sound as dangerous as, okay, guidelines, what are you planning to make use of the cash for an, you stated

Ashley:
It’s solely been a couple of that you simply’re not offending the vast majority of folks if you’re

J:
Precisely. And most people which have principally refused to reply that query, they haven’t been impolite about it as a result of the way in which I ask it isn’t in a method that’s accusatory or being impolite within the first place. Once more, it’s a part of that complete dialogue, Hey, I do know you need to promote. I’d actually love to purchase. Are you able to give me an concept of what do you propose to do with the cash? And actually if it comes off that method, it doesn’t sound dangerous and it’s not going to set off a adverse response.

Ashley:
So now what’s one of the best method in case you are utilizing an actual property agent or going by means of any person else, and even worse, you’ve gotten two brokers. You’re telling your agent, they’re telling the opposite agent and the agent, and also you’re principally paying phone by means of this complete course of. What’s type of one of the best technique there?

J:
And that may be actually, actually troublesome. It’s truly one of many the explanation why I all the time advocate that if you happen to’re going to do that enterprise full-time over a protracted time frame, contemplate getting your actual property license or having a partner get an actual property license or having a associate get an actual property license as a result of it actually does provide you with much more management. All people thinks that getting an actual property license is nice since you earn more money. I don’t must pay the three% on the gross sales aspect, or I get 3% once I purchase. The fact is that my spouse is a dealer, I’m licensed, and we nonetheless pay any person to checklist our properties and we nonetheless pay any person to symbolize us after we’re shopping for a property. We don’t care in regards to the 3% on the purchase aspect or the promote aspect, however the truth that we’re licensed signifies that we will speak to the opposite agent ourself, we will speak to the inspector, we will speak to the appraiser, we will speak to the lender.
And there’s nothing mistaken with that as a result of we’re licensed, we’re representing ourselves. Shopping for or promoting this property doesn’t imply we essentially can speak to the vendor if they’ve an agent. And I do know folks disagree right here. I’ve no problem with going to the vendor’s agent and saying, Hey, do you thoughts if I’ve a cellphone name together with your vendor or on the opposite aspect? Do you thoughts if I’ve a cellphone name together with your purchaser? Plenty of occasions they’re going to say, no, I’m not snug with that. Generally they’ll say, nicely, let me ask my vendor or my purchaser. Generally they’ll say, I’m okay with that so long as I’m there. And you must be a bit bit extra cautious with what that dialog entails. Once more, you don’t need it to sound such as you’re negotiating immediately, but when they are saying sure in any capability, it provides you the chance to ask these questions.
Even when they are saying no, nothing mistaken with saying to the agent, Hey, are you able to give me an concept of why they’re promoting now? Looks as if a bizarre time to be promoting on this market, and we’re simply curious what their motivation is. A superb agent’s going to say, I’m not going to ask and I don’t care. However loads of brokers on the market will probably be like, I’ll ask. I’ll let you already know what they are saying. So once more, can’t damage to ask. The opposite factor is I’ve seen lots of people who will write letters to the vendor or to the client, and most of these occasions, these letters undergo. Now in a scorching market, everyone’s writing letters, Hey, my household would like to stay in your home. We’ve bought three children. One goes to this college, one performs the piano, please decide us. Okay? I imply, if you happen to’re doing a kind of issues, you’re in all probability not going to get picked.
However I imply, there are alternatives so that you can principally ship a letter saying, Hey, let me let you know a bit bit extra about what we’re going to do together with your property. Let me let you know a bit bit about how we might help you. If there’s some explicit downside that you simply’re trying to clear up and cash’s not going to unravel it, come again and let’s discuss it. Once more, it’s opening up the strains of communications. And numerous occasions you are able to do that even with one other agent accessible by simply saying, Hey, are you able to cross this letter on to your vendor, to your purchaser? And numerous occasions they’ll.

Ashley:
I truly had any person write me a card asking to purchase a duplex, and on the time, I had owned it in my private title, and it was proper type of when the rookie podcast began and the individual stated, we love the podcast. So are you interested by promoting your duplex? And it was an image of him and his girlfriend and their canine, and I ended up assembly them a number of years later at a BiggerPockets convention. However it was a memorable second that if I have been to promote, I might keep in mind them. Out of the texts I get, the chilly calls I get from factor was that private contact.

J:
For those who bought two equal gives and considered one of them was for a half, a % much less, a thousand {dollars} much less, $2,000 much less, however any person despatched a be aware like that, you’d in all probability take their supply despite the fact that they have been much less. So one thing like that may actually make a distinction. And that goes again to what I used to be saying firstly, it’s constructing rapport, it’s constructing belief, it’s constructing a relationship. It’s making you are feeling like we’re not simply two adversaries in a negotiation. We’re two folks which can be making an attempt to assist one another clear up our issues.

Ashley:
So Jake, type of a follow-up query right here so far as that being considered one of your methods, a private contact, what are some issues that you’re doing to have a aggressive edge going into the 2025 market?

J:
Yeah, it’s a troublesome, robust query. Sadly, lately, numerous it’s a numbers sport as a result of there are such a lot of folks on the market which can be competing for a similar properties, however that is the place you’ve gotten the chance to face out. I do know folks which have been very profitable with door knocking as a result of once more, they’re going to be lots of people who if you happen to present up at their door and any person’s randomly knocking on their door, they’re not going to be pleased. They’ll name the police, they’ll stroll out with a gun. However there are different people who find themselves identical to they’re starred for consideration. They love the concept any person’s knocking on their door, they’ve any person to speak to, and that’s a private contact that you simply’re not going to get from sending a letter or making a chilly name or placing up a bandit signal.
And I do know lots of people which can be very profitable with door knocking as a result of if you happen to discover the fitting individual, an older one who’s lonely, who’s simply searching for any person to speak to, chances are you’ll discover that needle on a haystack and have a bonus over different folks. The opposite factor is basically simply constructing long-term relationships. So too many people, after we take into consideration a negotiation, we take into consideration a one-time factor. We expect, okay, how do I get this home with out serious about the truth that even when I can’t purchase your home right now, even when there’s no method this transaction’s going to work out, there’s nonetheless a ton of worth in us persevering with to construct this relationship. Tony, if I am going and also you’re promoting a home and I say, Hey, I’ll provide you with 300,000 on your $400,000 home, and also you’re like, yeah, no matter. I’m certain I can discover any person to present me greater than 400,000.
Thanks anyway. If I stroll away and I say, no downside, I perceive I’m an investor. I notice that you simply don’t have to promote to an investor. I figured I’d give it a shot, however do me a favor if you happen to meet anyone or if in case you have any associates that want to promote a distressed property that they actually would profit by having an investor, let ’em know that I’m right here as a result of I’m all the time pleased to speak to ’em. And so now in your thoughts, I’ve now seated, Hey, if I ever talked to anyone that’s searching for an investor, this Jay man appeared very nice. He low-balled me, however on the finish of the day, he was trustworthy. He stated, Hey, it’s not going to work out. After which he left his card. You might refer me if you happen to try this. I’ll not hear from you Tony subsequent yr or the yr after, however who is aware of, 5 years from now, chances are you’ll discover any person that I’m the proper match for. And if I left that relationship on be aware, if I left the door open to working collectively in some capability sooner or later, you try this sufficient occasions and there’s going to be sufficient open doorways that individuals are going to be strolling by means of ’em on a regular basis.

Tony:
Jay, this anecdote you shared type of makes me consider one other query since you stated like, Hey, you provided your quantity. They stated no. You type of shake your arms and stroll away. I suppose, when do you that it’s time to truly finish a negotiation? Is there a marker or a degree the place you’re like, Hey, this isn’t going wherever. How have you learnt when to maintain pushing versus pulling again?

J:
And numerous occasions it’s apparent. Once more, if you happen to can’t decide a motivating issue apart from cash and the bottom value that they’re going to throw out there’s larger than you’ll be able to pay, there’s no motive to proceed. If Tony, you principally say to me, I don’t have to promote this home. I simply see a possibility to promote as a result of it’s an awesome market. I really feel like I can get greater than what it’s realistically price, and all I care about is making essentially the most cash, and I consider you, I consider there’s no different motivating components for you. At that time, I’m going to say, okay, what’s the bottom you’ll promote it to me for? And if that quantity is simply too excessive, we’re not going to return to an settlement as a result of all we each care about is cash. And after we each need the identical factor, there’s not numerous wiggle, wiggle room.
However once more, if yow will discover one other motivating issue, if yow will discover one thing else that they care about. So perhaps it’s, Hey, I’d actually like to promote my home right now, and I is perhaps prepared to promote it for a bit bit much less, but when I promote you my home for lower than 400,000, I’m not going to have the ability to discover one other place to stay as a result of each different home I need to purchase goes to value me 400,000. Okay, nice. Promote it to me for 3 50 and I’ll allow you to stay right here free for the following yr. That provides you a yr to seek out one other place. Possibly costs will drop, however you now have your $350,000 you can go begin doing what you need, and also you don’t have to fret about the place to stay for the following yr. You don’t have to fret about transferring.
You don’t have to fret about taking your children and placing ’em in a distinct college. You’d be stunned how typically the I’ll purchase your home for lower than you need to promote it for, however I’m going to allow you to stay there without cost for some time frame works. And it might finally lead to on the finish of that time frame you say you don’t need to transfer, nice. I want a renter for this property. Anyway, let’s discuss you renting again the property that you simply’ve been in for the final 10 years, and also you don’t have to depart in any respect. So there are alternatives to get inventive, however once more, it’s largely going to work when the problem is not only cash.

Ashley:
Properly, Jay, thanks a lot for becoming a member of us right now to have the ability to give everybody this wonderful information to negotiating actual property. Are you able to let everybody know the place they’ll attain out to you and discover out extra details about you?

J:
Yeah, completely. For those who go to j scott.com, the letter J-S-C-O-T t.com, that’ll hyperlink you out to my electronic mail tackle and all the things else I’ve occurring and would love to listen to from you.

Ashley:
Jay additionally wrote the e book co-authored along with his spouse Carol, the e book on negotiating actual property that yow will discover within the BiggerPockets Bookstore. And in addition if you wish to be taught extra about negotiation techniques, we’re going to have our keynote speaker for BiggerPockets Convention this yr will probably be Chris Foss, writer of By no means Break up The Distinction. So head on over to biggerpockets.com/convention, and you can even discover Jay on the Drunk realestate Podcast too, considered one of my favourite podcasts to take heed to. So if you happen to’re curious about studying extra about economics, market updates and actual property investing, ensure that to take a look at his podcast. I’m Ashley. And he’s Tony. And this has been an episode of Actual Property Rookie.