Discover how to get more of your offers accepted with my 7 step process as well as learn what NOT to say when presenting offers to sellers. This is a crucial skill that the most successful investors have mastered and it's something you can do too when you follow what I share in this video:
When you are submitting an offer through a real estate agent on a listed property, the typical winning formula looks like this:
- The higher the price in your offer the better
- Financing is ideally all cash, secondary would be conventional, worst would be FHA.
- The shortest closing date with no contingencies or the least possible
This is the formula Wall Street is using to buy main street and there’s no art to it. There is one strategy you can try when you're negotiating a conventional deal that doesn't have multiple offers, and that is to connect directly with the seller. Real estate agents don’t want you to know this, but if you're not a licensed agent, there's no law that says you can't contact the seller directly. And that can make a world of difference because when the agents are in the middle some of the negotiations get lost in translation. If you can connect directly with the seller, you can clear up some of the confusion. Again, none of that matters when you have a multiple offer situation and Wall Street coming in, paying more, all cash, and closing in two weeks with no contingencies.
That being said, what is an art is getting offers accepted by off-market sellers. These are people that have not hired a real estate agent and the property isn’t listed. So, when you are working directly with off-market sellers, you want to follow this seven-step process.
Off-Market Seller 7 Step Process
Step 1: Respond Immediately
As soon as that seller lead comes in, respond immediately. If you can’t talk, send a text. It's a small thing, but it makes a huge impact. You know this to be true yourself when you work with companies that respond quickly and efficiently. Immediate contact doesn‘t just have a positive impact on the seller, it also serves a purpose for you. Your goal is to find out if they are truly a seller and have the ability to sell the property. You can get the basics from them in step one and proceed to step two.
Step 2: Meet in Person
The more information you can get over the phone the better, but don’t let that deter you from meeting with the seller in person. Meeting in person makes a huge impact, especially these days and it will help you with the other steps. So, don't neglect this step even if it’s a long drive and you’re worried about the cost of gas. It may cost in gas to drive over there, but the numbers are huge in the form of profits. That's just the cost of doing business.
Step 3: Build Rapport
Sellers do business with investors they like, and that’s because people trust people they like. When you're working directly with off-market sellers, they constantly think you might be trying to take advantage of them. That means it’s important you build trust and building trust means building rapport.
Many real estate investors skip this step which is a critical mistake. When you don’t build rapport and establish trust, the rest of the seven steps don't work as well. Even though it's an off-market deal, you'll get dropped in to price financing, closing date, and contingencies. You need to stay out of that realm and that happens when you build rapport.
How Do You Build Rapport?
This is an expansive topic and there are lots of resources available on the subject, from how to mirror body language to finding common ground. So, find some common ground which will encourage them to let their guard down. And when they let their guard down you will be able to better understand their situation, which will help you tailor an offer that is more likely to be accepted.
Step 4: Ask Strong Questions and Actively Listen
This is arguably the most artistic step of this seven-step process. Some examples of strong questions are:
- What are you looking to accomplish?
- When do you want to move?
- Where are you going?
- What are you going to do with the money?
This also includes asking questions that create doubt or uncertainty in the seller's mind about the state of the property. Some examples of questions that create doubt are:
- Do you know if there's any termite damage on the property?
- When you bought the property seven years ago, did you get a termite inspection?
- Have you paid for a monthly or yearly termite contract with a pest control company?
- Do you have a survey for this property? Are you certain that fence over there isn’t encroaching on the neighbour?
Ask strong questions to create uncertainty in the seller's mind about the property without undermining your relationship with them. Remember, you must build rapport and part of asking strong questions is actively listening. Actively listening means not only hearing what they say but following up with questions based on what they said.
The goal of this step is twofold:
- Determine their circumstances because that will play a key role in the way you submit your offers.
- Cast some doubt on the property.
And to cast doubt you must avoid praising the property. You don’t need to start praising their ideas to build rapport. Just ask strong questions and actively listen.
Step 5: Present Indisputable Facts
Indisputable facts are facts that impact the salability of the property and they apply regardless of who purchases it. You're presenting information they have to contend with. An example would be the uncertainties with the termites, or that roof leak which could have caused mold up in the attic. These are indisputable facts that help with your offer. Another indisputable fact may be comparable sales. In today's market it's not always helpful, but if the seller has already mentioned a neighbour's house, sometimes you can refute what they thought was fact.
Presenting indisputable facts will help lay the foundation for why your offer makes sense. This is critical to the negotiation because it sets it as a principled negotiation versus a straight-line negotiation. With a straight-line negotiation, you go back and forth negotiating a price and end up somewhere in the middle. A principled negotiation is based on what the property will sell for once it’s fixed up. Discover the formula for predicting final sales prices in my video Predicting Final Sales Price.
Step 6: WIIFM Radio
Do you know what this station's all about? It's about What's In It For Me, meaning the seller. What is your offer going to do for them? Often when investors present offers they talk about what they need to make it work for them. The seller doesn’t care about what you need. What matters is what is important to them. So present your offer in such a way that it reflects what you learned from them. For example you could say,
"You shared that you don't have a place to move into yet. We can help you find a place. I can't promise we're going to find exactly what you love, but we'll give you as much help as we can to find something that works for you. And we can make the closing date flexible. I can set the closing date on the contract for 45 days, but if you find the right place sooner, maybe we can close early. Or if you need an extra week or two to move out, we can be flexible with that too.”
Tips for Submitting Offers
Submit More than One Offer: This will give them an option and it makes them feel like they've made the decision. They wanted this offer, not that offer, but all roads still lead back to you. This a critical component. And of course, you are tailoring your language to focus on what is important to them. A key component of persuasion is to share what's in it for that individual. And if you’ve been asking strong questions and actively listening, you will know exactly what that is.
Setting a Deadline: When some investors are presenting their offers, they push the seller to decide right then or loose the offer. You can do that if you like, but I think it depends on the circumstances. Remember, this is an art. In some instances if you take that approach, they coil and won't be as open. They are confused because you've been so flexible and different than every other investor and then, suddenly, at the very end you become completely inflexible.
We do set a deadline and we try to get them to sign right then and there. But you need to be careful and determine if that will push it too far. What you do also depends on if they're talking to a lot of other investors. If they are, then you might want to tie it down, because if you leave it open for a day, those other investors are going to swoop in.
Best Offer Guarantee: If the seller is reluctant to sign and I know there are other investors involved, often I will give them my best offer guarantee. This means if someone else offers more money or a different arrangement, I will not only match it, I’ll beat it. It doesn't always work, so when in doubt the best thing to do is get them to sign right then and there.
Step 7: Follow-Up
Follow-up is the most profitable thing you can do as a real estate investor: And following up with a seller you presented offers to is likely the most valuable time you will spend because you’ve already been through this 7 step process with them and made an offer.
Now, that offer didn't get accepted, either because they went with another investor or you simply couldn't get to where they wanted to be. But by following up, maybe you can make some adjustments to your offer.
Follow-up is critical to getting more deals: You'll get more offers accepted in follow-up than everything else combined because things happen. Other investors flake out, they change their mind or their situations change. And if you just sulk because you didn't win at step six, you're missing it. As Zig Ziglar used to say, "The fortune is in the follow-up.”
Learn my strategy for following up in Magic Bullet to More Deals.