In order to talk to sellers correctly and close deals, you have to start with the proper approach.

Start by recognizing that you should not be talking to 95% of home sellers about purchasing their property.

95% of homes should be listed on the MLS and sold to retail buyers.

This is because there are no problems to be solved with these properties and there’s no value to be added, which is where you make your money as a real estate investor.

Some real estate investors focus on all properties, and think that the goal is to trick a seller into selling their home for less than it’s worth so they can make a quick buck.

Don’t be that guy.

Instead, shift your mindset.  As a real estate investor, you are a service provider. The service providers that make lots of money and live happy lives, are the ones that provide the highest value to those that need it most.

You can provide this value and make lots of money by focusing on the 5% of properties should not be listed on the MLS.

The types of properties in this category are inherited properties, hoarder houses, properties that must be sold quickly due to divorce, properties that don’t qualify for traditional mortgage loans due to the condition of the property, or properties that are so far behind on their mortgage or taxes that the bank or county is about to take them.

These are owners with very illiquid assets that have big problems that you have the ability to help them with and they are grateful for the service you provide. 

If an average person inherits a property that needs a complete rehab, it will typically cost them approximately three times as much as it would cost a local investor to rehab the property.  They want to sell to an investor.

If someone is about to lose their house and get nothing because they haven’t paid their tax bill in years and you can pay them money for it at the last minute instead.  An investor is their hero.

If someone has been accumulating books, cats, and everything from every garage sale for the past 40 years, they don’t know where to even begin to prepare their house for sale to a retail buyer.  They often want to sell to someone who won’t cast judgement and is willing and able to deal with the situation.

If two married people have grown to hate each other and the only thing that is forcing them to still communicate is the home that they don’t want.  They want to sell to an investor who can close on it quickly, even if it is at a discount to the retail market.

You are valuable in these situations because you are willing to take on headaches that most aren’t, you have invested in learning how to turn around a problem property, you have relationships with vendors and contractors that allow you to get renovation work done at a fraction of the cost and time of a typical homeowner, and you have financing options retail buyers do not.

In all of these situations you can be 100% transparent that you are an investor and share all the options the homeowner has, as well as the value that you will provide. 

Your intent should always be to solve a seller’s problem in the best way possible.  The solution that benefits them the most, and still works financially for you.

Like any other service provider, the real estate investors that solve the most problems for their customers (home sellers) are the ones that are most financially successful and most satisfied with the work they do.

So Where do these 5% of deals come from?

Remember that if your main deal source is a website that anyone has access to, then every time that you are looking at a house to purchase, there are about 10,000 other people also looking at the same house at the same time.

You will not find the 5% by scrolling through sites like Zillow or Redfin.  These are excellent sources of deals for retail buyers.

You have to do things that the average person isn’t doing in order to locate sellers with problems that you can help them solve.  Things like reaching out to sellers directly, marketing online, attending events and meetings, sending mailers, or knocking on doors.

These things are more challenging than looking at Zillow and this is great news! This is what creates the ability to make money through real estate.

Think about it, if all information was shared evenly and it was easy to access, all houses would be bought and sold like mutual funds at a set price based on factors outside on any individual’s control.

When was the last time you heard of someone working hard to find an off market mutual fund that they could add value to, manage well, and vastly outperform the market?

It doesn’t happen when you put your money in mutual funds, but in real estate investing, it happens every day. 

A real estate investor can use their talents to solve problems for people that allow them to make money regardless of how the overall market is doing.

3 Steps To Successful Negotiation

So if you first start off by speaking with the right sellers, it makes the entire next process so much easier.

Once you do have the right type of seller on the phone or in front of you, there are three important aspects that I focus on throughout the negotiation.

1. A thorough understanding of why they want to sell

This sounds obvious, but most don’t do this. 

Everyone sees the world from their own point of view and most believe they understand the other person’s situation and perspective much quicker than they actually do.

As an investor, you really need to try to put yourself in the sellers shoes and understand what they are going through, why they think they way they do, and what they really need.

You do this by asking lots of questions and LISTENING to the answers. Typically the people who think they listen the most are the worst at it.

If you think you listen well, listen more, ask more questions, get curious, truly try to understand the sellers perspective.

This builds a relationship and trust, which is the foundation to working with someone over the next several days, weeks or months toward a successful closing.

2. Knowing all the different ways that you can purchase the property

While I’m not an advocate for pursuing every real estate investing strategy out there (you need to specialize to gain real traction), you provide the biggest value to the home seller and are able to do a lot more deals, when you have multiple options for any one property.

For example, you might market to your target seller looking for a property that could be a great rental in the area you want to buy rentals in.

However, in doing so, you will come across lots of situations and lots of different types of properties.  Having a network of people that can provide other options and understanding when it makes sense to use a different buying option helps the seller and gets more deals done.

Examples might be realtors that could list a property that really should be sold to retail buyer, knowing buyers who rent or flip in other areas that will pay you a fee for the property, what you could offer if the seller can owner finance, attorneys who can help with a probate situation, etc.

By having many options, you are able to make money (even if it’s just a small wholesale fee) on the majority of the deals you pursue, rather than just the few that fit one defined criteria.

3. Understand what is going to make the seller feel great about the deal

Everyone wants to feel like they won a negotiation. Many times this feeling of winning is not based on bottom line purchase price.  Many times factors that are important to the seller are different than the factors most important to you.  There is no limit to the different terms that could be negotiated into a deal.

In the incredible book Thinking Fast and Slow, the author, Danial Kahneman, goes through study after study showing just how illogical the human brain is.  People think they make rational decisions based on facts, but the reality is that we are emotional beings who make decisions based on how they make us feel.

When you strip it back, the core of everything that everyone does is fueled by a desire to feel a certain way.  People might want to feel smart, secure, superior, etc.

A “good deal” is defined different for everyone. This is why step #1 above is so important to do.

Understanding what is most important to your seller and what is going to make them feel best about the deal leads to a win/win situation, rather than one party feeling ripped off or like the deal isn’t what they wanted.

Conclusion

Above all else, what will lead to lots of great deals, sustained success, and happiness as a real estate investor is good intent.

If you approach every situation and every deal with a focus on how you can best serve your seller in a way that solves their problem and still makes money for you, you will take actions that will lead to lots of success.

If you approach real estate investing wanting to trick someone into something they don’t want to do, or convince them of something they shouldn’t do, you might make money here or there, but it will not be sustainable, and you certainly won’t live a satisfying life.

Learn to love your seller. I’m Facebook friends with people who I purchased properties from years ago and often get emails and testimonials thanking me for helping them through difficult times or situations.

This is a very profitable profession and a very satisfying one if you approach it the right way!

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