As a real estate investor, you meet sellers who expect you to pay unreasonable prices and to assume risk with no profit. In this article, I will teach you how to convince a seller to lower his price.
When a seller is unrealistic, it’s a good deal for the seller; bad deal for you.
You and the seller are thinking, “if you were just rational and reasonable about making this deal happen, we’d be able to come to agreement.” Here’s the problem, you’re both thinking in absolutes.
The discussion has two issues, the building and the price. You’ve reached a dead end.
Let’s rewind and use the following steps to see how to convince a seller to lower his price.
Step 1: When he asks, how much will you pay for my property? The seller wants to sell because it will solve his problems. He believes that the conversation begins with his solution–price for the building.
Tell him, “I want to pay you a price you’ll accept for the property. Before we go there, would you mind if I asked you a few questions?” Show respect of his position, that you’re on the same page, and that you want to make a deal happen.
Step 2: While you are in the real estate business, you’re in the people who own real estate business. You must explore the seller’s reasons for selling. He has personal motivations, plans for the money, timing issues, family plans, etc. Uncover this information.
Step 3: There are 3 components to making a deal: price, terms, and conditions. If you’ve completed Steps 2, then you know that he’s selling to satisfy his divorce judgment, his loan maturity, or he’s tired of managing and wants his evenings back to spend with his children. Start talking about terms and conditions. Terms and conditions solve these problems.
Step 4: Skip the price ultimatum to avoid being a loser. We learned to negotiate by moving to the price ultimatum too quickly. Don’t go there unless it’s a last resort. When you have two people arguing to save face by winning, in many cases, both lose.
Step 5: People rarely argue with conclusions they come to on their own. They believe stories they tell themselves. As the price focused investor, you are trying to convince the seller that he’s unrealistic, overpriced, and never going to get that price. Guess what, you’ve just convinced him that he should try for what he thinks he should get. He doesn’t believe you.
Guide him to his own conclusion. Remind him that he wants to sell the property to free his evenings to spend time with his kids and that he wants to stop answering tenant calls for clogged toilets.
Remind him that he told you he’s tired and wants his quality of life back and that you can help him do that. Now, ask him, “what will it take to make this happen for you?” Use the investment property to solve the seller’s problem by structuring price, terms, and conditions together.
When you’re in the people who own real estate business, it’s easier to solve these problems and reach mutually advantageous agreements.
When you skip these steps and enter the building and price discussion, you miss profitable deals, lose negotiations, and piss off people who feel disrespected by your inability to make a deal happen.
And if it’s too late and you’re in the building and price discussion, stop now. Tell the seller you’re embarrassed that you’ve made a mistake. Ask permission to ask some questions before moving forward. He’ll respect your honesty and you’ll be off to a good start!
Good luck and please share stories of your successes!