Single Family Homes - The No Risk Investment! - Part 10 EIGHT
TALKING WITH SELLERS
After you have screened a seller on the telephone with the list of
questions you found earlier in this manual you will arrange to meet with any
homeowner who seems that he is motivated to help you buy the home. The
real job of negotiating the purchase must be done face to face. It is only
with a personal meeting between you and the seller that you can truly learn
what the needs of the seller are and how you can structure a deal that will
satisfy those needs. Even if a real estate agent is involved you must be there
to negotiate the terms of the purchase in person.
The first rule of negotiating a home purchase is to be friendly and
likeable. Smile often and talk with a soft, everyday voice. Don’t put forth a
forceful, blustery demeanor. It is very important that the sellers find you a
likeable, friendly, knowledgeable person. Use good body language. No
quick gestures. Don’t fold your arms across you body. Don’t make fast
moves. Let your body be relaxed and open. Body language is a very subtle
form of communication and it can help you earn the trust of the seller.
The reason you have one mouth and two ears is so that you will listen
twice as much as you speak. It is important that you listen to what the
sellers are saying. Ask questions and listen! Ask lots of questions. Get
them talking about anything that interests them. Do you see family pictures
displayed in the house? Ask about them. Do you see a collection of some
kind? Ask about it. Do you see awards or trophies? Ask about them.
Admire the way a room is decorated. Ask and listen!
Ask questions about the house and neighborhood. How long have
they lived there? Why are they moving? Have they had any problems with
house or neighbors? How are the schools? Do they always have good water
pressure? Is garbage pickup satisfactory? Have they purchased another
home? Are they moving out of state? Do they have a deadline for their
move? What will they do if they aren’t able to sell the home?
People like to talk to someone who will listen. If you will listen, show
interest and understanding, they will like you! In return you will learn much
about them and the reason they are selling. Important facts that will help
you frame your offers. Never turn the conversation to talking about yourself.
Never say anything negative about the property. Don’t do anything
that would cause the sellers to become defensive. If you spot some minor
problems with the property say something like “I can easily repaint this
room.” or “My handyman is good at plumbing and it won’t be to big a job
for him to replace that tap.” In this way you are pointing out any problems
with the property, but you are doing it in a positive way that will not offend
the sellers.
All owners of the property must be present when you visit. Make that
clear when you arrange to meet with them. You don’t want to present an
offer to a wife and have her say that she will have to talk it over with her
husband when he comes home.
To prepare for the visit you have researched the property on the
Internet as we explained in an earlier section, or you’ve talked with a real
estate agent to gather information. You should know what similar properties
in the neighborhood have sold for. If the seller says that a home just down
the street sold a few days ago for $110,000 you can reply that you heard the
same, but when you checked it out you found that $110,000 was the asking
price and the actual sale price was $91,000.
Never get into an argument with the sellers. Always try to agree with
them and then present your information in a friendly and informative
manner.
It is important to understand a fact about anyone who is offering a
home for sale. The offer a seller is expecting is one that is slightly below
his asking price with a cash down payment to a new loan, so that the seller
can get all his cash within 30 to 60 days! That is what the seller is waiting to
hear. If you surprise them by just plunking down any other kind of offer
without preparing them for it you will get a quick refusal. Even though they
may have an urgent need to sell you need to prepare them for your offer
before you lay it on the table.
Get them ready for your offer by asking things like, “Would it be
helpful if we could wrap up a sale within the next two weeks?” “If I
could help you with the next mortgage payment would that be a good
thing?” “Would you like to live in the house for a few months after we
complete the sale?”
You learned much about their needs during the time you were asking
questions and listening. Now you want to begin suggesting ways you might
come to their aid as you structure a deal. Begin making your offer from the
bottom up. Get the easy points out of the way first so that you begin a
pattern of agreement between you and the seller. “Could you help me with
the down payment by taking some cash now and some later?”
Then agree on how much and when. “Could I pay you some of the
purchase price with monthly payments?” You are asking them to carry
back a second mortgage. Work out how many years they will be willing to
carry it. You are building your purchase agreement a little step at a time.
Ask for a few things they can refuse to give you. Ask for the washer
and dryer. Ask for the refrigerator. Ask if they will replace the kitchen floor
covering. Ask if they will replace the window screens in the bedrooms. Ask
if they will have the carpets cleaned. You would like to have all of this, but
the deal does not hinge on any of it. It gives them the chance to say no to
little things and makes it harder for them to say no to the key parts of your
offer.
Ask them what their best sale price is, “What’s the best you could
do if I bought your home today?” If it is close to reasonable you can
proceed from there in putting together your offer.
You can actually begin filling out the purchase agreement as they
respond to your questions. Just say, “Let me make a note of that, so I
don’t forget.” If they agreed that you could make all or part of the down
payment in monthly payments just write it into the agreement. If they agree
to a lease/option deal, write it down. By the time you are finished with the
discussion your have completed the purchase agreement.
Don’t mention the word “contract”. Just say “paperwork”. Don’t
ask them to “sign the contract”. Ask them to “OK” what you’ve been
talking about as you hand them the agreement and a pen.
There may be times when the sellers feel that your questions are too
personal and they show some anger. Quickly apologize and explain that you
don’t mean to pry into their personal affairs, but this is personal for you too.
Tell them that purchasing their home involves a huge debt and that you are
just trying to decide what kind of plan will be best for both of you. Stress
that the more they can help you with your purchase the sooner the home will
be sold and they can get on with their lives.
What if they won’t sign? If they say they want to think about it
suggest that you all think about it together right then and there. Go over the
agreement pointing out how it benefits them - solves many of their
problems. Ask them what parts are troubling them and then explain those
parts and why they are important to both of you. Explain there always have
to be benefits for the buyer in an agreement or why would you or anyone be
interested in buying? Let them know that you understand their problems and
needs and that you have found ways to satisfy both buyer and seller in this
agreement.
They still won’t sign! Along the way you have let them know that
you are a real estate buyer who buys property for profit. Now you let them
know that you have the owners of other properties waiting to discuss a sale,
but they can’t wait forever.
Explain that you will give 8 hours (or some other time limit), but if
you haven’t heard from them by then the offer will be void and you will
begin talks with the others. Write the deadline in the contract: “This offer
void if not accepted and OK’d by 4:00PM, July 22, 2008.” Underline those
words in the agreement with a bold stroke.
8-4
Remember, you want to be talking with motivated sellers - people
with a real need to sell within in a limited period of time. If they won’t
accept any of your suggestions for a deal that would provide some benefits
for both of you, move on! Don’t beat your head against a brick wall. You
soon will become adept at spotting those you will be able to deal with and
those you won’t. Your time is precious. Don’t let people rob you of it.
When it comes to putting a deal together you learn by doing. The
more often you talk face-to-face with people the better you will get. Look
for opportunities to practice your skills. Don’t be disappointed if you are not
successful the first few times. That is part of the learning process. It is the
dues you must pay to reach your financial goal. We all have to learn by
getting out there and using our wits. You’ll soon come to enjoy it. It will
become one or two of the most profitable hours of your life!
Part Three
PART ONE
Introduction
Chapter One
Chapter Two
Chapter Three
Chapter Four
PART TWO
Chapter Five
Chapter Six
Chapter Seven
Chapter Eight
NINE
GET IT IN WRITING!
Real estate contracts must be in writing to be binding. Verbal
agreements have no authority in real estate dealings. Don’t offer verbal
agreements and don’t accept them. Serious people are willing to put the
terms of a purchase in writing and sign it. If the other person fails to live up
to a verbal real estate agreement you would be hard pressed to bring a
successful legal action against them. Get it in writing!
Is there a standard real estate purchase contract? No! In most areas
there is a standard contract that is used by real estate brokers. That’s the one
they will use to write up a deal if you are buying a home from a seller who
has listed his property with an agent. Must you agree to use that contract?
No. You can use any form of contract you wish. In most cases it is OK to
use the standard broker contract if you direct the broker or agent to include
clauses and conditions that shape the deal to your needs.
Here’s an example of a property represented by a broker/agent. You
see a “For Sale” sign in the yard of a home that you might be interested in
buying. You call the broker’s office at the number displayed on the sign.
You ask for information concerning the property at the address that interests
you. You are told that such and such agent is the listing agent and that if
you leave your number the agent will return your call when he/she gets back
to the office. (Sometime you are given the agent’s cell phone number.)
Real estate agents must work under a real estate broker. They are
agents of the broker. The broker is responsible for the actions of the agent.
The broker provides office space, advertising and supervision for the
agent. The broker’s agents make their living by finding home sellers and
contracting to represent those owners in their sales efforts. They also find
buyers for homes that they or other agents have “listed” – listed means they
have contracted to be the representative for the homeowner.
The listing contract specifies that the broker (not the agent) will be
paid a percentage of the sale price if they find a willing buyer for the home.
The broker will pay the agent a percentage of the broker’s commission as
compensation for finding and negotiating the deal.
Real estate commissions can be any amount agreeable to the broker
and home seller, but they usually range between 5% and 7% of the home’s
sale price. If there are two agents involved – a seller’s agent and a buyer’s
agent – the commission is split between their two brokers and then the
brokers pay the agents.
When you call about the home the listing agent will contact you and
you can ask questions about the home and the sellers. You can use many of
the questions that you would use to screen a homeowner who is offering a
property for sale. Then you decide it might be worth the time to go and take
a look inside the home, so you arrange to do so with the agent. After you
inspect the property you feel a deal may be worth pursuing. You leave the
agent and do your research to learn all you can about the home and the
seller. Then call the agent and arrange for the two of you to meet with the
sellers and you attempt to work out a purchase deal. Don’t allow the agent
to present your offer alone.
Before the meeting explain to the agent that you buy homes as
investments and that you like to do a lot of talking with the sellers to
determine just how you should frame your offer so that it will be attractive
to all concerned. Tell her it would be very helpful if the agent would just be
a listener unless the sellers turned to her for the answer to a specific
question.
Some agents will be very cooperative others less so.
Remember the agent has a legal responsibility to represent the seller
and look after their best interest. That’s why you want to spend the time
talking to the sellers and working out a deal that will be acceptable to all
parties. If the agent hears you doing this in a respectful and helpful manner
she can offer no real objection to the deal you are offering.
Just as when you are negotiating with sellers alone you start with the
small parts of the deal. Agree on each point before moving up the ladder to
price and other important details. You will be leading the agent right along
with the seller.
Never try to cut an agent out of a deal. They work hard for their
money and you must deal with them fairly just as you will with all others. If
you have the misfortune to encounter an agent who just won’t let you talk to
the sellers as you wish, cut the meeting short. Call the sellers the next day
and ask if you could get together with them for a few minutes without the
agent. Say something like the agent seemed a little tense that day and maybe
the two of you would have better luck talking alone. If they are really
motivated they should jump at the chance. If they seem a bit hesitant tell
them that you will be glad to give them time to show any agreement you
reach to the agent before the deal would be final.
When you meet with them workout the deal, write it up on your
contract form and have them sign it.
We have described two typical situations. In the first the agent is
present and can write up the agreement on the standard real estate contract
used in your area. In the second situation the agent is not there and you
would use your own contract for the deal.
In situation number two you have offered the sellers time to show the
contract to the agent. Do this only if they ask to do it. Give them a deadline.
Something like 5PM the next day. Write in the contract that they have until
then to cancel the deal. If they have not called you to cancel by that time,
and they had signed the contract during your meeting, you have a firm
agreement.
Every agreement you make should have a deadline. That gives people
a reason to get things done quickly. You always let people know you have
other deals waiting, so you can’t waste time on this one. If you have an
active plan as we suggest you really will be just a day or two away from
another opportunity.
Some agents are inexperienced or poorly educated and may object to
seeing a deal written on a contract other than their standard form. I have
even had an agent tell me that the law required that the “standard contract
form” be used. Not true! You can write a contract on the back of a napkin
and it will be legal and binding to all parties who sign it.
Be gentle with an agent if they seem flustered when seeing your
contract. Most have never had experience with anything but the standard
form and are cautious with this unfamiliar contract. Most of the time you
will not be dealing with homes listed with brokers. You’ll deal directly with
owners and have no agents in the middle.
Next we are going to present a real estate purchase contract and
explain exactly the meaning of each section. You will see that a real estate
contract is not a mystery. You can easily understand it. You must be able to
clearly explain it to sellers, so that they will not be frightened by it.
This will be a contract that you can use when buying a home. It is a
basic contract that is easy to understand. It is important not to have a
contract that is too one sided in your favor. Whenever I am putting together
a deal I try to think how I would feel if I ever had to explain it to a judge.
Would it seem like a fair and reasonably balanced contract? Yes, I want the
contract to lean in my direction, but not so much that it might crush me in a
legal dispute. No, I have never had legal problems and it may be because I
use that little mental trick?
As you read the contract you will see there is plenty of protection
written for both buyer and seller. A numbered explanation follows the
contract. This document and accompanying materials are designed to provide authoritative information in regard to the subject matter covered in it. It is for illustration purposes only and presented with the understanding that the author and publisher are not engaged in rendering legal, accounting or other professional opinions. If legal advice or other expert assistance is required, the services of a competent professional should be sought. |
