I talk to many investors that get hung up on asking a seller what they owe on their property. Real estate investors that have not routinely asked this question and know better, often think that the seller might get mad at them for asking a question they feel is too personal or might say that’s none of your business. First, let me say that I have NEVER had a seller tell me that it is too personal or that it is none of my business. Perhaps it is how and when I ask the question, so let me share with you a little bit about how I ask a seller what they owe on their property.
Before I get started, let me point out that I ask this question to sellers that have called me. I do not call sellers that have ads in the newspaper, on a website or that have properties listed with a real estate agent. So, these sellers have called me and are asking me if I can buy their property.
Second, I want to stress that I ask this question late in the conversation. The conversation is not… “Hi, I’m James. What do you owe on the property?” In fact, I’ve spent a lot of time talking to the seller about the house, about their situation and then I usually ask them about what they owe.
While there is some variation in how it actually comes out, here is how I usually phrase it:
“Do you own the property free and clear or is there a mortgage I would need to take care of?”
And then, if they have a mortgage, I’d immediately follow up with, “And approximately how much would the balance be?”
Of course, there are other variations to the question like:
“Do you own the property free and clear or do you have a mortgage on it?”
But the basic idea is the same… you ask them if they own the house outright or if they owe anything on it and then the next logical question is how much they owe. In most markets, liens on a property are public information. You can find out what liens were put on the property when they bought it or borrowed money against it, but you often cannot tell how much remains.
So, asking how much a seller owes is nothing to fear. Just practice the question in advance so that you feel comfortable with it.
Until my next post,
James
P.S. We have some amazing training resources on how to talk to motivated sellers including our Calls With Motivated Sellers training programs that are available for Real Estate Investor Bronze Members free of charge.
I am down the last 4 sections of wholesaling resources to review and update for our webinar tonight on Setting Up Your Virtual Wholesaling Business and this section is about working with motivated sellers, negotiating and putting the house under contract.
This is a relatively wide sweeping topic with lots of nuances and an area that many real estate investors want to be able to hear how I (and other investors do it), but I want to make sure the basics are covered as well as give them access to hear how it is done.
So, here are the resources:
Put House Under Contract
- Download How to Talk To Motivated Sellers: Role Playing Volume 1 (Real Estate Course Download for Real Estate Investor Bronze Members)
- Download How to Talk To Motivated Sellers: Role Playing Volume 2 (Real Estate Course Download for Real Estate Investor Bronze Members)
- Download How to Talk To Motivated Sellers: Role Playing Volume 3 (Real Estate Course Download for Real Estate Investor Bronze Members)
- Download Calls With Motivated Sellers Vol 1 (Real Estate Course Download for Real Estate Investor Bronze Members)
- Download Calls With Motivated Sellers Vol 2 (Real Estate Course Download)
- Read How To Write An Offer (Article)
- Download Real Estate Contract (PDF Download for Real Estate Investor Bronze Members)
- Read How To Get The Paperwork For Your Deal (Article)
- Read Minimizing Earnest Money For Wholesalers (Article)
- Read Options Versus Purchase Agreements For Wholesalers (Article)
Starting to go through the list of resources above will give you a pretty good idea of how to talk to motivated sellers including what to say and how to handle objections as well as how to actually get a written agreement on the property (whether that is a sales contract or option agreement).
Until my next post,
James
I was fortunate enough to have some great real estate investing mentors over my career as a real estate investor and one of my mentors, the late Brent Grove, taught me the importance of being on the right side of the desk.
He taught me that you should set up your business to have people come to you and ask you if you want to buy their house. You do not want to chase people and ask them if they will sell you their house. There is quite a bit of subtlety to this business philosophy, which I will explore in this article.
One of the biggest benefits of having people approach you instead of approaching them is that, when they come to you, you are automatically established as a credible expert. They came to you for help with their situation or problem and while you still have to strengthen your credibility with them, it is much easier than having to convince someone you’ve called – who has never heard of you – that you are credible.
This benefit often shows up for us as real estate investors when we ask those somewhat sensitive questions about the seller and their property. For example, in my script for gathering information about a property, I ask if there is a mortgage on the property. If you have not established yourself as credible or you are chasing leads, this is a very, very difficult question to get answered – but when people call me I rarely run into a problem getting an answer. If you don’t believe me, try calling 10 sellers from the newspaper or from a classified ad website and ask them for info about their loan balance. Even though it’s on public record, you’re likely to get very few people who will feel comfortable enough to tell you.
Now, try asking that same question to someone who calls you on marketing you have out saying that you buy houses. For me, the difference is extreme: better than 9 out of 10 give it to me without hesitation.
The benefit of not chasing and being on the right side of the desk is also apparent when you make an offer. Make a lower than expected offer to someone who you called out of the blue and they’re likely to be offended. Make a lower than expected offer to someone who called you and you will get a much different result because they came asking what you could do and you told them what you could do. A different perspective yields a much different outcome.
Overall, I think you will find a huge benefit to having marketing out and having motivated sellers and buyers calling you rather than chasing down sellers that have not already pre-sold themselves on you and your service before they picked up the phone to call you.
Until my next post,
James
P.S. I had some great consultants and mentors… do you? Sign up for our Real Estate Investor Bronze Membership now.
You’ve probably heard it before, but everything is negotiable. As someone who has dealt with literally hundreds of real estate agents in markets all across the country as well as thousands of real estate investors, I see and hear many strange things.
It amazes me what some investors think they can do and it amazes me even more what real estate agents and brokers don’t think can be done.
Let’s talk about Earnest Money as an example. I’ve talked to a handful of real estate agents that believe you can never put a house under contract with just $20 in earnest money. Not true.
I’ve done it. Dozens of people I personally know have done it. Can it be done via the Multiple Listing Service (MLS) when working with real estate agents? Not usually. However, earnest money is completely negotiable and can be used to show that you are either a weak or a strong buyer.
If you go to a real estate agent to write an offer to buy a house and you tell them that you want to put up $20 (or some other ridiculously low amount) as earnest money, I would not be surprised if they told you to work with someone else. If you were my client, I would not want you wasting my time–especially at $4 per gallon for gas–taking you to see properties only to have you show the seller you’re really not serious when making an offer to buy.
Putting up a fair amount in earnest money can show that you are a serious buyer. If you are presenting a similar offer to another buyer with a larger earnest money deposit, you have a better chance of getting your contract accepted and buying that property.
Does that mean that you need to put the money up when you write the contract? Not necessarily. Talk to your agent or broker and find out if you can write the offer and have the earnest money due within a few days of having the offer actually accepted.
If you are actively investing and making multiple offers, it really helps to conserve your cash and only pay earnest money after a contract is accepted. I recommend this to investors that write contracts with me in my market. This is especially true with short sales and bank owned (REO) properties because it can take weeks, or even months, to find out if a contract has been accepted.
So, while you may be able to put a house under contract with very little in earnest money, it is NOT the norm when buying through the MLS and shows that you are not serious about buying. Rely on the experience and knowledge of your local real estate agent to discuss the benefits and downsides associated with the amount and timing of earnest money in your particular market.
Until my next post,
James
P.S. For our Real Estate Investor Bronze Members where I teach strategies for buying properties outside the MLS by using marketing it is a very different situation and relatively low earnest money is the norm not the exception. Sign up for Real Estate Investor Bronze Membership to access our extensive training collection of over 100 topic specific real estate courses plus on-going training and consulting sessions.
As real estate investors, it is important to remember that the “asking price” of a house is not the same as the sales price on a piece of merchandise in a retail store. While there are those among us who will negotiate with anyone, anywhere – most of us just don’t feel comfortable haggling with every salesperson that we meet (especially those not paid commissions). The majority of us realize that unless there is something wrong with the item, then an hourly employee just isn’t in the position to offer us a discount, even if we are a world-class negotiator.
This simply is not the case when it comes to the asking price for a house. It really is just what the seller is “asking” for. As buyers, and especially as investors, we may reasonably ask the seller to accept a lower price, because he does have the power to say, “Ok, I’ll give it to you for that much.”
You can think of asking price in this way: when a house first comes on the market, the seller prices it at the high end of what they expect the market will pay. Over time, if their price isn’t compelling enough to force a sale, then they will lower it. Sometimes a house is reduced in price many times before it finally sells. Wouldn’t you be doing the seller a favor by making your lower offer in the beginning and giving them a chance to sell their house right away rather than after months of letting their house languish on the market unsold? Of course, many sellers will say no, but you needn’t fell shy about asking.
My big picture advice when it comes to asking price: it is not some fixed magical number. It is an educated guess of what the seller (and his/her real estate agent) thinks the market will pay. There are many factors that can cause this number to change. So don’t be afraid to ask for the price you want!
Until my next post,
James
P.S. For our Real Estate Investor Bronze Members we teach a variety of powerful negotiating tactics and strategies that can be used to buy, sell and rent properties better. Sign up now and download a variety of real estate investor training courses, access our systems, checklists, forms plus receive on-going training and consulting plus much more.
As investors, sometimes we forget that good deals are ours for the asking. The critical point is that we have to ASK. Good deals seldom just fall into our laps, or miraculously appear the first time we look at a potential investment property. We need to structure them, ask for them and make them into deals.
Of course, this means that you will frequently hear “no.” This is why so many of us don’t want to ask, because we fear the word no. Or we are embarrassed to ask for something that the seller isn’t already offering. Or we think we are insulting the seller by asking for a discount. We must get past these hang-ups to become successful investors.
Any good salesperson knows that they have to ASK for the sale. They also know that they will frequently hear “no.” However, the good salesperson trains himself to translate every “no” he hears into the conviction that he is just one person closer to hearing “yes.” As investors, we need to think like this as we ask for the deals that we want.
So, next time you make an offer, don’t forget to actually ask for the deal that you want. Do not be afraid of hearing “no.” It is a necessary step on the journey towards “yes.” Ask for the discount that would make the deal really work for you. Ask for owner financing or terms.
You never know what a seller is willing to consider until you ask. Once you have opened up an area for negotiation… like owner financing… you may be surprised at what comes from it. The seller may say no to your original request while offering something else that they never would have offered originally. Maybe you asked for 100% owner financing, and they returned with the offer of 30% or better. You won’t know unless you ask.
To conclude, the mindset of a successful investor must include this willingness to ask. Never be afraid to ask. The worst possible outcome is that the seller might say “no.”
Until my next post,
James
P.S. A major benefit of our consulting and mentoring program is that you get to experience the belief structures of other investors and especially my own beliefs based on what I have done and seen with other real estate investors. Just having me tell you what I would ask for might encourage you to actually ask and get a much, much better deal than you thought was originally possible.
