Posted by Ellie (NYC) on July 16, 2002 at 13:49:18:
David,
I had the same thoughts as Dan…excellent answers! I never thought of it that way! Makes it a lot more comfortable to use that approach. Thanks!!!
-Ellie
Question #8 Biggest Mistake Negotiating - Posted by David Finkel
Posted by David Finkel on July 16, 2002 at 10:51:02:
I’m almost done answering the top ten questions I got at the CRE COnvention. Again, when I have finished writing out all the answers I will break it into chunks and ask JP to post them as articles so you can read all the earlier questions and answers in one place.
Many of you have asked me how to find the earlier posts. I don’t know how to find them either, but that’s ok because like I said, I’ll have all ten in article format for you soon after I finish question 10 over the next few weeks.
Question 8: What is the single biggest mistake that you see investors make when negotiating with sellers?
Answer:
The single most important key to closing the deal is to remember to never talk through any numbers or specifics of price and terms before you have spent time talking through the seller¡¦s motivation to sell the property. In order to get a great deal on a property you need the seller to feel motivated. We use the word feel intentionally. It¡¦s one thing if the seller intellectually knows he is motivated. It is quite another thing for him to feel it in his gut. One is an intellectual response, the other an emotional response. When you can help the seller cut through the layers of denial and get to the emotional core of why this property you are talking with them about buying is such a burden to them, then you will get a great buy.
To draw out the seller¡¦s motivation is something we call ¡§building¡¨ the seller¡¦s motivation. This is the process by which you help guide the seller¡¦s thoughts to the emotional core of why they are selling and why it has grown to be such a negative thing that they haven¡¦t sold the property yet. You accomplish this primarily through the use of questions, many of them will be the negatively phrased questions you learned earlier in this section. It takes a soft touch to draw out exactly what the seller¡¦s real needs are in a way that helps open his mind to your creative solutions. Remember, motivated sellers are often in a stressed emotional condition and you have to be very respectful and gentle in dealing with them.
Here is a list of great questions to use when you are building the seller¡¦s motivation in your next negotiation:
?h What were you really hoping I could do for you here today?
?h What else have you tried in the past to sell the house?
?h And that worked really well?
?h Why do you think it didn¡¦t work out as well as you planned?
?h What happens if you can¡¦t sell, what will you do then?
?h When did you want the property handled? Six months, twelve months? I mean, ideally when would you have the property handled? [Author¡¦s Note: Don¡¦t change this question. It works so well just the way that it is. It taps into the power of the negative phrasing by letting the seller think, ¡§Oh no! I could never wait that long to sell!¡¨ A motivated seller will almost always come back and say to you, ¡§No I don¡¦t want to wait that long. I want to sell it right now, today.¡¨ Can you see the difference between asking the question this way and just asking them when their ¡§deadline¡¨ is? If you ask them this way the seller isn¡¦t on their guard and they will feel the emotional connection to their answer. If you ask a seller when their deadline to sell is they will most likely be very cagey and evasive in their response. This is a subtle technique, but with a little practice will make a big impact on your success negotiating profitable deals.]
Here is a sample conversation of how this might sound:
Investor: So what were you hoping I could do for you?
Seller: Well, I wanted you to buy my house.
Investor: OK, what have you tried in the past to sell it so far?
Seller: I tried selling it For Sale By Owner for a while, then I had it listed with a realtor for a few months¡X
Investor: You say you tried selling it For Sal By Owner for a while. How long did you try selling it this way?
Seller: About 3 months, then I listed it with a realtor.
Investor: And so selling it For Sale By Owner worked really well for you?
Seller: No, not really. I just didn¡¦t have the time to spend all day on Saturday and Sunday to show the property. It was hard, I was tired from working all week and then I¡¦d have to go out and get the signs up on Friday for the open house, and take them down on Sunday.
Investor: Oh, but at least I¡¦m sure you had a lot of good offers right?
Seller: We had some, none of them seemed to pan out though.
Investor: Oh, would you mind sharing with me why you didn¡¦t accept the written offers you got?
Seller: Well, we only got two of them in writing, and they were too low.
Investor: Oh, but I¡¦m sure when you countered their offer they came to their senses and gave you a much higher offer right?
Seller: No, they just told us they could get the same house for less a few blocks over and disappeared.
Investor: Oh, well how long did you have it listed?
And now you are off spending time drawing out the motivation about their experiences selling with a realtor. Notice how you let them bring up the bad stuff. You merely asked questions that made it very easy for them to feel comfortable opening up. All throughout this example you can see how we lace in the negative phrasing designed to capture the seller¡¦s inherent tendency to mismatch you. The more time you spend letting the seller tell you all the reasons he or she has had trouble selling, the better deal you will get. Remember that the next time you are tempted to rush past this step. The amount of money you make in the deal is directly proportional to the time you spent building the seller¡¦s motivation.
Re: Question #8 Biggest Mistake Negotiating - Posted by Stacy (AZ)
Posted by Stacy (AZ) on July 16, 2002 at 13:53:18:
David, good post. I forget where I first heard of this “strategy” if you can call it that. I think of it as “you have to hurt them to help them”. It works VERY well for me, although I’m maybe a little more subtle in getting the seller to come to these painful conclusions himself.
I think it’s important to make a distinction, though, for any newbie that might misinterpret this whole subject. The goal is NOT to cause the seller undue pain. It may seem that way. The goal is to ease the seller’s head out of the sand, get him out of a defensive-denial stance, and to get him to face the truth, the reality of his situation. And it does no good to TELL him what that reality is. He has to come to the conclusion himself.
Very powerful if used well.
Re: Question #8 Biggest Mistake Negotiating - Posted by Dan (Cincy)
Posted by Dan (Cincy) on July 16, 2002 at 12:46:20:
David,
I’ve read a book of yours and while it’s probably my favorite one that I’ve read on the subject, the same question that caught my mind there came up here.
Specifically, it seems to me that some of these questions are more likely to annoy the seller than help.
Now, you’re the expert and I’m not, so the answer may just be that it works so use it.
But an example from your post:
Seller: I tried selling it For Sale By Owner for a while, then I had it listed with a realtor for a few months¡X
Investor: You say you tried selling it For Sal By Owner for a while. How long did you try selling it this way?
Seller: About 3 months, then I listed it with a realtor.
Investor: And so selling it For Sale By Owner worked really well for you?
My reaction as the seller would be to think “Duh - if it worked well for me than I would have sold it? Who is this guy?”
Just that it seems like such an obvious question that it would seem off-putting to me if I were the seller?
Thoughts on this?
Re: Question #8 Biggest Mistake Negotiating - Posted by David Finkel
Posted by David Finkel on July 16, 2002 at 12:53:42:
Dan,
If the seller reacts strongly that is GOOD. You want the seller to react EMOTIONALLY to the situation and not just intellectually. The whole idea is to deal with the seller on an emotional level FIRST (motivation step) and then on an intellectual level (money) second.
Also, think about it. If you are selling your house, would you prefer to sell it to someone SMARTER or SLOWER than you? I am guessing the latter. WHy? Because you would be more comfortable you weren’t being taken advantage of.
Still it might seem strange our approach to negotiating. We have seen great results ourselves and our students. Try it out and see for yourself.
David
Re: Question #8 Biggest Mistake Negotiating - Posted by Nate(DC)
Posted by Nate(DC) on July 16, 2002 at 15:45:30:
I would agree. You’d be amazed at how much people are willing to tell you when you “play dumb”.
NT
Re: Question #8 Biggest Mistake Negotiating - Posted by Dan (Cincy)
Posted by Dan (Cincy) on July 16, 2002 at 14:30:50:
David,
Thanks. Like I said, I figured you were using those scripts for a reason, and it was good to hear some backup on that.