In wholesaling, there’s a huge misconception that price is the main sticking point in negotiations. Today, I want to provide some key areas during the negotiation process to help you secure the deal.
Motivated sellers are not only motivated by money. Situation and circumstances play a big part in the acceptance or denial of an offer, too.
I’ve spoken with hundreds—maybe thousands—of sellers along my journey. As a real estate investor, I can confidently say there are a lot of deals my team and I have secured that had nothing to do with price. As we negotiate, there are some areas that we strategically structure to make the deal attractive for both parties.
Before we discuss it all, I would like to add some context to what I am referring to.
A Recent Deal That Had Nothing to Do With Price
As a virtual wholesaler, we’ve been marketing in multiple cities. Chicago happens to be a hot market for us.
I personally received a call from a woman who was interested in selling due to the passing of her husband. She moved out of the house because of the memories, and she was currently living with a family member.
During the call, I acknowledged the excellent condition of the house (here are some pics) and informed her that, unfortunately, our offer would be well below what she was looking for. I said she should consider listing the house with a Realtor. We ended the call, and I figured I would not hear back from her.
Unexpectedly, I received a call about four months later. It was the seller again, asking if I was still interested in the house. I kindly reminded her of our prior conversation and offer, but she insisted I meet her at the property.
During the walk-through, I was even more amazed at the condition of the house. She recently had installed new windows, refinished the flooring, added a new roof, and it was all situated on a double lot—just to name a few impressive qualities.
She informed me she knew she was giving the house away, but because of my honesty and transparency, she was willing to work with me. All she asked was that we pay the closing costs and reduce the close of the escrow timeframe. She wanted to expedite the sale, as she was going to use the money to purchase another property so she could have her own space again.
We agreed and got the deal done. We’re now in line to wholetail the deal and clear nearly $100,000.
Areas to Focus on During Negotiations
I wanted to give you the above backstory because too many investors get caught up on money being the main negotiating factor… when sometimes it’s not. (Although with this deal, we didn’t have to negotiate much—only the close of escrow date.)
Here are other areas to negotiate.
1. Earnest Money
This is a key area to negotiate. The earnest money deposit amount is not a standard amount, as some seem to believe ($1,000). We use higher or lower deposits, depending on the seller. If the seller is looking for a higher price and we cannot reach that with our offer, it’s good practice to increase the earnest money amount to prove you are vested in the deal.
We are aware the earnest money is refundable, but sellers will relax on negotiating if they know you are willing to increase the deposit.
2. Close of Escrow
Closing faster (as with the example above) will relieve some of the stress and uncertainty of selling.
Sellers can get sellers’ remorse. If you limit the time for them to ponder their decision, they may be willing to accept a lower purchase price.
Negotiating should not be a win-lose proposition. It’s good practice to make this clear in the beginning—but especially during the rehab valuation.
Negotiate around the rehab numbers. Let the seller know there’s some work that can get done cheaper.
However, some corners cannot be cut. When negotiating from a position of integrity, this can break down barriers.
4. Title Company
This may seem absurd, but some sellers like to close with their own title company. Inform the seller it’s common practice for the party that’s paying closing costs to determine the title company.
However, as an alternative, provide the seller with the convenience of having the escrow officer or mobile notary meet them at the location of their choice. This is a major win for sellers.
The Bottom Line
These are a few areas around negotiating that can put the seller at ease. The more you offer, the more the seller understands it’s a mutual agreement between parties and not a war.
Do not get hung up on price. Offer alternatives that are won for the seller in lieu of negotiating the offer amount.
Source: biggerpockets.com ~ By Marcus Maloney ~ Featured Image: pixabay.com ~ Content Images: biggerpockets.com