When dealing with Sellers there is a better way to behave then like the sleazy car salesman of the '80s. New investors are often surprised at how much emphasis I put on making offers in the “right way”. To me, "Hey, Mr. Seller, here is an offer just out of nowhere, come on and take the deal!" is just not the best way to approach sellers. Instead, I seek to first establish a solid relationship with the seller. Relationships beat transactions every time, and here's why.
In business, writing an offer and sending it out is like showing your hand when you are playing cards. You just gave your opponent everything and lost some of your competitive edge. One of the most well known tenets of negotiation is “He who speaks first, loses!” Beyond that though (and despite my analogy), you are not playing a game, you are dealing with people. When you rush past the “relationship building” and get right down to business with an offer, you unintentionally create an atmosphere of “me versus you” which is far less likely to produce optimal results (ie- a signed purchase offer).
So, Instead of making offers right out of the gate, I always opt to have conversations with the sellers (or brokers if direct contact with the seller is not possible). Even when it comes to making my ultimate offer, that action is more of a discussion than anything else. Now, realistically, at some point, the information gets put on paper to be presented. But because of the foundation we have built, they are rarely surprised by the offer.
Perhaps and example will allow me to better illustrate my point here.
"Hey, Mr. Seller, listen, I am super interested in your property. I think it's got a ton of value, and it's exactly what my wife and I are looking for."
Yes, I purposely talk about my wife during the conversation because I'm married. Chances are the seller is or has been married. Having had a spouse, we likely have established a commonality that connects us. Even if they have never been married, they have a family. Whether you have a wife or another family member, mentioning them is one way to humanize yourself. You are just like them. Always seek to find that common ground and relate to them in any way you can. People do business with people who are most like themselves. So, forge the relationship.
"Mr. Seller, I am absolutely interested in the property. To be honest, though, I don't know, based on its current performance, chances are I'm not going to get all that close to your asking price. I certainly have too much respect for you and for your time to waste any of it. So, are you stuck on getting something close to what you're asking? Or, are you open to other offers?"
This dialogue is showing him respect for his time and his asking price. At the same time, I am openly asking permission to low ball him. It also dials back his financial expectations, if only a little bit. Then, when I combine that wording with a discussion around seller financing, I can most likely continue with less resistance.
"Okay, excellent. I am not one of those guys who likes to negotiate, play games, and waste time going back and forth. I mean, there's always a little wiggle room here or there, and I want to work with you but I want to try and get you the highest number I can. I want to put my best foot forward. One of the ways that would allow me to do that is if you didn't need all of the money upfront, right?"
Notice here that I ask the question by ending it with another question, "Right?" By asking, "Right?" I am seeding his mind to say yes, hence permitting him to be flexible.
"I can certainly make you an all-cash offer, but I know that I can offer you more money that would be closer to your asking price if you are willing to take payments over time. Is that something you'd considered?”
That last sentence opens the discussion to seller financing and the tax benefits associated with this type of funding. Seller financing is always a great tool for “creating” deals and we will dive deeper into it in a future post so be sure to keep an eye out for that. In the meantime you might find some value in The Storage Rebellion University where you will gain instant access to more videos that educate and empower you around all things self storage. Click here to learn more