What Not to Do When Negotiating – Part 1
Jimmy Napier made the following quote and I truly believe these words are a key to create wealth in today’s real estate market.
Quote: “You Make The Majority of Your Money In Real Estate During Your Negotiations”.
Last month I made reference to what I believe will be the key to success for real estate investors in the event the economy tanks like the economist Harry S. Dent has recently predicted. As you may remember I talked about how every investor needs to learn how to talk to sellers face-to-face and negotiate profitable deals without thinking that all every seller wants is all CASH. Since then I have had much thought about things I have experienced through my career of over 35 years that were what I call “Deal Killers”.
If you want to be a successful real estate investor you need to not make the same mistakes I made when negotiating with sellers. For the first 20 years of my career I had no training of what to say and what not to say, I learned negotiating by just opening my mouth and saying what I thought every seller wanted to hear. I can’t tell you how many deals I screwed up just by saying the wrong things or by not asking the right questions. This article is about some of the things I have said and how those things were deal killers for me.
- Stuttering and Stammering – In the beginning when I had no money and no credit and I would sit at a kitchen table to talk to the sellers about buying their house there was one thing I knew for sure, one offer I couldn’t make was to offer to pay the seller all CASH for their house. As I talked to the sellers my mind would go blank and the only thing I could think of to offer the sellers was all CASH. Because I was trying to think quickly while talking to the sellers I would stutter and stammer which made the sellers recognize that I didn’t know what I was doing and because of my confusion I rarely bought a house when I would stutter or stammer and was red in the face.
- Look and Act Scared – Because of my inexperience talking to sellers and not knowing how to come up with a solution to buy the sellers house I have been told that I looked and acted scared which was another red flag that gave the sellers no confidence that I was capable of paying them every month for their house.
- Trying to Mimic a Seminar Speaker – After I attended a couple seminars and listened to the speakers I tried to mimic what they had said but it wasn’t too successful for me. I didn’t have enough experience to make much sense why I said the things I did. When it came time to make the seller an offer to buy their house I would say I had to run the deal past my partner before I could make them an offer. Just because I couldn’t make an offer myself that made sense to me I said what the speakers told me to say but the problem was I would leave without making an offer to buy the property and I would never go back. You see, I didn’t have a partner to run the deal past. I was just doing what the speaker had told me to do. I didn’t have enough money to buy the speakers course so I had to rely on my memory of the words they said to the audience.
- Over Dressing for Success – Another seminar speaker told his audience to go home and buy a $2,000 suit, a man’s diamond ring and a Rolex watch and drive up to a sellers house in a Mercedes 500 SL and try to buy the sellers house when I didn’t have the availability to borrow money nor did I have access to other people with money at that time. I didn’t do everything he told us to do, but I did dress up as much as I could afford. I quickly realized when the sellers saw me all dressed up they became less flexible, they asked more for their house and expected only all CASH. I quickly learned that this method wasn’t working for me so I quickly started dressing like a normal person who needed seller financing terms and had limited money.
Sounding Like and Expert – this is a mistake I see all too many beginning investors make. Many years after I started buying houses, my mentor, Jimmy Napier told me to always be at or just below the sellers intelligent level if you want to be successful negotiating with them. Until I learned what Jimmy told me I would say the things I would hear from a seminar speaker that the sellers didn’t understand. This was not good. I found out that when you sound too smart many sellers get uneasy because they start to think that you could be getting ready to take advantage of them in some way. Never sound too smart when talking to the sellers.
- Being a Name Dropper – all too often when a person doesn’t have confidence in themselves and their abilities they will tell the sellers about some well known person they know trying to build credibility just because they know someone. This doesn’t work in most cases. I recommend if you plan to be a name dropper, only drop the name of your minister, your banker or anyone of prominence in your community. I personally never mention my attorney’s name because once I did and the sellers immediately asked me if I made it a habit of suing people. I told them, of course I don’t but I guess they were paranoid and were afraid to sell me their house fearing I might try to sue them sometime in the future for something. Maybe they had a bad situation with someone previously. In that instance naming my attorney was a deal breaker.
- Being Too Aggressive – once I started to learn more about how to creatively structure deals and I bought several houses by putting together deals that were real money makers my confidence shot through the roof. When I would sit down with sellers I would quickly start to try to put the deal together without spending any time letting the sellers get to know me. I became too impatient. I knew what I wanted to do and I knew the deal I was offering the sellers was a good deal for them, so why would the sellers push back and many times I would lose the deal? Over time I learned that when you push too hard, too quickly the sellers get confused and need time to think about what you are offering. Most sellers need time to digest what you are offering them to be sure it is what they need or want.Several years ago I went to talk to some sellers from Chicago who flew to Florida to discuss selling me two houses they had in my area. In that particular case I was smart enough to spend nearly 5 hours talking to the old man who was in his mid-eighties about everything under the sun before we ever mentioned the houses I was there to buy. I needed to take the time to let the sellers get a chance to know me and believe that I have a stable life, a nice family, I pay my bills and I would pay them every month for their properties. You see I wanted the sellers to give me seller financing terms where I would pay them every month for the properties I was trying to buy. I have learned from experience don’t be too aggressive or push too hard if you want to structure a good deal.
I am coming to Kansas City this month, I hope to see you at the MAREI monthly meeting and again at the workshop I am teaching for them.
Real Estate Investor
Larry Harbolt is the nation’s leading Creative Seller Financing expert as well as a popular national real estate speaker and teacher whose time-tested strategies and nuts and bolts teaching style has helped thousands of aspiring real estate entrepreneurs realize their financial dreams with little or no money and without the need for credit. Larry has been successful creatively buying and selling real estate for over 30 years and has written numerous popular articles and real estate courses. Larry also has been running a meetup group for real estate investors in St Petersburg, Florida for over 13 years. Larry is the real deal!
Larry’s will be in Kansas City on September 9th at our Monthly Meeting discussing Creative Financing for Real Estate Investors and then he is coming back on Saturday September 13th, 2014 for an all day Deal Structuring Workshop. Please visit our calendar of events to learn more about these and other events at MAREI.