Imagine that you could win over every potential seller that you interact with… by getting them to agree to a fair but awesome property deal for you.
Well, I have bad news and good news. The bad news? This scenario won’t play out for you every time you interact with a seller. The good news? I’m here to help you make sure that it does happen as often as possible.
Because finding property deals is the lifeblood of a real estate investor… and your business can’t function correctly if you’re not zeroing in on the right sellers and deals.
By following this 5-step plan (and adding your own research, knowledge, and expertise into the equation), you should be scoring amazing deals in no time.
So, to get started, let’s talk about narrowing down your potential sellers…
Step 1: Pre-screening leads
One of the best gifts you can give yourself is to pre-screen your list of leads. For example, if you’re sending out a direct mail campaign, you want to narrow down your list of people to mail to. Even though it takes more time upfront, it will save you loads of time in the long run.
In other words, you want to make sure you have the right “bait” for the right audience. If you find out what your audience of sellers really wants (their true motivation), you won’t waste time communicating with those who don’t fit your criteria.
Step 2: Building rapport & gathering info
So, if you’re calling an owner-seller for the first time, you want to create a good first impression and start building rapport. Make the seller want to talk to you. How do you accomplish this? Well, there are a few important methods to use…
- Through small talk, find something you both have in common
- Always be positive and confident
- Smile (people can sense this even through the phone!)
- Have a joking and lighthearted personality
If you need a little more inspiration, check out the script below. Now, you’ll want to modify this according to your own personality and the seller’s responses (obviously!) but this should give you a good idea of how the conversation might go…
You: Hello, this is Josh Cantwell. How can I help you?
Or… Hi, this is Josh Cantwell. I missed a call from you. How can I help you?
Seller: I received a letter from you about buying my house?
You: Awesome, is that something you might be interested in selling?
Seller: Yes, it is. But how did you get my info?
You: Well I am currently looking for a couple more rentals in the area, so I decided to drive around and look for possible vacant houses. I wrote down some addresses and looked them up on the tax assessor’s website, and it gave me your name and address…. Do you mind if I ask you a few questions about the property?
Seller: No, go ahead…
Now, as the conversation continues, make sure you gather at least the following info:
- Their name (if you don’t know it already, based on your marketing campaigns and mailing lists)
- Confirm that the phone number they called from is the best way to reach them
- Info on the property (type, address, city and zip, # of beds/bath, livable square footage, etc.
- If they’re working with a Realtor, get that person’s name and number
- Reason why they want to sell and how quickly they need to sell (understanding their motivation level is essential; they need to have a sense of urgency)
- Last updates made to the home
- Any repairs needed
- Who currently lives in the property
- What the owner still owes on the property (note: if they are hesitant to give you this info, explain that you need to know so you can make an educated offer; if they owe more on the property than you can offer, there’s no reason to move forward with negotiations)
- If the mortgage payments are current or behind
Then, once all this information is covered, you’re going to get into the nitty-gritty with the owner. By this time, you should have built some level of trust – and you can ask your final two questions:
- What are you looking to get for the property?
- If I can offer you all cash and pay your closing costs, what is the lowest offer you would accept?
Now, not every seller will answer these final questions – but, do you best to get something out of them. Regardless of their answers, you can close out the conversation with, “Thank you. I’ll run some numbers and get back to you as soon as possible.” (Best practice is to call them back within one business day.)
Step 3: Running Comps
Your next step is to do your own research. There are so many ways you can run comps, including:
- Accelerated Investor Office (has the best and most inclusive process – and I’m not just saying that because it’s mine!)
- MLS (find cash sales)
- Other websites: Realtor.com, FindCompsNow.com, Zillow, Trulia, RealQuest.com (paid), etc.
Just a quick note on these websites: Properties that are on the MLS will automatically show up on Realtor.com, Trulia, and Zillow. But, if an owner is doing a FSBO and doesn’t use a Realtor, they may list their home on one of these websites and it won’t show up on the MLS. So be sure to use multiple sources to cross-check and get the most accurate information.
Look for properties…
- With similar square footage (example: a range of 800-1,200 square feet)
- That were sold within the past 90 days (ideal) to 6 months
- In the same (or nearby) neighborhood
Try to get 3-5 comps (a mix of active, pending, and sold is fine – but remember that the sold comps will give you the most accurate pricing information, so you should try to find as many of these as possible.)
Step 4: Estimating repairs
Now, you may see the property in person before making your offer (which is ideal, because then you can more accurately estimate repair costs). But, if you’re making an offer over the phone without ever physically walking through the home, these are some general guidelines to consider:
|If the seller says the home needs…||Estimate that the repair costs will be…|
|No work at all||$5,000|
|Minor work (paint, carpet, cosmetic updates)||$10,000 to $15,000|
|Work||$15,000 to $25,000|
|A lot of work||$25,000 to $35,000|
|To be torn down completely||Unknown; go look at that sucker|
If this all seems overwhelming to you – don’t panic. As you continue to invest in more properties, estimating the cost of repairs will come more easily. It just takes practice. If you’re working on your first few properties, allow yourself plenty of room for error.
Next, you want to fill out a repair estimate form and find the best contractor for the job. Be sure to get a few bids, even if you have a go-to person that you work with regularly. Based on the bids you get from your contractor options, you’ll be able to zero in on your offer price.
Step 5: Calculating & making an offer
Coming up with your offer price doesn’t have to be rocket science. Although every property is unique and every market is different, here’s the basic way to go about this…
Start with the After Repair Value (what the property will be worth after being fixed up; this number should be similar to your comps) and subtract…
- Your estimated repair costs
- Your closing costs (typically around $2K)
- Your holding costs, such as mortgage, utilities, etc. (estimate around $2-5K)
- Your wholesale fee ($5-10K)
This should give you the best idea of what you’d like to offer.
And now… here’s the nail-biting part (just kidding, don’t sweat it). I recommend making a verbal offer first, so you know that you’re in the same ballpark as the owner.
If it seems like you’re both on the same page, make a written offer. You can use a state real estate contract, a simple two-page contract, or whatever floats your boat. Just be sure to upload your documents to your AI Office Database (or any other database you may use) to keep track of your offers.
Ready, set, go
If you feel unsure or intimidated, just remember this: If you are not making offers, then you are not making money.
If it doesn’t work out, then it doesn’t work out. You’re no worse for wear. The seller could call back with a counteroffer that aligns better with what you’re looking for. Or, maybe you’ll encounter that seller again in the future, when they have another property to sell.
Just focus on building rapport, representing your business well, and sticking to your guns. And the right deals will follow.