negotiating offers

Talking To Sellers – Calculating The Offer

Whether you’re a numbers person or not, running a complicated calculation quickly while you’re multi tasking on a cell phone with a person you’ve 1) never met and 2) desperately need to convince that you’re the right person for the job—well, it can be a bit stressful.

Thankfully, it really doesn’t need to be all that difficult. Here are some easy tips to help you talk to your seller and calculate your offer at the same time. Have a questionnaire ready A list of prepared questions can open up some free space in your brain that could be used for running numbers or just making small talk. It also helps you make sure you don’t forget anything in the midst of all the chatter. Remember, though, you are not a computer, and your seller would like to work with someone who sounds human.

You don’t want to run them through the questionnaire like they’re taking a pop quiz. It’s a guide and a reminder—not a script. Practice, practice, practice The more experience you have chit chatting with strangers, the easier you’ll find it to put that function on autopilot while you direct your attention towards discovering the really important information and figuring out your offer.

Join local business clubs and attend their meetings regularly. The fewer people you know the better. Only then will you master the art of conversation. The first few times you attend, you can simply introduce yourself and then allow the business people in your community to call the shots. Once you feel more comfortable around them, you can begin imitating the more outgoing among them, and soon you’ll be talking about the local economy like a pro.

Use the hard money option first. There are basically two formulas for calculating an offer, and the only real difference between them is whether you’re planning on using hard money or traditional financing. Especially during the first conversation, if you’re being pressured to come up with a number, hard money is a safe bet.

If the seller is high pressuring you this early, they’re going to want to sell quickly. Traditional financing probably will not permit you to work within their timeframe. And even if they do find a reason to slow the transaction a bit, you can come back with an offer that’s even sweeter. It’s always better to increase the offer later rather than decrease it, and you can’t go wrong with the hard money calculation. Know your formula

Your offer will be based off of a very simple formula: 70% of the After Repairs Value minus the estimated repair value. On the first call, you’ll probably be relying on customer estimates for ARV and the repairs. Don’t be afraid to ask them for those numbers, and to ask for clarification about how they arrived at them. The only thing left for you to calculate will be your 70%, so be sure and practice your multiplication tables. Seven times one is one. Seven times two is . . . You get the picture.

Hedge your bets Make it very clear to the seller that your offer is calculated off the cuff using estimates and the information they’ve provided. Be sure they understand that you will need to verify all of those numbers yourself using your best professional judgment, and don’t let them hold you to anything that you haven’t been able to check out for yourself. Whatever you do, don’t sign anything until you’ve seen the property, run the comps, and checked out the repairs.

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