Jill’s Negotiation Approach (JJ 615)
Jill’s Negotiation Approach
Transcript:
Jack Butala: Jack and Jill here.
Jill DeWitt: Hey!
Jack Butala: Welcome to The Jack Jill Show it’s here that we provide entertaining real estate investment advice. I’m Jack Butala.
Jill DeWitt: I’m Jill DeWitt, broadcasting again from sunny Southern California.
Jack Butala: Today Jill and I talk about Jill’s “negotiation” approach. One of my favorite topics mostly because it takes the onus off of me.
Jill DeWitt: [inaudible 00:00:22]I was just thinking about this, and I was writing some notes for this show … Which, by the way, this is another one of those … It’s fun because you came up with this topic, not me, and I appreciate … I get to share my whatever. But anyway, what I was gonna say was, I wasn’t sure, which … I took it as a business direction, but some of the things that I say could be used in all kinds of negotiations. You know about … You know what I’m trying to say.
Jack Butala: I couldn’t agree more.
Jill DeWitt: Okay, thank you. So I wanna make sure whatever you think this show means to you, you can use it for that.
Jack Butala: How about I interview you?
Jill DeWitt: “I’m gonna negotiate how to get my wife to do ‘X'” Okay, sorry.
Jack Butala: It’s quite the other way around.
Jill DeWitt: Oh boy. Oh, oh! “That’s what my wife is doing when she did this or when she said that.”
Jack Butala: You know what this show should be called? It should be called “How Do You Get What You Want.”
Jill DeWitt: Ah.
Jack Butala: “How Jill Gets What She Wants.”
Jill DeWitt: Oh, yeah that’s good!
Jack Butala: Before we get into the topic, let’s take a question posted by one of our members on the jackjill.com online community, it’s free.
Jill DeWitt: Okay, Sandra asks, “Hi, everyone. Is it hard to transition from land to houses? I hear you guys talk about it all the time but I’m concerned because the dollars are so much higher. Is it difficult? What do I need to know?”
I love it, this is so good because so many of our members are like … Do you know what’s interesting? I think a lot of our members in our community, they found us knowing they want to do something in real estate, period. Right? We all know there’s money to be made in real estate, we got that out of the way. So … I think we’re over that one, we don’t have to convince anyone that one.
Jack Butala: We got that out of the way.
Jill DeWitt: Exactly.
Jack Butala: No, no, I can hear people say it. “Now what do you mean you make your money in real estate?”
Jill DeWitt: No, no, that’s funny. No.
Jack Butala: It cracks me up.
Jill DeWitt: I know. So, anyway, then I … Then people … But they get into it, they’re like “I can’t afford this, I can’t afford that.” You know, yeah, you’re … When you talk to someone who’s brand new thinking they wanna be an investor and they wanna invest in an apartment building and you tell them, “The best thing you can do is pay cash.” They usually don’t have enough cash sitting around to go and buy an apartment building.
Jack Butala: No-one does.
Jill DeWitt: Right, got it.
Jack Butala: I don’t care if you’re Sam Zell, you don’t look at your bank balance and say “Well, there’s not enough for us to buy a … That’s a really good deal, thanks for bringing it over, but we don’t have enough money right now.”
Jill DeWitt: Right.
Jack Butala: No, you find the money.
Jill DeWitt: Right. But, back to land, what I was gonna say was … So, with a lot of people in our group that [inaudible 00:03:03] and have been flipping land … Started out doing land, because of the ease of the transactions and cash and everything … And a lot of our folks are A: ready to move on, they got this all figured out, you know what I mean? And they’re ready to do some bigger deals and make more money. And then B: They have the cash, you know, so, I understand Sandra’s concern is, “Alright, maybe I’ll … I’m staring at a hundred thousand dollars, I started with ten, now I have a hundred thousand dollars. Now I can start making some different decisions.” Cos this is the discussions that I have with our members. So this is a really good question, and-
Jack Butala: Here’s a conversation, a synopsis of a conversation I had with a, on a consultant call today, and it went like this: “I just joined you guys in September, I bought fourteen properties, I’ve sold ten of them, and I made about …” He said, I think that he “made four thousand dollars per unit.” So he said a version of what you just said, “I made like …” I don’t know he said, “I made forty or fifty thousand dollars in a few months.” So now he said exactly what you said, “Well, I know it works now. Get that out of the way. But I got … Sat down in front of Excel and I said, ‘Well, what if I made twenty thousand dollars on each of these two deals?’ On each of these ten deals or fourteen deals or whatever his number was. “I would have made a quarter of a million bucks in the last few months.”
Jill DeWitt: Exactly.
Jack Butala: And so, it’s a very good question to ask yourself in front of a mirror.
Jill DeWitt: “Do I wanna make that much money?”
Jack Butala: Because two hundred thousand dollars, no, “What if I made more per deal?”. At two hundred grand, I mean now you’re very seriously considering quitting your job. For forty thousand, I don’t think so.
Jill DeWitt: What do you think, Jack? Is it hard to transition from land to houses?
Jack Butala: No, I think land is a great place to start. I think it’s a great place to learn, cut your teeth on the business, it doesn’t cost a lot of money, you got a great support group here, but I think houses is a great place to graduate to.
Jill DeWitt: Exactly.
Jack Butala: You know, and I don’t necessarily … In the distant future, we’re gonna roll commercial real estate into this, too. But, houses is a great place to make a really, really good living, and really make an institution out of it if you want to.
Jill DeWitt: One of the things that she asks, too, is: “Is it difficult?” And I would almost argue that in some situations these are easier because most of the house transactions, you’re not closing yourself.
Jack Butala: Yeah, so there’s two things that, two or three things, that you don’t do with a house deal that you do with land deals. Number one: Jill just nailed it, you don’t close the deal yourself, you get a title agent to close it. So you don’t have to worry about that.
Jill DeWitt: Which is great!
Jack Butala: Number two: You don’t have to sell the asset once you buy it, because if you do it according to the way we do it, you find a buyer first, you find the person who’s going to renovate it first. Number three: You don’t have to have a dollar, because the person that’s gonna renovate it is loaded. They’re the money, you just find the deal for them. And then they, you know, you … Depending on how you transact it at the end, they pay for it, one way or the other.
Jill DeWitt: Not to give anything away, not to give too much away, from the upcoming SFR program that you’re working on right now, Jack, but –
Jack Butala: Called “The House Academy”, by the way.
Jill DeWitt: It is … That’s one of the things that we’re really good at, and that’s why we’re here. Not only are we experts at finding the deals, let’s be honest, we’re experts at finding the people to fund the deals.
Jack Butala: Yeah.
Jill DeWitt: Seriously! So that’s it, so, you know, people, this is the whole common thing. People go, “Why are you guys not talking about selling so much?” And I always … You know, I try to restate your quote, which is: “If you’re selling an asset so far under value, if you’re gonna have an asset for sale that’s this much under value, do you think it’s hard to find a buyer? No.” That’s the truth, seriously! That’s it.
Jack Butala: Hey, you can’t hide in the basement and keep it a secret, but no, it sells itself pretty easily.
Jill DeWitt: Thank you.
Jack Butala: And then, finally what the huge difference between land and houses is, is the availability of data. You know the whole world is tracking house data, house sales data, everything about it. I mean, there’s economists that, you know … With land, not so much. Especially rural land, people who use data to make economic decisions from the federal government all the way down to us, they don’t care about land as much as they care about houses. I think we did a show yesterday on that.
Jill DeWitt: Exactly, you are right, that’s so good.
Jack Butala: So, is it difficult? No. I think it’s easier, and I think it’s cheaper, and I think you can make more money. But you need to know the basics first. So, like Jill says, it’s easier to fly a 747 but you don’t learn on one.
Jill DeWitt: Right.
Jack Butala: You learn on a little Cessna or whatever it is.
Jill DeWitt: Hey, thank you, that’s a beautiful little … That’s a great way to explain this. Thank you, Jack.
Jack Butala: You’re welcome.
Today’s topic-
Jill DeWitt: What a weirdo!
Jack Butala: “What a weirdo,” she says! “What a weirdo!”
You know that’s the reaction that all men … You know, men love that from women. “Hey, I think you look really pretty today.” “What a weirdo!”
Jill DeWitt: Oh my gosh. That’s good.
Jack Butala: Today’s topic, Jill’s “negotiation” approach. This is the meat of the show.
Jill DeWitt: Where do I start?
Jack Butala: What a weirdo.
Jill DeWitt: Yes, thank you, you can call me a weirdo.
Jack Butala: I am, all the way through the whole show.
Jill DeWitt: Under your breath, I know. I just said … I’m sorry was that my outside voice?
Jack Butala: There’s no under your breath in this show.
Jill DeWitt: I don’t know how to do that. That’s a fact. I don’t know how to whisper, my mom always said that I don’t know how to whisper and I don’t know how to keep a … Suck at secrets, don’t tell me a secret.
Jack Butala: Your mom told you this?
Jill DeWitt: Oh my gosh, yes.
Jack Butala: That’s hilarious, Jill.
Jill DeWitt: Yeah, she really said “You do not know how to whisper”, and you did that too me today, didn’t you, Jack, in the kitchen? “You’re kind of yelling and I’m right here.” It’s so … Yeah, okay.
Jack Butala: Jill, share with us-
Jill DeWitt: Oh no, oh no.
Jack Butala: Here’s what happens in real life with us, here’s what happens with Jill and me in real life. I send a bunch of mail out a bunch of people answer our phones, on our staff, but ultimately, all the stuff … A lot of stuff goes on in between and then I stare at a database and there’s a bunch of acquisition candidates in there where the people who’ve answered their phones, the people who work for us, qualified the deals and they say “You know what? This person, they do want to sell their house, here’s how much they want to sell it for, and it looks like we can close a deal.” Looks like the person’s not dead and all that other stuff. So what do I do. I say “Yes, I love this deal for the price that it is, let’s buy it, next one.” “I love this deal but it’s too expensive. We need to shave twenty thousand dollars off.” And I pick up the phone and I call Jill.
And that’s what this episode’s about. What’s your approach?
Jill DeWitt: I love these ones. It’s a challenge for me.
Jack Butala: I know you do, I know you love it. Because I hate it.
Jill DeWitt: You’ll come in and I try to go under what you say, “alright here’s the deal, we love this asset but we want it for this price not that price.” I’m like, “Okay, game on.” So now I’m gonna try and get it for less.
So, well, first I’m gonna really understand the property and the area, because I really want the other person to know I know what I’m talking about. And I’m gonna come out with all the good things, and the flaws, and all of the reasons why I deem it appropriate at this lower price. Now, right off the bat, obviously, they’re not gonna like it. Let’s just be honest. We all know they want to see it for their asking price, but that’s not the price we’re willing to pay. So, one of the things I do is, I listen-
Jack Butala: Let’s say it’s five acres in Indiana, by the way. Right on the road, but the terrain of the property is kind of like, only two acres are usable, you know, and the other portion of it is just unusable. Maybe it’s drainage or uneven.
Jill DeWitt: That’s the kind of stuff that I would point out to them, I would really talk about, “Have you been out there? Have you seen it? Let me show you some pictures. Here’s why it’s only worth … I feel it’s worth X.” And it’s not so much about that, where you’re going with it, it’s not so much about the facts, it’s more about the relationship. So let me … I wanna follow up with that, so, now I got the facts out, now I gotta get them to sign off on it, that’s the whole thing. So I’m gonna listen to them and their speech, and I’m gonna keep … You know, I’m gonna stand firm with why I think it’s priced at the price I’ve come up with. And I want to get them to the point where they understand it and they start to feel good about the transaction, and they can, you can get them to that point.
Sometimes what I’ll do is I’ll throw them a bone to get what I want. For example-
Jack Butala: This is good stuff.
Jill DeWitt: Thank you. Sometimes I’ll say “Okay, tell you what, this is what we’re gonna do, then. I’ll pay for all the recording, all the closing costs, this, this, this, and this, at this price.” Okay, right there, they’re going “Oh, okay.” That makes them really think about it. The other thing that I do is I set an amount … You know what? I sometimes don’t come at them with my end … I often don’t come at them with my end number. So I’m gonna start at one number, come on, it’s like buying … It’s like you’re negotiating. We all know how it’s going to go, when you put a car for sale on Craigslist, we all know that’s not the sale end price. We know there’s going to be some negotiation. So when I come at them I do have some wiggle room, but I will tell you this. I have a limit. And I set an amount, and I don’t move from that limit.
That’s one of the things you have to do, you have to know when to cut it off and you have to know when to walk away. What you have to do is, you have to see it as this: You don’t want … you don’t see it as risking losing the deal, but you see it as a means of not overpaying. Or what if you’re selling? What if the shoe’s on the other foot? You don’t wanna sell too cheap so there’s times you have to settle … Say what you need to say, throw a bone if you can, but know when to walk away, and then do walk away. And I’ll tell you, so many times … And I guess one other thing that’s underlying here is: Be transparent about everything, too. I mean there’s times that I’ll say, “Look, this is not my first transaction in this county, this is really what I usually pay. This is … You know, you can go look at the numbers, too, and see what people are doing, it’s not like it’s a big secret. And look at yours over here, and this is why, and hey, this is what I do, this is my business. And I’m not the end user. But I’m sure glad I can sure pay cash and get it taken care of right now real fast for you, that’s the deal.”
So, when you’re transparent you’ll explain who you are, what you do, all that good stuff, and be ready to walk away. You’d be surprised how many times go, “Okay, wait a minute.” And they’ll say, “All right, I’ll take it.” Or they might hang up the phone, don’t be afraid of this, too. Let them hang up the phone. Let them sleep on it. That needs to happen and then they’re gonna wake up the next day they might be … Even they might be furious and think you’re an idiot, seriously, hang up the phone and then call you. And I have one right now, it’s so funny because my staff just told me about the other day, one I forgot about. I said, “Oh is that the ‘X’ deal?” They go, “Yeah, that guy!” And I’m like, “Oh that’s hilarious.” Because it was one that he … We talked a couple of times and I just really walked away and he called back. And now he wants to do the deal at my price. It was like, I wanna say, two months ago, seriously. I can’t believe I even remembered the guy.
Jack Butala: Sure.
Jill DeWitt: But it was one of those that I kept going, “Okay, this guy’s nuts, okay, whatever.” And then … Because his price and my price were so different. And now my price makes sense. So …
Jack Butala: Yes, not so much … I mean, what clinches it for me, that I know this is in your soul, is cos very … I don’t even know if you know this, but of ten you’ll come back to me, this is all in the database, you’ll come back to me and say, “They won’t take twenty thousand off, but they’ll take ten off, and here’s why.” And then you sell me on it just like you just described it. “Well, this person’s really old and they really this, this, and that, this and that, this and that, this and this and that.” You know. But the difference is, I’m buying it to resell it so if I can’t get it for twenty off I can only get it for ten that’s ten thousand bucks out of my pocket.
Jill DeWitt: Right, I don’t do that really anymore.
Jack Butala: Yeah, you … Okay.
Jill DeWitt: Well you know what, let’s all just … Let’s be honest, back when I was first learning this and it was like eight hundred dollars versus a thousand dollars and that was gonna make the deal, alright, I’d throw in the extra two hundred bucks if that’s gonna make the deal close. That wasn’t a big deal because I’m selling it for three. But the bigger numbers, I’m not doing that, it’s too easy to walk away and send out more mail.
Jack Butala: It really is.
Jill DeWitt: So that’s the … I don’t have to do that, Jack. I really don’t.
Jack Butala: The clincher for me, and I have not had to negotiate in quite some time, because Jill does it, and what really just brings them home is, I say something like this: “The next guy that’s after me is not going to be this nice, and he’s not gonna answer his phone, in fact he’s probably not gonna call you back even once. So, you can choose to deal with a guy like me and probably maybe make a little bit less money, maybe you’ll make a little bit less under market, but I’m gonna pick up the phone, I’m gonna put my money where my mouth is, and when I say I’m going to close it on Thursday, we’re gonna actually close it. So if that’s worth twenty grand to you versus just … And then you’re done with it, then you really should close this deal. Otherwise, the next time I talk to you, it’s not gonna be this price.”
Jill DeWitt: Yeah, I don’t … That’s a different … You have a very different tactic than I have.
Jack Butala: And that works a lot, or worked, I should say.
Jill DeWitt: Is that the Detroit way?
Jack Butala: I don’t know! You know what, I think it’s a gender thing.
Jill DeWitt: Oh, Okay.
Jack Butala: More than anything, I don’t know. Because, I … Just like … You nailed it at the end, I mean, I’m gonna read down, I’m gonna pick up the phone right after this and call somebody else, so it’s up to you.
Jill DeWitt: Exactly.
Jack Butala: If I’m talking to a guy, that’ll push right over the edge. If I’m talking to a woman she’s gonna say-
Jill DeWitt: “Have a nice day!”
Jack Butala: “Have a good life!”
Jill DeWitt: That’s really funny. I love it.
Jack Butala: Well, you’ve done it again, you’ve wasted almost twenty minutes listening to The Jack and Jill Show. Join us tomorrow, where we discuss what to learn from HGTV and then you should just turn it off.
Jill DeWitt: And we answer your questions, should you have one, post it the JackJill online community. JackJill.com online community. Go find it, it’s free.
Jack Butala: You are not alone in your real estate ambition.
Good stuff, Jill.
Jill DeWitt: Thank you.
Jack Butala: I mean that is, you know how something’s so, like, normal to you and second nature, I think? That stuff is so not normal for me, it’s so not second nature. So to hear you talk about it and explain it is really valuable, and I think that a lot of people are like that. Like, talking about data to me, I just think everybody knows about it but they don’t.
Jill DeWitt: Every single person walking around this planet has something that comes natural to them and they … And so many people don’t realize-
Jack Butala: Isn’t that true?
Jill DeWitt: That it’s not that … That they are walking around with that … That’s gold that’s so easy for them. And they take it for granted.
Jack Butala: That’s so true. I know, I agree. They don’t really capitalize on it.
Jill DeWitt: Yeah. That’s on of the things that I’m working on with books and things on the side, is kind of like bringing that to light in everyone and saying, “You need to take this and run.” And by the way if it comes easy for you, that’s a sign that you should be doing that and more of it.
Jack Butala: I’m gonna put you on the spot, the three kids that we have, what are their things that they have that comes natural to them that they’re not capitalizing on. Number One, go.
Jill DeWitt: Confidence.
Jack Butala: Oh, really?
Jill DeWitt: Yeah.
Jack Butala: Leadership, that’s what I think, same thing.
Jill DeWitt: Okay, good, yep.
Jack Butala: Number two.
Jill DeWitt: He’s just getting it, his … He’s got the personality like-
Jack Butala: Charisma.
Jill DeWitt: With people? Yep.
Jack Butala: I agree, I agree.
Jill DeWitt: He’s just figuring that out.
Jack Butala: Number three.
Jill DeWitt: Number three? Smart, brains.
Jack Butala: Intuitive. Yep. Linear logic.
Jill DeWitt: You know what, we just had a conversation, it’s so funny you say that, number three and I were talking and she goes, “You know it used to not be that way but now it’s cool, being smart is cool.”
Jack Butala: Yeah, being geeky is cool.
Jill DeWitt: Being smart, being geeky was like, “Oh boy, that’s the smart … That’s the chess club.” And now it’s like, it’s cool. I’m like, “I’m really glad.”
Jack Butala: Bill Gates is a geek. Steve Jobs was a geek. Elon Musk is a geek. But they’re all … You know, they run the world. I agree, it’s cool, now.
Jill DeWitt: But it used to be like, they weren’t the cool kids. Like, “Uh, not those guys.” So, yep.
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