When to Negotiate with Land Sellers NEVER (LA 1053)
When to Negotiate with Land Sellers NEVER (LA 1053)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Hi.
Steven Butala: Welcome to the Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.
Jill DeWit: And I’m Jill Dewitt, broadcasting from sunny Southern California.
Steven Butala: Today Jill and I talk about when to negotiate with the land seller? Never.
Jill DeWit: Right. Well, I remember we were talking when we were in the kitchen writing our topics, and I don’t remember even why this came up, but I’m thinking this is important. Everybody thinks that we should negotiate. You should be good at negotiating. You should read negotiating books. I’m like, why?
Steven Butala: Even when you’re this far along in your career, I catch myself not taking my own advice, and this is one of the things that I find people in our staff doing and I do it myself. I negotiate too much instead of just saying, “You know, that’s it.”
Jill DeWit: Not going to happen.
Steven Butala: Jill’s famous for saying, “I love this asset at $22,000, but at $28,000 I hate it.” Love it at 22, hate it at 28. It’s up to you, Seller.
Jill DeWit: By the way, this is going to come into play later on today when we have a meeting about a certain asset that I don’t like the price, and you’re trying to make it, you want to negotiate. I don’t want to negotiate. I want to move on.
Steven Butala: Before we get into it, let’s take a question posted by one of our members on the landinvestors.com online community. It’s free.
Jill DeWit: T Kyle asks, My first mailer went out on July 13th, 1500 letters to two different counties. Here’s the response. This is so good. He got one “You’re a loser” email in quotes. “You’re a loser,” got seven or eight “Take me off your list” calls, three counter offers that were way too high, one yes, but I priced way too high so I had to decline, two acceptable counter offers but the sellers ghosted me, and one negotiated sale that I will be closing on this week, hopefully will net me $10,000 in profit. That is so cool. That’s this quick little down and dirty recap.
Steven Butala: Exactly what you can expect. It sounds like he may be even priced it a little bit too high his first shot around, he or she. So do you think people go into this with the realistic expectation of what’s going to happen in a mailer? Do you think we-
Jill DeWit: Yes.
Steven Butala: I’ll turn it back around on us. Do we prepare them for what’s really going to happen?
Jill DeWit: Yes.
Steven Butala: Because this is it, I think. This is an incredibly accurate recap. And I bet this is about a week old at least.
Jill DeWit: Right.
Steven Butala: So this is probably times eight, so hopefully he’s got four or five other $10,000 net properties in there, which is the type of mailer that happens to us.
Jill DeWit: That’s a good response for a 1500 unit mailer. That’s a good response of a week’s worth of activity. After three weeks it’s a lot more and he’s probably got a handful of deals now. So I think it’s great. And I do think that we do, that’s why we’re here. I feel like that’s my job. And that’s the whole thing about Land Academy. We are here to properly convey what this is. I don’t want to tell you this is easy. Everybody can do it. Piece of cake, whatever. No, I really want you to know what you’re getting into because the right people will come into this with the right attitude and the right expectations and kill it.
Steven Butala: Exactly.
Jill DeWit: I don’t want a lot of members that are just floundering. We have a really tight group of people doing really, really, really well.
Steven Butala: Exactly.
Jill DeWit: Thanks. I had to get that out. Thank you.
Steven Butala: Today’s topic, when to negotiate with land sellers? Never. This is the meat of the show.
Steven Butala: Do you really mean never? You wrote this topic.
Jill DeWit: I did.
Steven Butala: Usually I write the topics. Jill wrote this one.
Jill DeWit: Let me tell you my points.
Steven Butala: Do you mean never, never, never, or do you mean the vast majority of the time, never?
Jill DeWit: Well, if you had to ask me flat out negotiate or not negotiate, my answer would be do not negotiate.
Steven Butala: Me too.
Jill DeWit: So here’s what I mean. Here’s why. Number one, in this business, negotiating rarely works out in your favor. Why? It ends up being a time killer. You’re there negotiating with yourself, which is ridiculous, or you’re negotiating with them. They don’t even know what they’re asking for. They’re just trying to get more money out of the deal, which I understand. And if they’re in the mindset that they’re not serious about selling, they want to negotiate for the best price, I find that they’re thinking about it. They’re not really here to sell and I don’t want to waste my time.
Steven Butala: By now we all can understand why leveraging your time and leveraging money in your favor is so valuable. If you don’t, just go out and Google it because it’s a very basic Business 101 type thing where the further you get along in business, the more resources you have access to use, the more you can actually intelligently leverage your time and your resources and your money. So follow me on this. You send out, I’m going to make these numbers real round. These numbers are not real, but the concept’s real. You send out a thousand-unit mailer and you get after all the stuff, three properties back for every 300 you send out. With rural vacant land, you generally buy one property. So you send a thousand out and you’re staring at three properties that you think are pretty acceptable.
Steven Butala: You know in your soul one of them is great. In your soul, you know it: the way it’s signed, the property, how it looks, that you priced it right, everything’s perfect. Now you have these two others that are just kind of eating at you like, “Should I do these deals? They look good, they’re in the same kind of neighborhood, but if I only could get them for XYZ. I should go back to the seller and I should get these properties for a few thousand dollars less, then I could feel just as good about it as I do the first one.” That’s option one. Or you can send out 3000 letters instead of 1000 and get three properties that are just going to sleep like a baby at night knowing what’s going to happen with them. Which one would you rather do, and which one’s more efficient, and time efficient and money efficient?
Steven Butala: Here’s the math. I mean, a thousand mailers was going to cost you about $1,500 to send out start to finish, and you should be making between $5000 and $10,000 a property. So there’s just a no-brainer there. So now when you really do the math and the analysis about tripling your mailer size or quadrupling your mailer size to get those really low hanging fruit deals, it makes complete sense. So there’s lots of stuff that you have to unlearn when you start real estate, because your parents taught you or you’ve just been exposed to all … Negotiation, I mean, somebody should write a book about why negotiation is dumb. If you go to any bazaar anywhere out of this country or any place, it’s ingrained in their culture to negotiate prices and negotiate. And-
Jill DeWit: Some cultures, right.
Steven Butala: Like a bazaar or anywhere I think-
Jill DeWit: Well, a yard sale. Let’s just call it a spade. Say a yard sale.
Steven Butala: In some countries you’d go in and-
Jill DeWit: Craigslist.
Steven Butala: Even in a grocery store or an open air market, you’re really negotiating price for food.
Jill DeWit: Right. It really drives me nuts, by the way.
Steven Butala: I don’t think it’s efficient or fun, by the way.
Jill DeWit: Mm-hmm (affirmative), it’s so true. It’s like any used car if you’ve ever bought or sold a used car, we all know how it goes. You’re always going to mark it up because you know you’re going to mark it down. That person just has to feel like they’re getting something. And are they really? No, because you deliberately marked it up because you knew you were going to mark it town. So nobody’s really winning. Why don’t we just put it out there? But I love all your points and I agree with too, because I wrote down it’s just better to send out more mail and get more of those really, really good deals.
Jill DeWit: I do have one caveat to this whole conversation that I have done and I still kind of believe in. So you send out these offers. Some comes back and let’s just say it’s a wonderful, wonderful property. I mean, I was listening to somebody that day talk about a property that they bought, one of their first home runs that they paid $4,500 for it and they sold it for $45,000. So this is not crazy. So imagine that.
Steven Butala: This is a beautiful story.
Jill DeWit: Right, so thank you. So imagine that $4,500 property comes back and the person says to you, “I need $5,000 to pay off this credit card. That’s what’s holding me back.” And you say no, and you walk. Okay, so $4,500, you know it’s worth $45,000. Are you really going to let that $500 stand between you and this deal? For me, no. And have I done that? Yes. I have had people say, “I have a vet bill. I almost lost my cat.” I’m not kidding. This is true and-
Steven Butala: This is a real story?
Jill DeWit: It is a real story. “And I need to pay this bill if you can.” It was something little like, “If you could throw an extra $200 in here that would cover the bill, and I’ll sell it and it’s great.” And I’m like, well little things like that, $200? It got the deal done. And I know there’s plenty of skin in the game, I would do that. So that’s my, it’s not negotiating. It’s me going, can I afford to do that? And then yes. And is it going to get the deal done quickly? All the stars are in alignment on everything else? Yes. Am I in love with the property? Yes.
Steven Butala: I would file that under the heading repricing.
Jill DeWit: Okay, okay.
Steven Butala: Because here’s what that’s not. And Jill I completely agree with you, completely. That’s just a reprice based on a personal circumstance. And we built our whole real estate company, these companies on personal circumstances where they’re just going to sell the property because of a personal circumstance, not because they really wanted to sell it, they just don’t care. But negotiation is this: You send an offer, the number’s right on there. We’ll give you $4,500 for the property. They come back and say, “No, at $15,000.” And you go back and say, Oh man, I know it’s worth $45,000. How about $6,000? No, no, how about $12,000? How about $9000? How about $10,000? How about $9,500? And then everybody says something like this: “Are you happy?”
Steven Butala: “No. Are you happy?”
Steven Butala: “No. Good, we have a deal.” How many times have you heard that in your life? It’s the most ridiculous thing I’ve ever heard, ever.
Jill DeWit: I hate it.
Steven Butala: I can’t stand it.
Jill DeWit: It gives me goosebumps-
Steven Butala: Me too.
Jill DeWit: It makes me mad.
Steven Butala: Me too, Jill.
Jill DeWit: Oh, I hate that situation, yeah.
Steven Butala: And then it’s just like I got to spray myself off with Lysol because you just feel slimy and terrible. And they’re all unhappy because they didn’t necessarily get the-
Jill DeWit: Bad taste in your mouth.
Steven Butala: Yeah, and a lot of times the stuff just falls out anyway. Some people go dark.
Jill DeWit: That’s-
Steven Butala: There’s just a lot of issues that happen with negotiation, versus “I really need to pay my vet bill.” That’s a accurate, a goodwill repricing is exactly what I would call that.
Jill DeWit: By the way, the description you described just now is my number one point. It rarely works out when you do negotiate it, and it ends up being a whole waste of time back and forth. I’m doing a deal right now, a big large commercial land deal. The guy came in with this offer and he was expecting me to counter and you know what? I’m done with it. We’re making five times what we put into it, so I’m okay. He doesn’t know that. So I said okay. The only thing I asked for was I countered with a quicker closing time and a non-refundable deposit, I mean, those little things. And I think the buyer is so excited because I didn’t counter with a price. I’m like, “You know what? No, I’ll take it. Here’s what we’re going to do.” I’m sure he’s happy, I’m happy, and it’s not back and forth. That’s it.
Steven Butala: Here’s another thing, and I speak for all men, there’s a big chest beating scenario with getting a good price on stuff. I let go of that a lot of years ago. I had to be the guy in the room who paid the least amount for the car that they drive and all that, and it was just kind of this trophy that’s associated with getting a great financial deal and that’s over now, because you’re really looking at how much time you spend on it and why you’re hanging your hat on it, it’s all not good. What’s really good is a healthy repricing if it needs to happen.
Jill DeWit: I agree.
Steven Butala: Maybe the back and forth is maybe twice, but when it becomes this massive … If you’re negotiating to negotiate because that’s the culture you’re sitting in or that’s what you think has to happen, that’s not a good reason.
Jill DeWit: What I hear with our members and you never want to be in this situation, is when a seller says, “Can you do any better?” And with no number. You don’t want to be in that situation.
Steven Butala: I walk away from it.
Jill DeWit: And that happens a lot because you never know what they’re asking. You need to know-
Steven Butala: They don’t know.
Jill DeWit: Yeah, they may not know. You need to know. You need to say, “What’s it going to take to get the deal done?” Let them give you a number, and then you say yes or you say no. And often, most of the time I say no. I’m going to say no. Unless it’s like that little old lady at $200 is going to make it, I’ll say yes, but when it’s a $4,500 deal and he wants $25,000 I’ll say, “No, have a nice day.”
Steven Butala: Yeah, totally.
Jill DeWit: And I really mean it and I walk because you know what? I got more mail to open and more calls to take.
Steven Butala: Half the time they come back six months later and say okay.
Jill DeWit: Yeah, it’s true. It is really true.
Steven Butala: Hey, we know your time’s valuable. Thanks for spending some of it with us today. Join us next time for another interesting episode.
Jill DeWit: And we answer your questions posted on our online community found at landinvestors.com. It is free.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: It’s Friday.
Steven Butala: It is Friday. That felt pretty good.
Jill DeWit: Yeah, I’m glad.
Steven Butala: I like our stance on this.
Jill DeWit: I agree.
Steven Butala: You and I actually really agree on this topic.
Jill DeWit: We agree on a lot.
Steven Butala: It doesn’t feel like that.
Jill DeWit: Wherever you’re watching, wherever you are listening, please subscribe and rate us there.
Both: We are Steve and Jill.
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