Land Purchase Price Renegotiation: How Often Does It Happen?
How often does land purchase price renegotiation happen? Steven Jack Butala and Jill DeWit answer this question by sharing their own negotiation tactics, especially some they have conceptualized and developed themselves.
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Land Purchase Price Renegotiation: How Often Does It Happen?
I’m Steven Jack Butala.
I’m Jill DeWit, and this is the Land Academy Show.
This is episode number 2027, and the topic is, how often does land purchase price renegotiation happen? You send out all these offers, they have prices on them, and you spend all this time pricing. How often do you have to renegotiate the price that’s on that purchase agreement you send out, and how often do they sign it and send it back in?
Book Club
Here’s what’s funny about this. People dig in deep to prepare themselves to be good at this. I’m going to say that you don’t need to. We’re going to talk about this. What’s interesting is my Land Academy ladies, the Land Gals, have developed their own book club. You may or may not know this.
I do know this.
They have a book club. I’m a guest by the way. I have my Land Gals. We meet every month and do a formal thing and all get together. This book club is a little bit separately run by some other people in the group. They started it, which is great. I get to be a guest at that.
There’s no male equivalent of this.
No. This month, the Land Gals book club is reading Never Split the Difference: Negotiating As If Your Life Depended On It. I have the book. I downloaded it. I have it on my tablet. I have not read page one. I will get to it.
Will you ever?
I will because I want to see what they have to say. It’s funny because at the end of last month, in September or October, they asked me to do a talk on how I get these deals done. I’m going to do more of a deeper dive for our team about getting the price and locking it in. Everybody thinks there’s a lot of negotiation that goes on, and I’m here to tell you that I don’t play that game. It’s quick and fast. I’ll go through the steps here in a few minutes. I thought it was funny that they’re all into this book.
They all want to make sure that they negotiate right and have their thoughts together. It’s good. I’m not saying there’s anything wrong there. I don’t think there’s any such thing as too much education. I always want to get other people’s viewpoints. I will read this book, and I’m sure there’s going to be some nuggets in there that I look forward to, but I haven’t dove in yet. I think what I should do is I’m going to probably write my content separately before I even crack this book to see what comes of it.
There is no such thing as too much education. Share on XI’m a big fan of reading the cover of a book.
The back page or the back cover?
No, just the cover.
Just the front cover or the back cover?
“Never split the difference,” then I don’t have to read the book.
What about reading the back? I read the back.
No.
You read the title.
“Never split the difference in negotiation.” That’s what I need to know. It’s a prelude to how I feel about negotiating anything.
This week is all about our theme of rules to live by in your land business. We’re talking on Friday about getting the land deal under contract to be purchased within two days. That’ll be tomorrow, which will be good.
Renegotiating With Sellers
We did a podcast this week. Go back and check out our other episodes. Each day on the show, we answer a question from our Land Academy member Discord forum, and we take a deep dive into land-related topics at your request. Jill, we have a question.
The question from Heidi is “When you have to renegotiate with sellers, is that a one-call conversation, or do you do that over a couple of calls or even more?”
This ties into the topic too.
It does. Do you want me to go right into the topic because it is?
Sure.
The meat of the show is how often these land purchase renegotiations happen. It’s a lot fewer than you think. Let me paint the picture. We do these direct mail offers. You know how we roll, and people get them in the mail. They either like them or they don’t like them, or it’s N/A, not applicable, because they’re going to die there. Those go in the trash. We don’t care about those. That’s good.
They like the price. They don’t like the price. If they like the price, they’re going to call and say, “Thank goodness. I lost my job yesterday. You’re offering me $10,223. How fast can I do that?” They sign it and send it in, they email it in, or whatever it is, and they’re ready to go. That’s easy. As you can see, no negotiations are needed. The only thing you’re going to do at that point is make sure, “Let me make sure they still want it at that price,” and confirm all that. Assuming you did everything great, you move forward and live happily ever after.
You buy it for $10,000, whatever, and sell it for $40,000. Check. We have all the rest of the stuff, and there are multiple reasons why prices are different. 1) Maybe you over-offered. It should be lower. There’s going to need to be a little change there. 2) They flip and don’t like it. They think it’s worth something, and maybe it is. Maybe there are some reasons why. You missed the creek and Amazon moving in down the street. It’s zoned commercially, not this. You could do all these things with it. There might be some reasoning there. 3) They might need different prices. They have a number in their head, and often the number in their head is something that they need.
We’ve had this. There was a sweet woman. The mom had cancer and she wanted to take her on a trip, “This is how much the trip costs.” I’ve had, “My dog needs surgery.” I’ve had that one many years ago. There was a dog surgery, and the price she wanted to get out of the property was exactly what she needed to pay for the dog surgery. I said, “I can make that work.”
There are some numbers there. What I’m not going to do and I don’t want you to do is go, “We offer $10,200,” and they go, “No, not good enough. Needs to be higher.” “$12,000?” “No, not good enough. Needs to be higher.” “$14,000?” “Nope,” and then back and forth, justifying it. “How about this, or how about that? Here are all these comps, and here are all those comps.” That’s where you don’t want to play that game. Do you want to jump in yet?
I’ll wait till you’re done.
What happens for me is the call comes in. You heard me earlier this week talk about how I answered the call and started asking questions about the property. I ask questions about the situation. I get to know what’s going on. If they don’t like my price for any reason, the last thing I do is give them another price. What I do is I make them stay on the phone with me till I get a price, whatever it is. I want to know what they’re thinking. They’re like, “This isn’t good enough.” “Okay. I made you an offer. Now it’s your turn.” I literally say that. No problem. What do you think it’s worth and why?
Keep in mind, my name is Jill. I’m a sweet little land company owner. Whatever you and I agree on, that’s going to be a thing, “I’m going to pay for this, I’m going to pay for that.” There are no negotiations. I’m going to make this so easy. Here I am explaining the convenience to them, “I can get you paid out in fourteen days because I did a deal nearby there, and I did it that fast. I can make this happen.” “Okay, Jill. I’ll tell you what. Make it $15,000 and it’s yours.” Now I have a number. That’s how I roll.
I devised this system a lot of years ago in the mid-’90s. Many people have copied it and touted it as their own. Almost all of those are former Land Academy members. I decided to devise this system in the mid-’90s out of frustration with the inefficiency of cold calling. I realized many years later that it accomplishes a lot more than that. It accomplishes more than solving inefficiency.
You do a bunch of research. You send out a mailer that’s priced correctly. It’s individually priced based on the property. What ends up happening is you’re utilizing that tool as leverage just like you’re leveraging physical leverage. You send these mailers out and you let the mailer do its job. You send out 10,000 mailers. The people who want to respond to your mailer are going to respond at about 1% to 1.5% as we learned earlier this week.
A certain percentage of those people are going to say the price is fine and they want to do the deal. You’re going to look at the deal and make sure you want to do it and adjust the price accordingly. A certain percentage are going to say, “There’s no way I’m going to sell this for anywhere near that price,” and then what Jill talked about is those last percentages of negotiation. I believe, and this is my opinion, that most people who negotiate are doing it because they like negotiating.
There’s some of that. That’s true.
There’s negotiation for negotiation’s sake. It’s because they’re banging their chest, “I was offered $5,800 and I got it to $9,000, and he bought it anyway. I did great.” There’s so much of that that goes on. I’m not a big fan of negotiation. One of the things that these mailers do is remove a lot of that. It naturally weeds out the people who just want to sell the property. They don’t care about the price, much like in a garage sale, “I just want to sell that old broom over there. I don’t care if I get $5 or $0.25. I want it out of the garage.” That’s what you’re looking for, and that’s what happens here.
Be very leery of people who want to sit on the phone for an hour and negotiate a price. Can you imagine doing 10,000 phone calls? You can’t do it, but sending out a 10,000-unit mailer if you’re brand new is a day’s work. If you don’t want to negotiate, send out twice as much mail or three times as much mail. Let the mailer work for you, and a certain percentage of those mailers will come back. I would not recommend doing this very early in your career. I would recommend doing it after you go through what Jill goes through naturally, talking to these people, understanding the negotiation process, and meeting them from where they come.
If you want to negotiate, send out twice or thrice as much mail and let the mailer work for you. A certain percentage of those mailers will come back. Share on XThe whole point here is ending on a number that you’re both happy with. That’s it. No one is beating anybody up. No one is talking anybody into anything, you or them. We’re just trying to see what number makes sense and then move on. That’s the biggest thing too. I’m not sending out three offers. We’re sending out 30,000 in a month, and I have a lot to work with. If I don’t like it, I move on.
The best part is so often, I always tell everybody to leave the door open. Often, I’ll go, “You know what, I get you. My offer was $10,253. You want $50,000. Sorry. There’s no way that will work for me. I tried. I gave it a day. I looked all over. I tried to figure out if I missed something. I didn’t. If your $50,000 ever someday becomes $10,000, hang on to my letter. Let me know, and watch what happens.”
It’s the psychology behind the negotiation process that gets under my skin. I’ve spent decades devising a system where you can get a real estate deal done, get it under contract, and purchase it in a week. That’s very unusual. A lot of that happens because there’s no contact or very minimal contact. It works this way. The psychology behind negotiation is not to get to a better price. For us, it might be, but for the regular seller, it’s a beating-your-chest situation. It’s emotional and inefficient.
The psychology behind negotiation is not to get a better price. It is a beating-your-chest situation that’s all emotions and inefficient. Share on XI loved your example because there are times when people do this. I often find that when they come back with a number, “Okay, make it whatever,” they round up to the nearest number that makes sense. I always let them think that it’s hurting me a little bit.
That’s in the book that you’re not going to read.
I don’t think so. I don’t know. You can say the book that I’m going to write. That’s coming, but I always let them go if it’s $10,00 and they want $15,000. I’m buying it for $10,000 and selling it for $40,000. Maybe that’s what I went out with. When they say, “Make it $15,000,” I have to go.
I’m not patting myself on the back but I’ve been in acquisitions my entire life, and I have done probably 17,000 real estate deals combined. I did a bunch of healthcare transactions, and mergers and acquisitions transactions before that. With serious experience, negotiation is a chest-beating exercise for the vast majority of the time.
I bought a post-acute hospital in California on behalf of our company one time. It was $3.2 million, and they wanted $3.5 million. It’s $300,000 more. It had nothing to do with their debt structure, nothing to do with anything. We couldn’t make it work for a lot of reasons, mostly lender-driven, and it killed the deal. We could have made up for that in all kinds of different ways. We could have purchased their inventory and booked it. Nope, they wanted a $$3.5 million price in it. That’s one small example of how it usually goes.
We send out a lot of mail and price it well so that when it comes back, you will accept that price and move forward. In a few cases, I’m lucky to have Jill because she doesn’t have that attitude. She wants to get the deal done. She’ll shove her pride aside, as long as the deal works financially. If you have to negotiate, don’t make it about you. Make it about getting the deal done quickly.
Episode Wrap-up
That’s good. You’re right. It’s not about me. It’s about the deal. Join us tomorrow where we’ll discuss getting the land deal under contract to be purchased in two days.
You are not alone in your real estate ambition. We are Jack and Jill. Information and inspiration to buy undervalued property.
