We have been talking a lot recently about how to locate great deals. When dealing with individual sellers I recommend following these steps:
· Make contact (advertising)
· Speak on the phone and set an appointment
· Negotiate the deal
· Due diligence
In the above list, closing refers to actually buying the house. There is no turning back after you close the deal. In the negotiation process there is also a close. What I mean by this is getting the seller to agree to the deal and sign the contract. I want to talk today about how to actually close the negotiations and get the seller to agree to your offer. This will only come AFTER you have verbally agreed to the offer.
For some reason people get scared of this. I have actually been in the house with other investors when they had a deal but did not get the seller to sign (they objected to their own offer), that is crazy. There are many rules, especially dealing with pre-foreclosures that give the seller time to back out after they sign. The right thing to do is to give them this time but your chances are much higher if they sign a contract on the spot. Always, always get a written commitment when you can.
I never bring anything in the house with me so once we are at the kitchen table and ready for the paperwork I go over all the terms we talked about again and ask them if I should go get the agreements. It goes like this:
Investor – “I think we can agree to those terms. So you want to sell us your house for $90,000 cash and you want all your money within the next two weeks. Did I get that right?”
Seller – “Yes that is what we agreed to”
Investor – “I am sure that will not be a problem, does it make sense for us to go ahead and write this up on an agreement?”
Seller – “yes, do you have one?”
Investor – “I normally carry a few in the car. Do you mind if I go check?
Seller – “no”
Investor – “I will be right back. When I come back should I just come right back here or would you like me to knock again?”
Seller – “No don’t knock, just come back here.”
At this point you will go get your contract and come back in. Sit down and pull the agreement out. NEVER call it a contract because that word scares people. Go through the agreement and complete the blanks BUT ask the seller for input on every line you can. For example you would say “How is your name spelled? And is that how it is listed on title? What is today’s date? What is the address here?”
Even if you know the answers, ask as many questions as you can so they feel as if they participated in putting the agreement together. Once the agreement is done say out loud “it looks like I put my name here” and sign it. Pass the agreement and say “it looks like you put your name here”, at this point hand them the pen.
They may or may not read it. If they start to read it and it takes a while you need to become very reluctant. You will want to start asking questions like these:
“How is the school system?”
“When was the last time the roof was inspected?”
“How about the furnace?”
“I noticed a problem with ___________, how long has it been like that?”
As you ask questions, especially ones about the house, they will want to sign it quicker. They don’t want to lose you as a buyer. I am OK putting pressure on them like this because they have time after I leave to review everything. You might even tell them to call you the next day if they have any questions about the agreement.
Be upfront with them as you go through the agreement and explain things that they should know, like the inspection period, what they can expect in closing costs, etc.
After you leave get your financing lined up and do your inspection and due diligence. If anything comes up that will cause a delay or a reason for you not to buy the property, call the seller right away. It is also a good idea to call every week or so leading up to the closing letting them know you are excited to work with them. Give them updates on the progress with closing.