“An agreement cannot be the result of an imposition” ~ Nestor Kirchner

Imagine. You have a hot lead in your hands that could make you thousands in the next 30 days. Tens of thousands. Appears to be a decent house. Needs a little updating. Good neighborhood. Great schools.

But the owner tells you he’s talked to other investors. He tells you, “Don’t bother to come if all you’re going to do is make a low offer.”

So…do you go? Even if you’re going to make a low offer.

The answer is yes. Always yes.

You’ll go because you’ll get a ‘yes’ to your offer. You’ll be prepared. You’ll do your due diligence and analyze the numbers. And unlike the other investors, you’ll have a tool that will explain the numbers, explain why your offer is reasonable. Your tool will negotiate for you. In fact, you will become the seller’s advocate. You’ll try to make the numbers work, for both of you.

Even if your offer is tens of thousands less than the seller wants out of his house, you will get them to say ‘Yes.’

Here’s why. Having an objective basis for your offer makes the negotiating process much easier.  So when you take the time to explain the numbers and the logic behind your offer, the seller both understands and appreciates it.  You’ll differentiate yourself because most other investors don’t take the time to do explain their offer.

And the biggest benefit of walking through the objective basis for your offer is that you get a series of ‘yeses,’ or agreements. So when you ultimately make your offer, the only logical answer is ‘Yes.’

Let’s take a minute and review some basic concepts that will lead to that ultimate ‘Yes.’

Here’s a basic real estate truth: you make your money when you buy. You only realize it when you sell. And here’s a basic business truth: knowledge is power. Taken together, it means that before you go to the house to meet the seller – before you ever make an offer – you’d better know what that house is going to cost you and what you can sell it for.  It means gathering information and doing lots of due diligence up front.

I know this is pretty basic.  But a lot of investors are still using the old formulas, like MAO – Maximum Allowable Offer, to evaluate and make offers on houses. The trouble I have with those formulas is that they don’t help you explain the objective basis for your offer to your seller, which doesn’t help you get that series of agreements that will lead to acceptance of your offer.

So if you do your due diligence, you’ve already looked up the recently ‘sold’ houses in the neighborhood. Most sellers base their estimate of their home’s value on the ‘for sale’ flyers in the neighborhood.  When a seller tells you that their 3BR/2BA house is worth X because the house down the street is selling for X, you will politely tell them that the house was listed at X, but sold for Y, a lower price.

Immediately you build credibility, because you will say it nicely, but authoritatively. You establish that you’re a professional, and that you use objective information, and not just opinion or SWAGs, to evaluate their house.  (And, you increase your credibility by pulling out your iPad and using the Zillow app to show all of the houses that were sold in the area!)

After you build rapport, you’ll ask if they’ll show you around the houses (getting a ‘yes.’) You’ll take notes on all of the repairs that need to be done. You’ll ask a lot of questions, eliciting ‘yes’ responses. (“Are these the original appliances? Has it been a while since the house was painted? ”)

Meanwhile, you will explain to the seller that you renovate your houses with extra special touches to make them stand out and sell quickly. Then you will sit down and walk through the numbers with the seller. I have an evaluation tool that I use, but you can write the numbers down, or create your own spreadsheet.

Here’s how the conversation goes when I review the numbers using my evaluation tool, the Easy Offer Maker:

First, I explain that this is a tool that I use to evaluate houses, so I can account for all of the costs associated with the property in order to ensure that there will be a profit on the back end. Because of course, I won’t be living in this house; I’m buying this with the intent to make money on it.

I ask, “You’re ok with that, right?”

This is important. You need to make sure that the seller is ok with the fact that you’re in this for a profit before you go any farther. This may seem intuitive, since you’re an investor, but you still need to make sure they understand it, and get them to say ‘Yes’ they understand it.

I explain that my company has certain criteria I have to meet and thresholds that I have to pass in order to make it an opportunity we’ll pursue. Taking the time to do this is important. It shows that I’m a solid professional, that I have an objective basis to what I’m doing.  I’m not just holding your finger up in the air to see which way the wind is blowing. Another benefit is that it also sets up my competition, so that if they don’t go through a similar process, the seller might not see them in a similar professional light. And it gets the seller to continue to say ‘yes.’

Then I walk through the numbers that go into my evaluation. And as I go over the numbers, I get agreement, or a ‘Yes,’ as I describe what goes into each one.

I review the four expense areas:

• acquisition costs
• holding costs
• repair costs (based on my walk-through of the house with the seller – so there should be no surprises!)
• selling costs 

Each time, I get them to agree that those are the costs that go into buying, rehabbing, holding and selling the house. These are real costs that I must consider if this is going to be a profitable deal for me. There’s nothing magical to it and it makes it very clear why my offer is what it is.

My offer naturally falls out of these numbers. And if the seller has agreed with each number as we’ve reviewed them, then my offer is just one more ‘Yes’ in the process because it’s all based on the numbers. It’s me and the seller against the numbers.

I can only offer as much as the numbers allow.

Unless the seller goes against every ‘yes’ that they’ve uttered during the negotiation, the only logical conclusion is that my offer is a valid one. And usually, they’ll take it. 

It’s all in the numbers.  And the beauty is, that if I get my ‘yeses,’ then I’ve got a profitable deal.