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Real Estate Rookie
The “Secret Sauce” for Buying Rental Properties BELOW Market Value
00:48:37
Want to learn the secret to snagging rentals below market value? Every successful investor has this one crucial skill, and it’s often the difference between getting the door shut in your face and coming away with a discounted property. Even rookies can learn this skill, and today, we’re bringing on a pro to show you how! Welcome back to the Real Estate Rookie podcast! Today, we’re joined by J Scott, who delivers a masterclass on real estate negotiations with sellers, agents, contractors, vendors, and anyone else you encounter in your real estate investing journey. In this episode, J will show you the best way to sharpen your negotiation skills, the questions that will help you determine a seller’s motivation, and how to stand out to sellers in a competitive housing market. But that’s not all. If you’ve ever wondered where you should set your starting offer and how to get over your fear of insulting the seller with a “lowball” bid, J’s got the answers. Better yet, he’ll show...
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- [00:00]
Ashley Kerrick
Negotiating underlies so many aspects of real estate.
- [00:04]
Tony J. Robinson
Learning how to negotiate can transform how you close deals and make deals work for your strategy.
- [00:09]
Jay Scott
Good negotiators aren't good salespeople. They really are people that are just good at building relationships, rapport, and gathering information. Getting that knowledge is power.
- [00:23]
Ashley Kerrick
This is the Real Estate Rookie Podcast, and I'm Ashley Kerrick.
- [00:27]
Tony J. Robinson
And I'm Tony J. Robinson. And we want to give a very, very warm welcome to none other than J. SC Jay, thanks for joining us today, man.
- [00:33]
Jay Scott
Hey, thanks. I, you know, I love being on the show with you guys, so thanks for having me back.
- [00:38]
Ashley Kerrick
Yeah. Jay, why don't you start off with telling us a little bit about your experience with negotiation?
- [00:44]
Jay Scott
Yeah, so I've been negotiating for a long time. I started out in the corporate world. I did tech for a while. Actually spent much of my career at Microsoft, and they sent us to some really good negotiation courses when it came to business negotiation. So I kind of got my start long before real estate. And then 2008 jumped into real estate. We flipped about 500 houses. So when you do that, you have about 1,000 negotiations. You have a negotiation on the buy side, you have negotiation on the sell side. That doesn't include the thousands of negotiations with contractors and agents and attorneys and title companies and appraisers and everybody else involved in the transactions. So, yeah, I realized early on that being able to negotiate well really can make a big difference in your bottom line. Even if, I mean, if you save $100 on a transaction and you're doing 20 or 30 transactions a year, that adds up to thousands or tens of thousands of dollars over a career. You can literally make or lose millions of dollars by being a good negotiator or conversely, not being a good negotiator.
- [01:49]
Ashley Kerrick
For rookies that are just starting out, maybe besides just, you know, purchasing a deal, who are some other people that, for our rookie investors, should primarily be focused on learning how to negotiate with.
- [02:01]
Jay Scott
Yeah. So when it comes to neg and all the stuff I'm going to talk about today, for the most part, is applicable to buying real estate, selling real estate, negotiating with contractors, negotiating with other vendors that you're going to use, or even negotiating outside of real estate, these are just universal negotiation strategies, techniques, whatever you want to call them, that is going to make you a better negotiator. The thing that every negotiation essentially boils down to, well, two things that every negotiation essentially boils down to. Number one is rapport. So having a good rapport with the person or people, People on the other side of the transaction. And two, information. There's a saying that he who has the most information is going to win the negotiation. And I found that that's very much true. Information is power, and the more information you can get, the better you're going to perform in that negotiation in terms of giving the other party what they want and you getting what you want. So we can talk about those. But it basically boils down to rapport and information. And there's a lot of strategies outside of that, but those are the two big ones.
- [03:03]
Tony J. Robinson
Jay, let me ask one thing just to kind of set the table, because I don't want to lo half of our audience here before we even get started. But in your perspective, do you feel that you need to be an extrovert to be good at negotiation?
- [03:15]
Jay Scott
That's a great question, and I probably should have started with that. I started negotiating again in the corporate world, but at the time I did, it was really, really difficult for me. I'm an introvert. I'm former engineer. I spent my first career as an engineer. I don't like talking to people. I don't like doing a podcast like this. I'm used to doing it, and I'm kind of putting on a brave face and acting here a little bit because this is tough for me. I'm an introvert and talking to people and negotiating, and I'm not a sales guy. Asking people for stuff is really hard for me. And so it has taken some time and effort and energy to get good at it. But very much negotiation is like a muscle. The more you use it, the stronger it gets, and the more things start to come naturally. And what you realize is good negotiators aren't good salespeople. They really are people that are just good at building relationships, rapport, and gathering information. Getting that knowledge is power. And so it doesn't matter if you're an extrovert, doesn't matter if you're an introvert, as long as you're good at building relationships and as long as you're good at gathering information.
- [04:24]
Ashley Kerrick
Jay, let's get into it then. What are some of the things that a rookie investor should do during a negotiation? What are some of the tactics?
- [04:33]
Jay Scott
Yeah. Well, first, let's talk a little bit about why negotiation is so important in real estate. And I mentioned that negotiation is kind of universal, and we'll use it in everything we do. But when it comes to buying and selling real estate, there's. There's a few things that make Negotiation and good negotiation much more important than a lot of things that we're going to do. Number one, the amount of money involved. When you're buying or selling a house, you're spending what's potentially the largest investment of your life. More importantly, the person on the other side of the transaction is potentially negotiating with the largest amount of money they've ever negotiated with. And so they're obviously going to be more on guard. They're going to be more aware of the negotiation and more serious about the negotiation than if they were negotiating a trinket in a store. So the amount of money involved just makes everybody a little bit more on edge, everybody a little bit more astute and attuned to what's going on. Number two is just the timeline. If I walk into a car dealership, I might spend a few hours, maybe even I come back over the course of a couple days to negotiate a car, or I go into a store in a foreign country and I negotiate over a trinket or some product. These negotiations last minutes or hours, maybe at most a day or two. But when it comes to real estate, we're talking about a negotiation that lasts literally 30, 60, even 90 days if we're doing a big transaction, which means there's a lot that can go wrong. Just because you and I come to an agreement today doesn't mean that one of us isn't going to change our mind a week from now or some circumstance is going to happen a week from now that causes us to have to renegotiate. And so, again, building that relationship, having that rapport, building trust between the parties, is super important because we're talking about literally weeks or months of holding the negotiation together. Number three, I mentioned the renegotiation points. In real estate, we have a lot of different situations where we may need to come back to the table even after we've come to an agreement. So, as an example, we get our inspection report back and we find that the inspection comes back with some things that we're not happy about. Well, we might have some contingencies that allow us to now reopen negotiation and negotiate repairs or negotiate price concessions. If that negotiation, that original agreement wasn't strong, it's easy for the negotiation to fall apart at that point. Lots of reasons we may need to renegotiate. And if we don't have a strong relationship with the other party, it's very easy for the negotiations to fall apart during the first, second, third, or fourth negotiation in the process. And then finally there's this Realistically, there are going to be multiple intermediaries in every real estate transaction. It would be great if everything involved just the buyer or seller. But a lot of real estate negotiations and transactions, transactions involve agents. Not just one agent, but maybe an agent on both sides. Title attorneys or title title agents, attorneys, lenders, appraisers, inspectors, all of these people kind of on one side or the other that are going to influence the negotiation. And so when it comes to real estate negotiations, it's a lot more complicated, it's a lot longer process, a lot more things can go wrong. And this is why it's so important to be good at negotiating real estate. Now that didn't answer your question. Your question was what are some strategies and tactics we can use? Well, I mentioned the first and the first really is the ability to build rapport. If I'm going to convince somebody to do the largest transaction of their life, the highest priced negotiation of their life, I'm going to want them to trust me. When somebody trusts me, it's a lot easier to come to an agreement than when somebody kind of looks at me like an adversary. And too often when we go into a negotiation, we take this attitude. I mean, we watch the Apprentice or we watch whatever TV show talks about these high priced corporate negotiations and we see these sharks coming together and using these strategies to outwit each other. In reality, the best negotiations are two people that trust each other and like each other and want the other person to get a good deal at the same time that they get a good deal. We don't need to be employing these, these, these complex strategies or these hard nosed tactics that try and trick the other side or try to undermine the other side. In the end, what we want is we want the two sides to come together and mutually try to find solutions to the problems. And so how do we do that? We build a relationship, we talk to the other side. We don't go in on day one with the, okay, here's my offer. You go in on day one with, hey, tell me about yourself, tell me about your family, tell me about why you're selling this house. Tell me what you're going to do next. My wife, who I really, she's the one that should be doing this show right now because she wrote the book with me, the book on negotiating real estate. And in our business she does a lot of the negotiation. She will never show up at a seller's house or meeting a buyer without coffee, without doughnuts, without bagels, just basically something to build that relationship. Build that rapport and open up the line of communication. And it might be a half hour, an hour, three hours before it goes from sitting down and having a cup of coffee to actually talking about the negotiation. Because again, it's all about building a relationship so that by the time you do start talking about money, the other side's like, I like this person. I trust this person. I'm okay doing this deal with this person. I'm okay with this person getting a half million dollars for their property or them giving me a half million dollars for my property because I like them. And so, again, building rapport. Information is the second piece that I talked about. And information is important because when it comes to real estate, too many people think that everybody wants the same thing. And this is part of the reason why most real estate negotiations fail. If I make an offer on a hundred properties tomorrow, it's likely that 95% of them aren't going to go anywhere. And the reason for that is because both sides likely have the same goals, and that goal is money. If Ashley, I'm negotiating a deal with you and all you care about is getting the most money. And as a buyer, all I care about is getting the best deal and paying the least amount of money. We're never going to come to an agreement. There's no way that you can receive the most money and I can pay the least money at the same time. And so the way these negotiations work, the successful ones, is we figure out what is it besides money that the other person wants. And there's not. It's not always that the other side wants something other than money. As an investor, a lot of times it really is just about the money. But in many cases, we can find something other than money that motivates the other side. And if we can find that thing, very often we can get a better deal because the other side is willing to give up money to get that thing that they really want or that they really, really need.
- [11:45]
Tony J. Robinson
J what a refreshing take on negotiation. Because I think for a lot of people, when they hear negotiation, they do think kind of old school sales tactics, high pressure situations. But the way that you're taking A J, where it's a focus on, hey, what are your motivations, what are you trying to get out of this and how can we approach this? So it's a win for both of us. I think it's such a refreshing take, and it takes away some of that, that stress that rookies might feel when they think about negotiating.
- [12:10]
Jay Scott
Yeah, I think one of my Favorite stories about negotiating. Probably back in 2010 or 20, my wife and I. One Sunday morning, we get a call from our closing attorney who said we were just. My wife and I were walking around our neighborhood and they're doing this estate sale. Apparently a woman died in the house and they're selling a bunch of stuff. And I don't know if they're looking to sell the house or not, but just wanted to let you know that there's a house in our neighborhood that they're doing an estate sale. And I don't know what's going on. And so my wife and I were like, well, we were friends with our attorney and we said, we haven't seen you guys in a while, we're going to come and say hi. But we're also going to use it as an opportunity to stop by the house and see what we can learn about it. So we get to the house, my wife finds the woman that's running the estate sale. Turns out it was the daughter of the woman that passed away who owned the house. And my wife is talking to her and basically said, hey, are you looking to sell this house? After a while she said, are you planning to sell the house? And the woman was like, maybe at some point, but I'm just, I'm not ready to think about that yet. And my wife's like, no problem. Just let you know we're investors if you're ever interested in selling or I'm an agent, I'm a broker. If you just like, just want information or if there's anything I can help you with, just sincerely trying to be nice, just let me know. And the one was like, thank you, I really appreciate that. They exchanged information. A couple months later, I think my wife dropped a card in her mailbox, didn't hear anything. In return, we added her to our Christmas card list. It was about 18 months later that apparently my wife like just sent her a Christmas card. And it was like somewhere around the two year anniversary that the woman's mother had died. And my wife was just like, I hope you're doing okay at this hard time, just Merry Christmas. And just left it. At that, at that point we had resigned ourselves, this woman's not going to sell the house. We weren't looking to buy the house at this point. My wife had just made a friend and was being nice. And a couple weeks later the phone rings and it's the woman and she's like, you know, it's been two years since my mom died. You're literally the only one that reached out even and mentioned it to me and asked how I was doing and I don't even know you. And I just thought it was the sweetest thing. And it made me realize that it's probably time for me to sell this house. Are you still interested in buying it? And we ended up buying that house and my wife and that woman ended up being friends for a long time. But it really was, we were no longer in the mindset of this is a negotiation that we're trying to get a good deal on this house. It was at this point we have a relationship with this person, we're maintaining that relationship. And just naturally out of that relationship came this opportunity. And so what we found is the best opportunities that we've gotten over the years have just come from these relationships where there was no expectation that we were trying to buy something or sell something.
- [14:56]
Tony J. Robinson
What an incredible story, Jay. And I think it just goes to show that when you put the relationship over the revenue, good things tend to happen. So I love hearing that story. So we're going to take a quick short break here and when we get back, we're going to ask Jay what he's doing in today's market to have a competitive edge when negotiating deals. Now while we're on the short break, we want you guys to head over to your Bigger Pockets profile. Go to your settings and turn on notifications for the Ricky newsletter. Yes, that's right. We now have a weekly newsletter dedicated to rookies to give you more information on investing in real estate. We'll be right back after this quick break.
- [15:31]
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- [16:11]
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- [17:25]
Tony J. Robinson
Hi guys, we're back from our short break with Jay Scott again, the author of the book on negotiating real estate from Biggerpockets. You can find his book at biggerpockets.com/bookstore. So Jay, what are some of the things that Rickies could do today to really sharpen their negotiation skills? Like we know that when we're underwriting properties we can practice by just analyzing a bunch of deals. What's the equivalent to that in negotiating real estate? Like how can you practice to try and get better?
- [17:51]
Jay Scott
So number one, negotiate everything. This was probably the biggest lesson I learned when I took that, that high price negotiating course that Microsoft paid for when I was, when I was working there, our homework assignment, it was a multi day class and our homework assignment every day was basically go stop somewhere after the class and negotiate. Whether that's McDonald's, whether that's Macy's, whether that's Target. Someplace where you never imagined you could possibly negotiate something and go in and try and negotiate something. Like if you've Never walked into McDonald's and tried to negotiate down the price of a Big Mac, it really forces you to get out of your comfort zone and you may not be successful. But what you realize is that nobody's going to take out a gun and shoot you just for, just for suggesting that you might get a discount on something and it makes you comfortable with the idea of learning to ask, I'm.
- [18:45]
Ashley Kerrick
Terrified already thinking of.
- [18:48]
Jay Scott
Let me tell you something, I'm still terrified of thinking it. But I will do it now because I've done it before, and I've done it enough times just to. To practice and just to show other people that it actually works when it comes to just building that confidence that it takes to be able to ask for what you want. But probably the biggest lesson I've learned over the years in this business is that too often we don't get things because we just are too scared to ask for them. And oftentimes people are happy to say yes. And even if they're not happy to say yes, oftentimes people will say yes just out of obligation because they owe you something or because they're too uncomfortable saying no. And I'm not saying we should necessarily take advantage of people, But I have no problem asking somebody something. And if they come back to me and they say, hey, yeah, I guess I'll do that. And I know that they're a little uncomfortable, but they're doing it just because I asked, great. If I hadn't have asked, they wouldn't have done it. And so the first thing that I would say to everybody is, don't be afraid to ask. I know people that will go and look at 100 houses and make offers on five of them, because the other 95, they feel like I'd have to offer so low that I'm not going to insult them. Well, go insult them. What's the worst that can Happen? Go offer 25% of the list price on this house. The worst that's going to happen is they're going to say no. And let me tell you something, you do that 100 or 200 or 500 times, it only takes one person to come back and say, well, maybe we can make this work. And it'll make all those times they said no worth it, because you'll make enough money on that one deal. So the biggest piece of advice I have to everybody is get used to asking. Get used to throwing it out there. Because the worst somebody can say is no. And more often than you expect, they're going to say yes or they're going to open up a negotiation.
- [20:38]
Ashley Kerrick
And there's also going to be that one person happy that you threw in that low ball offer. I have a property now that's been sitting for two months. It's had a ton of showings, but zero offers. Literally, if someone offered me a low price, I would sell it. It's been a vacant property. We never did anything with it. And like, go ahead and make an offer because I'll probably say yes and I will be happy about it. Even though it's way less than what it's listed at.
- [21:03]
Jay Scott
Yeah, Ashley, you and I were talking about this before the show started. A story that I've told before, I tell it in the book and, and I think it's a really important story of a house that we were looking at. And the woman that we went to talk to and she wanted to sell the house. We made an offer, it was a low offer and she didn't want to take it. And we asked if anybody else had offered on the house and she was like, yeah, we've had a lot of people look at it, a lot of people make offers. And we're like, well, has anybody offered like close to what you want? Yeah, a couple people have offered close to what we want. And we started digging in like, well, if people are offering the amount of money you want, why haven't you agreed to sell it to them? And after, like really digging in and asking open ended questions and trying to get to the root of what was going on, what we learned was this woman had lived in this house for about 70 years. She was born in the house, she grew up in the house, her kids grew up in the house, her grandkids grew up in the house. And she was finally, after some 70, 70 years of living in this house, ready to move. She didn't know how to move. She didn't know the process of getting her stuff from where it was in that house to where she wanted to move, which was in with her kids in another state. And once we realized that, we realized this has nothing to do with the money. She's happy to sell this house to us for well below what she's asking if we can solve her real problem, which is her fear of trying to figure out how to move. And at the end of the day, what we told her was, look, we'll take care of this for you. We will hire a reputable company, we'll let you pick the company to hire. We will have them come, they will pack up your stuff, they'll put it in a truck, they'll drive the truck to your kid's house, they'll unload it on the other side. You have nothing that you'll need to do. And when we said that, her reaction was, oh, well, yeah, let's do this. Because we had solved her real problem. Her real problem wasn't that we weren't offering enough money. Her real problem was she was scared to go through this process of moving. And so once we got to the basis of what the problem was, we knew we could solve that problem. And that's what really. That's how real estate negotiations or any negotiations are successful. You figure out what problem the other side has other than money, and you solve that problem. And if you can do that, you can generally get the things you want for less money than. Than. Than you otherwise could.
- [23:24]
Tony J. Robinson
Yeah. I think the biggest challenge or misconception that rickies have is that they don't understand the power of searching for a no in negotiations. They're so afraid of hearing the word no that they close themselves off to opportunities. And I was literally just talking with some. Some rookie investors, I think it was like, earlier this week. But they had come to me. They said, tony, we've been looking for deals. We can't find any good deals. And, like, here's a property that we like, but they're just asking too much. I said, well, just offer whatever number makes the most sense for you. Who cares what they're asking for? Just offer it your number. The listing price was half a million bucks. They offered at $400,000. The sellers countered, I think at like, 470. The buyers recountered. I think at like, 420, the seller recounted 435. And now they're under contracted for 35. The only way that they get there is if they have the courage to submit an offer that's so low that the seller is going to reject it in the first place. But so many people are afraid of that first. No, they never get there.
- [24:20]
Jay Scott
And the crazy thing is that buyer is probably sitting there thinking, wow, I should have started at 350, and I probably could have gotten it for 400. And so that's part of the issue that a lot of us have is not just that we're scared to negotiate, but when we do negotiate, we're scared of insulting the other side. I often get asked the question, if I'm going to make an offer on a property, where do I start? How do I pick that first number? And my answer is, you should pick the number that is as low as possible that won't have the other side walk away. If somebody's selling something for $500,000, and I think if I offer them $300,000, they're going to walk away. But if I offer them 300,000, they're going to be insulted, but they're going to start to negotiate, then $301,000 is my starting place. I want that number where I don't care if they're insulted, as long as they don't walk away. And it can be difficult to find that number. But let me give you a secret. This is how you find what that number often is. You figure out how much they owe on their mortgage, you figure out that number that if you pay them this amount, they won't have to come to the closing table with any money out of pocket. Normally that is the lowest point where you'll probably still insult them, but they're not going to walk away because you haven't asked them to actually put up any additional money to sell this property. And so one of the things that we do when we're looking to buy a property is we do as much research as we possibly can to try and figure out how much they owe on the property. And a lot of times that just involves going and looking in public records saying they got a property four years ago at 7% interest rate at this amortization. And then you stick that in a calculator and you see, okay, today they probably owe 8,000 less than that. That's my starting number. And you'd be surprised the number of sellers that we make an offer to. And they're like, wow, that's like, basically exactly what I owe on the property. And I'm just like, oh, wow, that's amazing. But that's often that lowest number you can start with where they might be insulted, but they're not going to walk away. And that's the number that I want.
- [26:27]
Ashley Kerrick
With that finding the mortgage amount or estimating it. There's resources, too, like propstream.com is one where they'll actually estimate it for you, like, based on when they got their mortgage, how many years it's been, what their monthly payment is, too. So you can use different websites like that to help along with the county records.
- [26:47]
Jay Scott
And you can just ask the seller. I mean, it's not unreasonable to say, hey, looks like you've been in this house for 15 years and you know how much they bought it for? Because you can look, probably look on Zillow or in public record, see what they bought it for. And you just say, have you refinanced it all in the last 15 years? If they say no, well, they probably bought it for 80% of the. They got a loan for 80% of whatever they bought it for. And. And you can figure out what the interest rate was 15 years ago. And you can ballpark it yourself, you can generally get pretty close. But yeah, there are plenty of tools out there that will help you with that as well.
- [27:21]
Tony J. Robinson
But yeah, I think the important thing of what you've said here, which I don't want to get lost in our rookies, is that being curious as you're going through the negotiation phase is probably one of the most important things that you can focus on. Even more so than like, hey, what's the one way to really convince someone? It's just like if you can ask, ask questions and listen to responses and ask more open ended questions and get deeper into their motivations. That's how you really build some of that connection and that rapport and give yourself an opportunity to negotiate in the right way.
- [27:51]
Jay Scott
There's a person in the real estate world, his name is Pete Fortunato. And a lot of younger folks or newer folks in the business probably have never heard of him. But for anybody that's been around for a while, he was, see, what's the best analogy? He was the Grant Cardone or the Brandon Turner of the 1970s real estate. Everybody knew who he was. He was the person everybody listened to. And everybody would go to his seminars and watch him speak. And he's still around, doesn't live too far from me. But he was kind of like the king of creative deal making for the last 30, 40, 50 years. And he has a saying. When he walks into a house, he will look around, get a big smile on his face and say, why would you be selling a property as nice as this? Basically sending the message to the other side that this is great, this is awesome. Why would anybody want to be getting rid of this? Like, you're now opening the door to the other side. Basically telling you their life story, but in a way that you didn't insult them, saying, oh, yeah, okay, great. Why are you selling? Like, nobody wants to hear why are you selling? But why are you selling a beautiful house like this? Oh, well, thank you for saying that. Let me tell you what's going on. And so it's, it's. A lot of people use that as a joke now when they, when they see Pete. Why would you sell a beautiful house like this? But the reality is if you have no better opening line, it's a fantastic one.
- [29:21]
Tony J. Robinson
Now, Jay, we've got to take our last AB break here and Ricky's before we do, we want to make sure that you guys have the opportunity to get the best discount on BPCON 2025 tickets in Las Vegas. Look, even Jay's negotiating tactics won't get you anything cheaper than what the prices are at right now. So head over to get.biggerpockets.com conference to secure your tickets to come learn with like minded investors and we'll be right back after this.
- [29:44]
D
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- [30:21]
Ashley Kerrick
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- [33:11]
Tony J. Robinson
All right guys, welcome back. We're here with Jay. So Jay, one thing that I want to just drill down on really quickly in kind of a tactical sense for the rookies, how exactly can I find the motivations of the seller? I know we talked about curiosity, I know we talked about kind of peeling back those layers, but maybe what specific questions can I ask to better understand what's actually driving this person to sell their home?
- [33:30]
Ashley Kerrick
And Jay too, if you could kind of touch on if you're not even in contact with the seller, like if you're using an agent, what are some of the ways to kind of figure this out too, through somebody else?
- [33:42]
Jay Scott
So let me start with the first question, because the second one actually's question is a little bit tougher. But let me start, Tony, with your question. If you're talking directly to the seller and once you have that rapport and you're not going to insult them with this question, my favorite question is literally saying, what do you plan to do with the money that you're going to get from your sale, which is a much different question than, like, where are you moving? Or what do you, what, what, what's your next house going to be? Because you're going to get a lot of different answers that you might not expect. It might be, well, my daughter's getting married next month, and I don't know if you know anything about weddings, but they're pretty expensive now. You know, okay, they're planning to use that money for a wedding, or maybe they're using that money to put their child through college. Or maybe they say, haven't quite figured it out. We're going to rent for a few months, and so probably just going to throw it in a savings account for a few months until we figure out where we want to move. Well, suddenly now you know that they have nothing better to do with that money, and maybe you've now opened up the door to a seller financing offer. Oh, great, you're going to throw that into a savings account making 1%. What if I could help you make 7 or 8% on that money? Would that be something that's attractive to you? And if they go, oh, wow, I can make 7 or 8% of my money. Yeah, let's talk about it. And now you've potentially opened up the opportunity for a seller financing deal. So. Yeah. So asking the question, what do you plan to do with the money? Is a great way to figure out what their motivation is, because that's basically going to tell you exactly what they need the money for.
- [35:17]
Ashley Kerrick
Jay, when you ask that, how many people have said to you, that's none of your business?
- [35:21]
Jay Scott
I've had a few. I'm not going to lie. But this is the reason why building that relationship first is really important, because that question can come off a lot differently if you're talking to somebody that you're in an adversarial negotiation with and somebody who you've sent the message, I'm here trying to help you. Like, you're trying to sell your house, I'm trying to buy your house. Let's figure out how to make this work, because I know you don't want to be here any longer than you have to, and I really would love to buy this house. So. So what do you plan to use the money for if we can get this deal done? That didn't sound as bad as, okay, checklist. What are you planning to use the money for?
- [36:02]
Ashley Kerrick
And so you said it's only been a few, that you're not offending the majority of people when you're.
- [36:08]
Jay Scott
Exactly. And most of the people that have basically refused to answer that question, they haven't been rude about it because the way I ask it isn't in a way that's accusatory or being rude in the first place. Again, it's part of that whole discussion. Hey, I know you want to sell. I'd really love to buy. Can you give me an idea of like, what you plan to do with the money? And it really, if it comes off that way, it doesn't sound bad and it's not going to trigger a negative reaction.
- [36:32]
Ashley Kerrick
So now what's the best approach? If you are using a real estate agent or going through somebody else and you know, even worse, you have two agents, you're telling your agent, they're telling the other agent than the agent. You're basically paying telephone through this whole process. What's kind of the best strategy there?
- [36:49]
Jay Scott
Yeah, and that can be really, really difficult. It's actually one of the reasons why I always recommend that if you're going to do this, this business full time over a long period of time, consider getting your real estate license or having a spouse get a real estate license or having a partner get a real estate license, because it really does give you a lot more control. Everybody thinks that getting a real estate license is great because you make more money. I don't have to pay the 3% on the sales side or I get 3% when I buy. The reality is that my wife is a broker, I'm licensed, and we still pay somebody to list our properties, and we still pay somebody to represent us. When we're buying a property, we don't care about the 3% on the buy side or the sell side. But the fact that we're licensed means that we can talk to the other agent ourself. We can talk to the inspector, we can talk to the appraiser, we can talk to the lender. And there's nothing wrong with that because we're licensed, we're representing ourselves. Buying or selling this property doesn't mean we necessarily can talk to the seller if they have an agent. But I, and I know people disagree here. I have no issue with going to the seller's agent and saying, hey, do you mind if I have a phone call with your seller? Or on the other side, do you mind if I have a phone call with your buyer? A lot of times they're going to say, no, I'm not comfortable with that. Sometimes they'll say, well, let me ask my seller or my Buyer. Sometimes they'll say, I'm okay with that as long as I'm there. And you have to be a little bit more careful with what that conversation entails. Again, you don't want it to sound like you're negotiating directly, but if they say yes in any capacity, it gives you the opportunity to ask those questions, even if they say no. Nothing wrong with saying to the agent, hey, can you give me an idea of why they're selling? Now seems like a weird time to be selling in this market, and we're just curious, like, what their motivation is. A good agent's going to say, I'm not going to ask and I don't care. But plenty of agents out there will be like, I'll ask. I'll let you know what they say. So again, can't hurt to ask. The other thing is, I seen a lot of people who will write letters to the seller or to the buyer, and most of those times, those letters go through. Now, in a hot market, everybody's writing letters, hey, my family would love to live in your house. We've got three kids. One goes to this school, one plays the piano. Please pick us. Okay? I mean, if you're doing one of those things, you're probably not going to get picked, but, I mean, there are opportunities for you to basically send a letter saying, hey, let's. Let me tell you a little bit more about what we're going to do with your property. Let me tell you a little bit about how we can help you if there's some particular problem that you're looking to solve and money's not going to solve it. Come back and let's talk about it again. It's opening up the lines of communications, and a lot of times you can do that even with another agent available by just saying, hey, can you pass this letter on to your seller or to your buyer? And a lot of times they will.
- [39:41]
Ashley Kerrick
I actually had somebody write me a card asking to buy a duplex. And at the time, I had owned it in my personal name. And it was right kind of when the Rookie podcast started. And the person said, like, we love the podcast. So, you know, so are you interested in selling your duplex? And it was a picture of him and his girlfriend and their dog. And I ended up meeting them, like, several years later at a Biggerpockets conference. But it was. It was like such. It was a memorable moment that, like, if I were to sell, like, I would remember them out of the texts I get, the cold calls I get from thing Was that personal touch if.
- [40:19]
Jay Scott
You got two equivalent offers and one of them was for a half a percent less, $1,000 less, $2,000 less, but somebody sent a note like that, you'd probably take their offer even though they were less. So something like that can really make a difference. And that goes back to what I was saying at the beginning. It's building rapport, it's building trust, it's building a relationship. It's making you feel like, like we're not just two adversaries in a negotiation. We're two people that are trying to help each other solve our problems.
- [40:47]
Ashley Kerrick
So Jake, kind of a follow up question here as far as that being one of your strategies, a personal touch, what are some things that you're doing to have a competitive edge going into the 2025 market?
- [40:59]
Jay Scott
Yeah, it's a tough, tough question. Unfortunately, these days a lot of it is a numbers game because the, there are so many people out there that are competing for the same properties. But this is where you have the opportunity to stand out. I know people that have been very successful with door knocking because again, there are going to be a lot of people who, if you show up at their door and somebody's randomly knocking on their door, they're not going to be happy. They'll call the police, they'll walk out with a gun. But there are other people who are just like, they're starved for attention. They love the idea that somebody's knocking, knocking on their door. They have somebody to talk to. And that's a personal touch that you're not going to get from sending a letter or making a cold call or putting up a bandit sign. And I know a lot of people that are very successful with door knocking because if you find the right person, an older person who's lonely, who is just looking for somebody to talk to, you may find that needle in a haystack and have an advantage over other people. The other thing is really just building long term relationships. So too many of us, when we think about a negotiation, we think about a one time thing. We think, okay, how do I get this house without thinking about the fact that even if I can't buy your house today, even if there's no way this transaction is going to work out, there's still a ton of value in us continuing to build this relationship. Tony, if I go and you're selling a house and I say, hey, I'll give you 300,000 for your $400,000 house, and you're like, yeah, whatever, I'm Sure, I can find somebody to give me more than 400,000. Thanks. Anyway, if I walk away and I say, no problem, I understand, I'm an investor. I realize that you're not. You don't need to sell to an investor. I figured I'd give it a shot. But do me a favor. If you meet anybody or if you have any friends that are looking to sell a distressed property that they really like, would benefit by having an investor, let them know that I'm here because I'm always happy to talk to them. And so now in your mind, like, I've now seated, hey, if I ever talk to anybody that's looking for an investor, this J guy seemed really nice. He lowballed me, but at the end of the day, he was honest. He said, hey, it's not going to work out. And then he left his card. And so you may refer me. And so if you do that, I may not hear from you, Tony, next year or the year after. But who knows, five years from now, you may find somebody that I'm the perfect fit for. And if I left that relationship on a good note, if I left the door open to working together in some capacity in the future, you do that enough times, and there's going to be enough open doors that people are going to be walking through them all the time.
- [43:35]
Tony J. Robinson
Jay, this anecdote you shared kind of makes me think of another question, because you said, like, hey, you offered your number. They said no. You kind of shake your hands and walk away, I guess. When. When do you know that it's time to actually end a negotiation? Like, is there. Is there a marker or a point where you're like, hey, this isn't going anywhere. How do you know when to keep pushing versus pulling back?
- [43:55]
Jay Scott
Yeah, and a lot of times it's obvious. Again, if, if you can, if you can't determine a motivating factor other than money and the lowest price that they're going to throw out there is higher than you can pay, there's no reason to continue. If, Tony, you basically say to me, I don't need to sell this house. I just see an opportunity to sell because it's a great market. I feel like I can get more than what it's realistically worth, and all I care about is making the most money. And I believe you. I believe there's no other motivating factors for you. At that point, I'm going to say, okay, what's the lowest you'll sell it to me for? And if that number is too high. We're not going to come to an agreement because all we both care about is money. And when we both want the same thing, there's not a lot of wiggle room. But again, if you can find another motivating factor, if you can find something else that they care about. So maybe it's, hey, I'd really love to sell my house today and I might be willing to sell it for a little bit less, but if I sell you my house for less than 400,000, I'm not going to like be able to find another place to live because every other house I want to buy is going to cost me 400,000. Okay, great. Sell to me for 350 and I'll let you live here free for the next year. That gives you a year to find another place. Maybe prices will drop, but you now have your $350,000 that you can go start doing what you want and you don't have to worry about where to live for the next year. You don't have to worry about moving. You don't have to worry about taking your kids and putting them in a different school. You'd be surprised how often the I'll buy your house for less than you want to sell it for, but I'm going to let you live there for free for some period of time works and it may ultimately result in at the end of that period of time you say you don't want to move. Great. I need a renter for this property anyway. Let's talk about you renting back the property that you've been in for the last 10 years and you don't have to leave at all. So there are opportunities to get creative. But again, it's mostly going to work when the issue is not just money.
- [45:55]
Ashley Kerrick
Well, Jay, thank you so much for joining us today to be able to give everyone this amazing guide to negotiating real estate. Can you let everyone know where they can reach out to you and find out more information about you?
- [46:07]
Jay Scott
Yeah, absolutely. If you go to jscott.com, the letter J S C-O-T-T.com that'll link you out to my email address and everything else I have going on and would love to hear from you.
- [46:18]
Ashley Kerrick
Jay also wrote the book co authored with his wife Carol, the book on negotiating real estate that you can find in the Bigger Pockets bookstore. And also if you want to learn more about negotiation tactics, we are going to have our keynote speaker for BiggerPockets conference this year will be Chris Voss, author of Never Split the difference. So head over to biggerpockets.com conference and you can also find Jay at the Drunk Real Estate Podcast too. One of my favorite podcasts to listen to. So if you're interested in learning more about economics, market updates and real estate investing, make sure to check out his podcast. I'm Ashley and he's Tony and this has been an episode of Real Estate Rookie.