If you’ve closed countless deals, putting them together becomes second nature to you. However, if you’re new, it’s a totally different story.
Fortunately, in this episode, virtual investing mastery’s coach Lauren Hardy shared how you can effortlessly put together deals and not get pushed around. She also talked about some of her experiences when she first started out and the cardinal rules she adheres to at all times.
In addition, Lauren also provided proven and tested negotiation tactics that has worked for her. Hey, it just might work for you too! Plenty of helpful insights in today’s episode, so don’t forget to tune in!
Negotiation Tactics – What to Do When Your Buyers Try to Bully You
If you are new to this show, I want to welcome you. If you are one of our loyal readers, thank you for continuing to support our show. I decided to jump on because I have seen some stuff go on with our community and a lot of questions about dispositions. I wanted to take some time to talk about it and give you some tips when putting deals together. When you have done it a bunch of times, it’s easy. It’s second nature. You’ve got these rules, and you never waiver from them but when it’s your first few deals, it’s very easy for newer investors to get pushed around by end buyers.
I wanted to take the time to talk about some cardinal rules that I don’t ever waiver from and help you be able to be a deal, put your deals together, and feel confident. After you read this episode, you will feel like you are deal mastery. What are some things that are super important when you are selling a property to another investor?
A lot of us are assigning our contracts if that’s what you choose to do or you are closing on the property, and you are reselling them specifically to other investors. These other investors are either fix and flip investors, developers or landlord buyers. What are the important things to remember when you are negotiating that deal between the end buyer and yourself? I will get into it. I want to illustrate it with some stories because storytelling is the way we remember things.
I had some students putting deals together, and they were getting pushed around by their buyers. I had to work this deal with them because it was going to blow up. I would die before I let that happen. I realized that there were a few things that they and a lot of people don’t know. I wanted to get into them. The first thing is that when you are a contract holder or in control of that property, I want you not to lose control. You are in a power position. Remember that. You are going to make the rules and not going to let the end buyer push you around too much. There are a lot of ways that end buyers will use their influence and try to get you to accept terms that you would not normally accept.
There are certain terms that you need to be firm about. The first one would be an earnest money deposit. What is it? Earnest money is essentially a down payment to show good faith that they intend to buy the property and perform on the contract. I have seen end buyers try to get out of putting EMDs down. I will tell you a story of this happening to me.
In Nashville, we had some hedge fund buyers. It was a pretty hot and heavy hedge fund area. These hedge funds would get these realtors in the area to be their representatives, and the realtors would go around talking to wholesalers like myself. They would essentially get our contracts under contract. Our realtor approached me and said, “I am the representative for X, Y, Z hedge fund. I am in charge of everything. I put the deals under contract. I coordinate the inspections. I do everything.”
I thought, “I’m talking to the right guy, and this is great. I will form this relationship. This is wonderful.” The first go at it, we put it on and come up with a verbally agreed price. I sent him an assignment agreement, and he sent it back to me. It has no earnest money. That was wiped out of it, and there are other terms in the assignment. He adds that he has inspection contingencies of X amount of days. He has all these other contingencies he threw in there. Essentially, it completely changed the verbiage of my assignment agreement altogether and the nature of the deal.
I thought, “For me to work with you, do I have to work with these terms? How many of these can I now say no to?” At the time, I was newer and didn’t have good reasons for striking out stuff that he sent me. I took and signed it. There was no EMD, which was very important. Sure enough, he put the thing under contract, inspected it, and pulled it out. There was no EMD to hold him accountable. He had the contingency dates, so he wasn’t accountable there. It was disappointing.
When you are a contract holder, or you have the property, you are in control. Do not lose control. You are in a power position.
I later found out that this was very common practice for these representatives of the hedge funds. They would essentially tie up as many properties as they could from other wholesalers but they didn’t use EMDs to keep them accountable. They would put inspection contingencies on the assignments, so they had an out contractually. I learned I will always collect an EMD.
My EMDs are non-refundable when I’m assigning contracts, and I do not put inspection contingencies in my assignments. They have one chance to inspect the property, we walk them through, and then they give us their best and final offer. If I accept it, they have to give me an EMD. It’s usually at least above $1,000, and they do not have an out from there. At that point, it is non-refundable. There are no inspection contingencies. Sometimes you are going to have to be flexible.
If there’s some foundation damage and I don’t have any other buyers that are any better, then I might say they can get a foundation expert there because I don’t have any other options. I might work with them and give them a chance to inspect further, and I might refund their EMD in that situation. This might not be obvious but EMDs would be refundable if we can’t deliver a clear title.
If the seller, for whatever reason, cannot convey the property to that end buyer for whatever reason, maybe it would be title issues or that the seller is not performing, they are going to get their EMD back. Holding an EMD is our way of securing that we have an end buyer in place because I don’t want to be in that situation where we are a week before closing an escrow or a couple of days, that buyer pulls out, and they have nothing holding their feet to the fire. EMDs are so important.
Another huge thing is the expectation of them signing the assignment agreement and depositing this EMD. Another example would be that you have this property under contract and you now send over an assignment to an end buyer but where people mess up is they don’t make that assignment agreement expire after 24 hours. Instead, they send it.
There’s no expectation. That end buyer can hold that property hostage, take their sweet time to sign the assignment, and now you are in this position of going, “I found a better buyer. What am I going to do? They could sign it three days later. Now I have a situation where I have 2 buyers in 1 property.” I always make sure that my assignment agreement has the language that expires within 24 hours.
My assignment agreement is dated. It’s very clear that this end buyer has 24 hours to sign it. Otherwise, it’s null and void. I also make sure that the earnest money is deposited within 24 hours. That is very important. I have had end buyers sign assignments but then drag their feet with the EMD, and then they start requesting things like more inspections like, “Can I get it back to you because I’m on vacation?”
Any time I start getting excuses from end-buyers when it comes to depositing EMDs, I know they are playing me. This is not my first rodeo. I go tell them to pound sand at this point. I have it in my assignment agreement and all my contracts. All of my languages protect me very well, so I can tell them to pound sand. That’s a very important one. A lot of people don’t think about this until it happens to them but you want to make sure that you’ve got some expiration on your contracts. That goes with all of your contracts. You do want to have expirations in there.
Another thing that is pretty important to me, and I am inflexible about this unless there are a few cases where I might not be is that, I choose the escrow company. In every territory I’m in, I’ve got my favorite escrow companies. I give them repeat business, so I get a good deal. It’s not about the price or the discount they give me. It’s more about the escrow company being investor and wholesaler-friendly. They are willing to be quick and prioritize my deals, give me good customer service, and don’t mess up. I love picking escrow companies in transactions. I usually like to control that.
Never do the first few wholesaling deals on your own, especially if you’ve never done anything like it before. Be sure to partner with somebody who knows what they are doing.
If an end buyer who’s buying the property off of me insists, “I want to use my escrow company,” and they will from time to time, I always say, “Part of the deal is you’ve got to use mine or it’s no deal.” If they are willing to walk away and I have no other end buyers in line for the property, then I might inquire a little bit more as to why they are being so inflexible.
It could be that they say, “I get a discount. That’s why.” I would say, “I do $50,000 plus a year in this territory, and I get probably a better discount than you do.” A lot of times, I can negotiate this, and the end buyers end up doing what I want them to do but if they don’t and they are being super insistent about this, which sometimes they will, I will ask if I can have the escrow company’s contact and vet the escrow company out myself.
I will say, “Do you work with other wholesalers in the area? How quick can you close this deal?” I ask them different questions like, “Do you know what a double closing is? Do you do one HUD for everyone, or can you separate the HUDs and have HUD between myself and the seller? HUD between myself and the buyer?” I ask the more technical questions to see if they have answers.
If they don’t know what I’m talking about and say something like, “What is a double closing?” I am like, “This is not going to be great.” I will go back to the end buyer and insist again, “We use my escrow company because I don’t have faith in yours.” After a while of doing several deals and being firm on these principles, most of the time, end buyers comply with my rules.
If they are not willing to comply, it’s usually because you are not delivering the message with enough control and know-how to deliver. That’s why I like to illustrate with stories. I like to go back and say, “I had this happen but we had a bad experience.” For example, we went to an end buyer’s escrow company, and the escrow company completely messed up. We ended up having to settle it out after closing, where I had to write checks and settle it out because they couldn’t even put the final settlement statement together correctly.
When I start illustrating stories, the end buyers realize I know what I’m talking about and feel comfortable. A lot of times, the reason end buyers insist on their escrow company is because they don’t feel comfortable with you and don’t fully trust that you know what you are doing. If you portray that you know what you are doing, they will be more open to following your rules. That leads me to the topic of, “What if you don’t know what you are doing? What does somebody completely new to wholesaling do in this situation?” My answer to that is you need to partner with someone who does.
It’s very important that you don’t do your first few deals on your own. It is great that you have the guts to try to do it but don’t be a hero. Do not try to do these transactions on your own at first when you have never done anything like it before. You will avoid so many headaches if you partner with somebody who knows what they are doing. If you are in that situation and you are brand new, partner with somebody who knows what they are doing. They can help you put that deal together and deliver these messages and rules that I’m talking about with full confidence. In that way, your end buyer feels more confident in you.
If you want to learn more about virtual investing, investing in an area that is not your backyard, whether that’s out of state, a couple of hours away or maybe you live in a different country, my program is awesome. Go to www.VirtualInvestingMastery.com. I would love to have you as part of the program, either way, follow me on Instagram because I share a lot of awesome free content, all things virtual. Thanks for reading.
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About Lauren Hardy
Lauren Hardy is a Virtual Investing expert and Real Estate influencer who owns multiple companies in the real estate industry including real estate investment, coaching, and software companies. She is also a Wholesaling Inc coach and co-host of the Wholesaling Inc Podcast.
Her experience in the last decade has been focused on real estate investing and creating products and services to serve the real estate investing community. If you are interested in investing in real estate virtually, house flipping, or virtual landlording, Lauren’s your girl.