From Jack Miller’s Power Negotiation Book:
People are forever trading off one aspect of a property or transaction for another, depending upon their needs, prior experience, and personal goals. Some of the things they trade off include:
(a) less cash now for higher payments later;
(b) lower interest for higher payments;
(c) lower payments for more interest;
(d) the right to continue to occupy a home for interest and payments;
(e) lower cash for a balloon payment in a shorter time;
(e) higher cash down payment for a longer payout period.
DISCOVERING “NEEDS” INSTEAD OF “WANTS”
For me, the single most important thing I can discover is the real motive for selling or buying. Sometimes sellers, when asked what they want to achieve act like a kid in the candy store who wants some of everything.
Anytime I perceive that the most important motivation for sellers is to make a profit, I usually refer them off to a Broker or another investor and try to glob on to some kind of referral fee or a future “favor”. There’s no point in both buyer and seller scrapping like dogs over the same profit bone.
On the other hand, when I can see that there is a real problem that the seller is willing to sacrifice to solve at the expense of his profit, I will work hand and glove with him or her to find a workable solution. In doing this, it’s important to sort out WHAT sellers really NEED — and WHEN it’s needed –from what they WANT.
Only by getting sellers to trust you will they open up. When sellers begin to finally explain why they’re really selling it’s crucial to be empathetic if you can, and non-judgmental.
Your questioning will attempt to find a path through this morass of variables so that you can structure an acceptable transaction. Let’s start with DIRECT QUESTIONING. You may find it useful to use some form of checklist that you can routinely fill out and which will act as an unintimidating entree into more sensitive questions.
You’d surely need to know who owns the property and who makes decisions, the details of financing, legal description of the property and the specific personal property that is included in the sale. With rentals, you might want occupancy factors, operating costs, warranties, property tax bills, zoning, insurance data, and technical data relating to any more sophisticated heating and cooling systems.
QUESTIONING AND LISTENING TECHNIQUES
a. Listen creatively, intelligently.
b. Be sensitive to leads, and then follow up.
c. Question so as to bring out real world range of possibilities.
d. Don’t be judgmental. Don’t react to information.
e. Don’t do anything to stifle open, frank communication.
f. Engender confidence and trust. Treat information confidentially.
g. Aim to DEFINE, not to SOLVE, the situation/problem/motivation.
h. Listen for the AHA!, the real root of the problem/motivation.
i. Be sensitive to CLUES that tell you which direction to pursue.
j. Discriminate between NEEDS and WANTS; find out WHY.
k. Use common, comfortable, jargon-free language.
I. Project integrity, openness, honesty competence, willingness.
m. Don’t try to impress sellers with your knowledge and expertise.
n. Don’t impose your value judgments. His goals aren’t your goals.
o. Never argue, criticize, ridicule or rob sellers of their self-image.
p. Don’t ask questions you already know except to test honesty.
q. Don’t jump to conclusions about his honesty or accuracy automatically; sellers simply may not know the real truth.
r. Bring out and make him validate the reasonableness of his price.
s. Get him to approach financing from the standpoint of how much house can afford to pay out of net rental revenue.
t. Ask about fall-throughs, other offers, time on market, buyers.
u. How did he buy it? Long he’s owned it? His cost? Terms?
v. What is his tax basis? Tax bracket? How much he’ll NET?
x. WHY is he selling? (Taxes, Loans, Transfer, Cash-flow, Divorce)
y. Evaluate: Is he: Cooperative, Open, Reasonable, and Honest?
Put yourself into the other guy’s shoes. How would you feel being interrogated, manipulated, put on the spot? The key to using questioning techniques is to maintain a relaxed environment on both sides so that each party can concentrate on the flow of information rather than their personalities and/or egos.
Probe, don’t challenge. Seek to understand his fallacies. Be empathetic, not sympathetic. Don’t intimidate or be intimidated.
Keep asking WHY until you either understand or dismiss his point. Don’t catch on too quickly. Make him elaborate to help you.
Be deliberate. Phrase questions first in your mind, then ask.
1. Are you the owners?
2. Are there any others you have to check with before you can sign?
3. How long have you lived here? Why did you buy/build THIS house?
4. What’s the current loan balance? Interest? Payment? Are they current and paid up to date?
5. Is there any reason why I couldn’t take title to existing financing without qualifying? FHA? VA? Other?
6. Do you have full liability for the mortgage? Is it personally endorsed?
7. Is this your first home? Why would you ever sell such a nice place?
8. Have there been any major changes in your family, business, etc. lately?
9. You say values are going up, how much did you pay for the house?
10 What are the costs of taxes, insurance, utilities?
11 Suppose I bought the house from you today, where would you live?
12 If I bought this property, would you be willing to rent it from me?
13 How soon could you move out?
14 If I agreed to rent/manage the property, could I buy it from you later?
15 Will it be more expensive in your next home? What’s it like?
16 If you lose your next home deal because you can’t sell this house, will you still be happy staying here? Then why move?
17 Have you made any improvements yourself? Permits? To Code?
18 I don’t know much about construction, is there anything wrong with it?
19 Is there anything wrong – or going to change in the neighborhood?
20 Is there any other information you could give me to help me decide?
21 Have I overlooked any questions I should have asked before I decide?
22 Would you describe your business and family situation as pretty stable?
23 How did you arrive at your price? Terms?
24 How much did the Appraiser offer you for the house (or Broker)?
25 How much per month can the house afford to pay out of the rents?
26 I don’t know much about management. Could you make a profit if I rented the house to you at 20% under the rents you said I could get?
27 How many payments would I have to make to you before I’d accumulate enough for a down payment?
28 Would you buy this place at the same price and with the same terms as you’ve offered me?
29 What’s the area like? Stable? Low crime? Schools? Shopping? Amenities?
30 Sometimes these judges are screwy; could I read your divorce decree?
31 What were the closing costs for you when you bought it? Could I take a quick look at your closing statement and the house papers?
32 What kind of Deed did you get when you bought the house. Could I see it?
33 Describe the worst and the best features of the house and neighborhood.
In the questioning process, the seller will gradually become aware of problems, inconsistencies, and the differences between needs and wants. If we listen (and hold off translating what we’ve heard into an instant opportunity to make an offer) we’ll be able to gather all the facts we need for analysis before committing ourselves. More about that later.
Remember we’re searching for true needs versus wants. We don’t want our seller to become a kid in a candy store. Initially, we’ll concentrate on listening. Next, we’ll probe using more indirect and sophisticated questioning techniques to bring him to full cognizance of his situation.
We’ll begin to use blunt, block-buster questions to jolt him into the real world. An inoffensive tone and attitude is essential during questioning. i.e.
a. I’m not sure I understand. Would you run that by me one more time?
b. Oh, I never knew that. Why do you suppose that is?
c. I guess I’m just slow, but I still don’t get it. Can you explain it to me again?
d. Oh? Why do you believe that?
e. How in the world could I ever make a profit doing that?
f. I assume that you and your wife are on the Deed; is that true?
g. You probably have to ask someone else before you make a decision; but, if you didn’t, you and I could make a deal today.
h. I’ll bet those neighbors of yours are a real pain.
i. Does that dog bark ALL the time?
k. Does this neighborhood have any negative factors?
I. I can understand this isn’t what you wanted, but will it work?
m. Suppose we made a deal today, why would we have to delay?
n. What if you don’t sell your home, how else would you raise cash?
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