Real Estate Investors: Learn How to Make Offers to Sellers-The Importance of an Upfront Agreement

Encourage Honesty

This is also a very critical step where you want to develop within that person some common ground and agreement of what is going to happen between the two of you. Now all the commitment at this point is going to be, "Mr. Jones, if I make an offer you like, you'll tell me you like it. Mr. Jones, if I make an offer you don't like, you'll tell me you don't like it." That's all you're asking that person to commit to. That moves the process down the line.

What it does - and what you're trying to avoid - is the seller that says, "I don't know. Let me think about it. I've got to talk to my financial advisor," or something like that. You want to try to avoid that middle of the road process.

If the individual doesn't like your offer and he tells you, that's fine. There are no guarantees here. We're certainly not going to get 100% accepted offers. At least that way you know what the status is.

"I don't like your offer. Thanks for coming by. Good luck." You shake hands and you leave. Or he says, "I do like your offer. Maybe we should talk more and try to work it out."

Avoiding the Middle of the Road

The worst thing in the world is that middle of the road where they say, "Well, let me think about it. I'm not sure." You leave and you call them back and this whole process goes on and you never really get an honest answer.

What you're trying to do in the upfront agreement is to try and eliminate some of that. Typically you would want to try to find a place to sit down - kitchen or living room - and basically ask the person in an upfront way if you make an offer they don't like, "Would you be willing to tell me you don't like the offer?"

Once that's been established, you would do the positive. That is, "If I make an offer you do like and it's something you want to talk about further and explore, I would ask that you tell me that, that it's something that's worthwhile considering and I would give that some serious consideration."

You're trying to eliminate that middle ground that's useless for him and useless for you. No deals get done in the middle. I'd rather be rejected quickly and be done or be told, "The truth is, yeah, there's something here. Let's see if we can hash a deal out."

You're simply trying to develop some communications with that seller. You're trying to make it clear as to which direction you're going - North or South. That's called the upfront agreement.

Conversation vs. Negotiation

The key wording point here is to always refer to your conversation with the seller as a visit or a conversation, not a negotiation, certainly not at this point. At this point you're both exploring the possibility of doing a transaction in terms of buying their home. At this point it's just a conversation. Try to keep those things in mind.

Always do it in the order of the negative first and then the positive second. So make sure, "If I make an offer you're not interested in, you'll say no," and vice versa, "If I make an offer you do like, you'll say yes." Do it with the negative first and the positive second.