Dale on the Daily

Oops, My Numbers Were Off: The Art of Seller Renegotiation

• Dale Kerns • Season 1 • Episode 16

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We explore the challenging situation wholesalers face when buyers come in with offers lower than expected and how to successfully renegotiate with sellers when your original numbers no longer work.

• Setting proper expectations with sellers upfront that everything is subject to verification
• Using a real-world example of a deal that looked great on paper but needed renegotiation
• Gathering concrete evidence including buyers' feedback, additional photos, and written repair estimates
• Presenting revised numbers to sellers in a factual, educational manner rather than seeming predatory
• Having all information ready makes the conversation fact-based instead of emotional
• Building in margin on your initial offers to avoid dramatic price reduction requests later
• Being prepared to walk away if the seller won't meet your price
• Putting sellers who don't accept your terms into a follow-up system for future opportunities

If you like this video, click and subscribe. Comment below with your own renegotiation tips and tricks so we can all improve and close more deals.


Speaker 1:

Have you ever gotten a deal under contract and then you start marketing it and all the buyers are coming in lower than what you thought you could sell it for, even lower than what you have it under contract for For a beginning wholesaler? This is the worst nightmare. You're even thinking about this before you get the deal under contract. Is this going to be a good deal? Do my numbers work? What are my buyers going to say? Worst nightmare. You're even thinking about this before you get the deal under contract. Is this going to be a good deal? Do my numbers work? What are my buyers going to say? So today we're going to go through how to prepare and what you can do to help renegotiate with the seller when you have to. More times than not, you're probably going to have to go back to them for something, unless you just get a great screaming deal from the seller right out of the gate. So let's go through and see what that looks like and see what that looks like. So most beginners and even myself, you're going to panic when buyers come back and they tell you oh, I need it at 130, 140, and you have it contracted for 130 or 140 or maybe even less. So what we're going to go through today is how to renegotiate with the seller, what to do when that happens and why you don't need to panic in these situations. So we actually have a lead currently that we are working on renegotiating with a seller. We have the property under contract. On paper it looks like a great deal. We're getting it at probably about 60% ARV, maybe 70%, not a lot of repairs. The owner had just moved out of the property a couple months ago, so it's not like tenants are in there trashing it up and it needs a bunch of repairs. Got pictures, the pictures look good. We start marketing it to our buyers and the buyers are coming in around where we have it contracted for. So a couple of things to note when this happens and how to not make this mistake moving forward.

Speaker 1:

So in this scenario, we had the ARV around $250,000. Had the ARV around $250,000. We have a contract price at $145,000 and repairs about $25,000. So we're thinking we can probably sell this for around $165,000. We got a couple buyers in there. There's a couple things that came back that the pictures didn't show us Some siding issues where siding's going to need to be replaced.

Speaker 1:

The ceilings have popcorn ceilings, so there's a spot on there where it's not there, which typically can indicate some kind of moisture problem or some repair that needed to be done, problem or some repair that needed to be done, and also buyers nowadays they don't like, and even retail buyers don't like, the popcorn ceiling. So that's something that's going to have to be removed, which we didn't account for, and the ARVs that the actual buyers were looking at were less than what we thought. So the ARV came down, the renovation went up. Therefore our contract price is no longer as good as we thought. So Now the math is completely changed. The buyers all want it for what we are under contract for, basically. So now what you have to do is look at the numbers, verify what they're saying. If it's legit, it's legit. But also you know how you can avoid the situation. But also how you can avoid the situation. The buyers actually sent us some other comps that made our numbers look the way they needed to be and not what we thought initially. So we got all that feedback from the seller. So now we obviously had the wrong prices up front.

Speaker 1:

Now we have the buyers in there, we're getting the feedback from the buyer and then now we're going to take that and go back to the seller to review that and hopefully get a price reduction. So one of the things to note in the beginning when you are getting these under contract is setting the expectation to the buyer that once we get in there, we'll verify what you're saying is everything, that it is everything that we think it is. If, for some reason, we get in there and there's something going on and the price won't work, then we'll let you know that. We'll let you know where we need to be and we'll see if it can work for you or not. If not, no worries, we'll part ways. If it does work and the numbers are all good, then we'll move forward and close. So you're setting the expectation that we haven't seen the property yet. We are just going based off what the seller is telling us and what we see online. We're going to go in, we're going to get pictures, we're going to review everything and then we're going to come back and let you know if it still works for us, if we need a price reduction or if it's all good and we can move forward.

Speaker 1:

So setting the proper expectation up front helps the renegotiation process on the back end when you actually do go back to them and review things that need to be done if you do need a price reduction, and review things that need to be done if you do need a price reduction. So now we have all that in place, you're going to go back to the seller and talk to them about what you found and why you need it where you need it. So having the feedback of the buyer is huge. You can even have buyers. If you have contractors or buyers that go over there, you can have written estimates or estimates of what their repairs are going to be versus what you thought it was going to be. That would hold some weight. We have extra pictures that the contractors and the buyers had taken and sent to us. So we have the initial pictures that we got. Plus, we now have some pictures additionally for the people that walk through it that we can use to talk to the buyer about the price reduction. We can review the comps again.

Speaker 1:

So now a deeper dive into our due diligence. We found this, this and this. This house sold for this price. This house sold for this price. This one is currently on market at this price and not selling. So you're looking at data that has sold prior and maybe that's adjusted and changed based on what buyers are seeing in that market. Maybe that's adjusted and changed based on what buyers are seeing in that market. So now your ARV. We thought it was this, but it's actually this. Therefore, the numbers don't work as well for us, especially with the elevated budget that we now have.

Speaker 1:

So when you go and talk to the seller, you're reviewing that step by step, so you're educating him on what you found, where you were, where you are now and why the numbers don't work and why listen, if I'm going to do this, I need to be at this X number and is that something that would work for you? So having the facts and the information allows you to really talk it through and have a conversation with the seller, rather than the seller just feeling like you're trying to beat him down on price. So as we've had to do this more and more, we've learned that having all the information from your buyers and the feedback from your buyers is crucial in getting the seller to understand where you're coming from, where you need to be, and then him making a decision on if that's something that would work for him. So if you've uncovered motivation correctly, then typically this wouldn't be as much of an issue as if the seller maybe isn't as motivated as you thought or there's something you didn't uncover in the initial upfront process when you were getting under contract. They might give you a little bit more pushback. Or maybe they have a mortgage in place and the numbers just doesn't work. You may know that going in.

Speaker 1:

So make sure that you're renegotiating based on the facts. Here's new pictures, here's new ARVs, here's new renovation costs. This is why the numbers that we initially thought don't work anymore, based on the physical and current condition of the property, based on the pictures, the walkthroughs and all the feedback that you're getting from your buyers and contractors. But you've got to also run the seller through the numbers. Here's our ARV, here's our renovation, here's the holding cost, closing cost, a little bit of profit for us. This is where we would need to be.

Speaker 1:

So just have a conversation with the seller and walk them through where you are and where you need to be. This will help both of you feel comfortable about going through the process. At that point it's just facts and math. It's not you're trying to sell somebody or you're trying to force them into doing something. Here's the numbers. Here's the math Either it works or it doesn't.

Speaker 1:

It's more of a conversation than just trying to go back to the seller and say I need more of a discount. So that will help the situation with the seller feeling comfortable and even you feeling comfortable having to go back and renegotiate with them. To go back and renegotiate with them and, upfront, always leave some margin in there if you can, so that when you do go back to them you may not have to go as deep as if you locked it up too high and now you've got to go in for a steep discount. It makes it harder for the seller If you're looking for a $20,000, $30,000, $40,000 price reduction. They might just feel bait and switch that oh, you locked it up for this, you told me it would work and now you're trying to beat me down at this price. It's not going to make them feel warm and fuzzy about it. If you can work those numbers into your upfront pricing, it may help the renegotiation piece on the back end if you do need to do it to where you're not asking for as much.

Speaker 1:

And then one of the biggest things that wholesalers and beginner wholesalers experienced wholesalers it doesn't matter, you've got to be ready to walk away from the deal if it doesn't work. Here's your math, here's why it works or doesn't work. And if they're not willing to renegotiate or meet your price, you've got to be willing to walk away. We've got to remember that we are the buyer in these situations and we are buying that and they're selling it, not the other way around. So if the price doesn't work, you've got to be willing to walk away.

Speaker 1:

On to the next deal. Maybe put that person in a follow up. You can follow up with them every so often if they don't want to go with your deal at that time. Maybe things change in the future. But don't lock up a deal and move forward on something that won't work. Obviously, if your assignment fee may be less and it's something you want to close, get to the closing table, take the money you can out of it and move on. That would be up to you. But if the numbers don't work, don't try to squeeze it. Move on. Work on the next deal. Put that person in some type of follow-up, contact them later. Maybe things change, you never know.

Speaker 1:

So these are some ways that you can help the renegotiation process. Make it go smoother with the seller. Make yourself more comfortable about going back and doing it. Have your facts, have your buyer's feedback, your new ARVs, the math that you're going to use. Be prepared to go back and talk to the seller and show them why it's not going to work. Here's some evidence, here's some math, and it makes the negotiation process go smoother. It's more of a conversation, not you just coming in trying to beat the seller down and get a discount. So hopefully this helped you. If you like the video, click and subscribe. Comment below some of your tips and your tricks that you use so we can all help ourselves get better, renegotiate better, feel more comfortable about it and close more deals. See you on the next video.