When buying a commercial property you may wonder “What’s the best way to structure this deal?” or “How can I get the seller to agree to a creative deal?”
Finding Out What the Seller NEEDS
We can use a variety of methods and/or paperwork to structure a deal. That’s one of the fun things about creative investing, we have so many different options. Before deciding on which route to go, it’s critical to find out what a Seller really needs.
The Broker or Seller will usually tell us what the Seller WANTS.
“The Seller has owned the property for 10 years and now they want to sell it.”
That’s great, if everything was perfectly in place for the Seller and they had everything they NEED then they wouldn’t be selling their property. So when the Broker responds to your questions about the Seller by telling you…
“The Seller needs to sell so that they can buy another property.”
Then please understand that in many cases the Broker doesn’t even know the Seller’s true motivation. They are just happy to have gotten a listing or to have found you as an interested potential Buyer.
You’ll want to use the ideas in this article to help guide you to finding out what’s REALLY going on so that you know how to best structure the deal and also, more importantly, put together a deal that is going to hit the Seller’s hot buttons by solving their issue – the hidden NEED that is the key to putting together a successful deal.
Scripts to use:
“This sounds like (or appears to be) a wonderful property. Why would you – ever – consider selling it?”
NOTE: After asking this question, be quiet and listen. Sometimes silence can be an incredibly powerful tool.
“If someone was to come by today and give you a check for [Full asking price amount] what would you do with it?”
NOTE: Listen to Seller’s answer carefully paying attention to any points where they might hesitate or change the tone of their voice indicating that they are making up something as part of masking their real answer.
“I mean… wow, that’d be great if someone was willing to write you a check for [Full asking price amount] … so you’d probably take that to Vegas and put it all on red number 7… huh… “
NOTE: This is a ludicrous statement on purpose. Notice that it also ends in a manner that makes it easy for the Seller to disagree with you. This way they can say “No”, which helps to keep the Seller comfortable, while also guiding the Seller to provide more information about their REAL REASON or NEED that is driving their decision to do something with the property.
You might find out that the Sellers is going to get the money, put it into a CD and get the interest payments on it. That’s great, but why? If the property is as nice as the Seller has made it out to be, why not just keep the property and live off the cash flow?
You are looking to discover a NEGATIVE emotion that is behind the Seller’s decision-making process.
This could be any number of things:
- They are tired of dealing with the property (Frustration, annoyance)
- Their spouse doesn’t support the investment decision (Lack of success, failure, need for appreciation)
- A health issue, either personally, or for a family member (Fear of dying, potential loss of a loved one, inability to provide for care)
- They are unable to retire (Failure, worry of how children or others will see them, frustration with having to keep working)
- They need money to pay for kids college (Worry kids will fail without their help, lack of success, what will others think)
And you want to find a POSITIVE place along with identifying the emotions that the Seller will experience once they have reached that place.
I was talking to a Seller we’ll call “George” who wanted to sell because he had been managing the property himself and was tired of dealing with tenants and maintenance issues. This identified the negative emotions that we can then magnify, more on this in a moment.
Using the script above I found out that once George sold, he was going to move to the coast of Florida to retire. I wanted to be able to reinforce this experience with positive emotions, so I kept asking questions. “Which side of Florida, the East or the West coast?” “Do you have any grandchildren.. oh really.. how old.. what are their names.. “
The One Two Punch
It’s nice when you’ve created enough of a connection and rapport with the Seller that they are ok sharing their real needs with you. If we’re going to be effective at helping a Seller solve their problem(s) and do a deal with us then we need to do two things. First off, we’re going to magnify the negative emotions so that the Seller can really understand the consequences of NOT doing something to solve their problem. Then we’ll take the Seller into a place where they can fully experience the positive emotions which they will get once the deal is done.
This process packs a powerful one – two punch that works like magic.
How To Magnify The Negative
Most people will try to point out the negative aspects to a Seller without understanding the physiology that’s behind the scenes. In addition to the driving reason they have to sell the property, the Seller is aware, cautious, and worried that they might be talked into something. All of this causes them to be in a stressed state. When someone is in this stressed state, they are going to resist believing anything we say. The other thing they are going to do is tend to disagree with us by default.
So let’s use some language patterns to help the Seller TELL US the negative bad stuff. Notice how I’m also using negative phrasing so that when the Seller disagrees with us, they are actually giving us the response we want. Here’s what it sounds like:
“So George, the good thing is that you’re pretty handy so at least it’s not a problem for you to spend your Saturdays over at the property fixing stuff… huh… “
George – “What.. ? No.. Didn’t you hear what I said… I’m sick and tired of dealing with tenants breaking stuff.. “
Peter – “Yea, I can just imagine… (pause) any horror stories you want to share.. ?”
Your goal is to get the Seller to tell you the bad stuff they want to get away with. Then drill it in a bit more by getting the Seller to reinforce it. Sometimes the easiest way to do this is to just say “Really… ?” and let the Seller keep talking.
The other thing you can do is get hard of hearing when the Seller says something especially bad so that they have to say it again. “What’s that you say.. .?” This helps to magnify the negative emotions and make them seem bigger and more real so that the Seller can really FEEL them.
Immerse Them In The Positive
Now that we’ve pulled the Seller over to the negative side, let’s help them out by painting a picture of the positive experience and emotions that they can get once their problem is solved by selling us their property. Remember when I asked George about which coast of Florida he wants to move to along with questions about his grandkids, etc.? Notice how we’ll use this information to create an experience that includes as many of the emotional senses we can fire off.
“OK, wow George, thanks for sharing all that with me.” (The negative stuff)
That will be so cool once you’re down there in Florida… I can just see it.. sitting there looking out over the water… seems like there’s always a nice breeze… can you imagine the colors as the sun is going down… yea… that’s going to be awesome. You’ve worked for it too, with all the hard work you’ve put into this property over the years (Stroking his ego and need for acknowledgement a bit) you certainly deserve that. That’s going to feel… (pause and let the Seller feel and experience something during your pause) … yea… really nice… Little Johnny (the grandchild) is probably there… does he like to sit on your lap or is he going to be running around?”
NOTE: We want to fire off as many of the sense as we can here
“I love hearing all the sounds by the water… can you hear the… is it… seagulls… ? The sounds of the waves coming in.. Maybe even some food cooking on the grill… what’s your favorite? Oh, really I love the smell of [_______] cooking.. it tastes extra good when you have an incredible sunset like that to see.”
Opening Up The Seller To Your Creative Offer
You’ve just completed the most important parts of putting together a great deal. You’ve found out not just what the Seller wants, and not just what they initially say they need. (Their first or second answer is almost always wrong) You’ve found out what they need along with the negative emotions that are driving them to do something with their property.
You’ve also helped them to see, feel and experience a resolution. Or more accurately, you’ve helped them to see the light at the end of the tunnel . Here’s what to say next:
Let the Seller Feel They Are in Control
“I can’t promise that I can help you, but it sounds like if there was a way for us to get your property handled so that you could be sitting there watching the sun go down at your new place in Florida, then would you want to talk about it or probably not… “
The “Other Situation” Method
“In another situation like this, the deal was structured where payments came in to cover buying your place in Florida. The problem with this other deal, and this applies to your property as well, is that right now the lenders just aren’t crazy about lending on a property unless everything is in A one tip top shape. So if there was a way to get you a regular stream of payments for a period of time… that would give me the time we need to go in, put money into improving the property, doing all the stuff so that at some point in the future I could bring my lenders in so that we could cash you out completely at that time. Is that something that’s even worth talking about or you probably hate the idea… huh. .”
The Seller might say something like “You mean owner carry?” or “Do you want to master lease the property?”
Whatever the owner says, respond with “It could be structured a number of different ways. What does [ owner carry / master lease ] mean to you?”
Based on the Seller’s response here, you’re going to move into structuring the deal using whatever method you think the Seller is most comfortable with.