Do you want to know one of the most frustrating aspects of being a new real estate investor? It's all of the wasted time dealing with people who never end up selling you their property! You might spend hours on the telephone with someone negotiating the deal and you might end up driving to their house multiple times, without ever getting a signed contract.
I remember one of my early deals when I thought I had a perfect lease option on a property located in Stafford, VA. I had talked with the seller multiple times and we had agreed to sign the paperwork on a Sunday evening. I arrived at the seller's house and he immediately invited me to take a seat at the kitchen table to sign the paperwork. He asked me to explain all of the lease option documents one last time, which I did, and then he picked up his pen to sign. He literally had the pen in his hand when he said to me “Jason, this program sounds great and all, but I've decided it's not right for me at this time“.
I looked at him stunned and asked him if there were any other questions I could answer or anything else I could do to make him more comfortable with the deal. He said no, and that was it. I remember driving home feeling as if someone had punched me in the stomach. I had wasted hours with the seller and had nothing to show for it.
Looking back on that deal I realized what I had done wrong and made sure to never let it happen again. In short, I started using deadlines. Let me explain: When I get a call from a seller they usually end up in three categories. The motivated seller, which is an easy deal to close. The un-motivated seller, which has no real desire to sell and I only have one call with them. Lastly, there is the half-motivated seller. The half-motivated seller is the one who will waste hours of your time and drive you crazy.
Here's how I now deal with these types of sellers…I try and close the deal the first time. If the seller isn't ready or doesn't sign for any reason then I give him a week to sign the contract. I tell him, “Mr. Seller, I understand you're not ready to sign the paperwork today which is not a problem. However, our company is looking to buy two houses in the next week and we certainly hope yours is one of them. So, if you would like to sell your house I will need a decision by Tuesday the 31st. After that date we won't be able to purchase the property.”
That “magic” phrase means I only spend one week of my time with a person and not months with someone who may never sign a contract. In fact, just the other day I was talking with a new investor who told me she had spent the last two months trying to close a subject-to deal with a seller who kept brushing her off. I told her to call the seller the next day and tell him that her company needed to know by next week whether or not he wanted to sell, because they weren't purchasing any more properties after that date. She gave the seller the deadline, however did not end up closing the deal… at least though, she didn't waste any more time.
When I first try and teach new investors this “deadline” technique, many try and fight me on it. They're afraid that they will lose a lot of deals by giving people deadlines. This deadline method will not hurt your business at all. Let's say you give a seller a deadline of Wednesday for when the contract must be signed. What happens when he calls on Friday and says he's finally ready to sell the property? Well, you can do a couple of things. You can tell the seller that you'll make an exception and sign the contract on Friday even though it's past the deadline. Or, you can tell the seller that your company isn't buying houses for another 30 days and since it's past the deadline, he will have to wait a month. I've used the later technique before when I was highly busy and it's incredible how motivated a seller will become when you make them wait an extra month.
I'll admit, this isn't easy to do if you're brand new, but when the deals are flowing like crazy, it's not a problem to make someone sweat it out. Plus, when you make someone wait a month you can usually go back and renegotiate the deal. Since they missed the initial deadline you can tell them that they'll now need to pay closing costs, or reduce the price, or put in new carpet and paint, etc. (and a lot of times the sellers will make these concessions).
Now, are you ready for an even better way to use deadlines? Put them right on your marketing pieces. When you mail out a letter to a bunch of sellers have it say somewhere in the letter, “we are looking to buy three houses by September 24, 2009. Please call us before that date if you would like your house to be one of the three.” When you put it directly in the letter you can refer to it often when dealing with the seller.
Whichever way you plan to use deadlines, I promise that you'll be thankful that you did. You'll no longer want to pull your hair out with sellers who waste your time. And you'll no longer drive to the same seller's houses five times trying to close a deal.
Besides using deadlines on sellers, you also need to start using them on yourself. When you give yourself, self-imposed deadlines you will become more productive and you will make more money. You should give yourself deadlines when it comes to your marketing. Set a deadline to get 2,000 letters in the mail by September 20, 2009. Tell all of your real estate investor friends about this plan, so they will hold you accountable. Give yourself a deadline for when you will quit your job and become a full-time real estate investor. Most importantly, put all of your deadlines in writing and look at them daily. This is a very powerful self-motivator if you have to stare at the deadline everyday.
I can definitely say that one of the reasons I close so many deals is because I have personal deadlines for all aspects of this business. I use deadlines for marketing, for when I will buy my next property and for when I will have a certain dollar amount in my bank account.
From now on, value your time and don't let sellers play games with you. Also, give yourself a deadline for when you will become a six figure real estate investor…I did, and I got there sooner than I thought. Without the deadline, I wouldn't have been so motivated to reach my goal and you won't be either.