Successful real estate investors—whether part-time, full-time or transitioning into full-time—know that while they are in the business to buy houses, their success is really dependent on their ability to sell. And what a successful real estate investor is selling is a solution to the fear that so many sellers have.
To illustrate what I am talking about, let me recount a recent experience I had in my Dallas-area home market. I was set to buy a house from a widow there, and I met her at her home about a week after our initial meeting with the contract in hand, ready for our signatures to formalize the agreement and begin to execute the purchase. As I customarily do in these situations, I greeted her with a friendly, “How are you doing?” but I was caught off-guard when she answered, “I’m scared.”
I did not expect her to say that. I thought if anything, she might express how excited or relieved she was that she was finally selling this house and getting out from underneath what had become a burden to her. And so I asked her some questions to try to understand the source of her fear about selling her house.
What I realized was that this was much more than a piece of property to her. This was the only home that she had ever purchased in her life. It was probably the largest asset she had ever owned, and her husband with whom she purchased it many, many years ago, was no longer there to assist her in the sale of it. Then it dawned on me why this was such a scary experience for her.
This can be a scary process to a seller
And it also made me realize that for me and other real estate investors who buy and sell houses regularly, it becomes a very transactional, non-emotional activity because we do it so often—whether it’s monthly, weekly or even daily for some of us. So we’re well-versed in the process. We understand it. We’re educated in it. And we’re professionals.
However, for a lot of our sellers, this may be the only time in their life that they actually sell a piece of real estate, which can be a very intimidating, very scary task for them. And that was exactly the case for this seller with whom I was working.
And that brings me back to the idea that we as real estate investors must “sell” these individuals a solution, or a way to erase their fear. Your recognition and understanding of that will ultimately make it possible for you to buy more houses because you’re catering more to your sellers’ needs. You understand their objectives. And you empathize with their feelings and the hesitations about selling their homes.
In my experience, this fear takes three fundamental forms:
- I see sellers who have a fear of the unknown.
- I see sellers who have a fear of the unscrupulous.
- And I see sellers who have a fear of the undesirable.
When you can recognize these fears, you’ll be much better able to understand your sellers, meet their objectives and ultimately purchase their homes. Plus, you’ll be making them feel good about the transaction—before, during and after the close and purchase.
Let’s examine each of these three fundamental forms of fear in a seller so that you can better understand how to address them and help your seller overcome them.
Fear No. 1: The Unknown
Fear of the unknown takes a lot of different forms with sellers. They may be wondering, “Gosh, how long is this transaction going to take?” A lot of times, sellers are calling us because they are under a time constraint. Perhaps they are trying to sell the house before the next mortgage payment. Or perhaps they found another house that they desperately want to purchase but they need to sell their current home quickly before they can do that. So they could be worried, concerned or fearful of how long the process is going to take. Or they are afraid of missing a mortgage payment or missing out on the chance to buy their dream home.
There may also be a fear of the unknown in terms of, “How much will I get for this house?” The sellers don’t know what their home is worth, or they don’t know to quantify the repairs needed before it can sell. And so they’re wondering, “How much will I get? How much will I earn? How much will I make from the sale of this?” Those can be very daunting questions for someone who is not familiar with market values and repairs costs, etc.
Speaking of repairs, these sellers may wonder, “Gosh, what repairs am I going to need to make to sell this house?” They may know what’s wrong with the house but they’re fearful of the amount they might be required to invest in that house in order to successfully sell it. The financial aspect can be a huge fear. They may worry that, “I’ve never done this before, but I’m sure there are legal expenses or commissions or fees or taxes or all sorts of things … I have no idea how much that’s going to cost me and how much that will take out of the proceeds of the sale.”
And another unknown is whether the buyer will perform. “If I do find a buyer for my house, is that person going to follow through correctly, legally, ethically and efficiently and actually purchase the home and complete the sale?”
These are all examples of the many unknowns. And for you as a real estate investor, your solution is to use the proper contract. And by proper, I mean that the contract will be complete, correct and compliant. When you have that type of contract, it removes all of these unknowns that a seller will be concerned about.
Fear No. 2: The Unscrupulous
Unfortunately, there are some unscrupulous investors out there. There are unscrupulous buyers, and there are unscrupulous real estate personnel in other areas. So sellers are often fearful. They wonder, “Am I going to come across an unethical buyer, unethical investor, or an unethical real estate person?”
What you as an investor have to do to overcome that fear is to make sure that you conform, communicate and comply. By that, I mean that once you do write up that state promulgated real estate contract that is complete and comprehensive, make sure you conform to everything that it says. Be sure you execute everything that you said that you would do and committed that you would do, as spelled out and defined in that contract. You’ve also got to communicate throughout the process of the transaction, all the way up to the point of funding. And you have to comply with all the legal regulations, stipulations and requirements for real estate transactions in your state and in your area.
Fear No. 3: The Undesirable
And then finally there is the fear of the undesirable. That is the reason why sellers call real estate investors who will purchase a home “as-is,” quickly, for cash and pay the closing costs.
Here’s an example: I’ve come across many sellers who do not want strangers walking through their houses, looking in their rooms, their closets, their basements, their attics, going through their garages, opening up cabinets. That’s very undesirable and very invasive to many people. And they have a fear of that undesirable aspect of selling their home.
Showings are inconvenient for many people. They have to gather up the kids. They have to put the dog in the car. They have to get out. And often, they get only a few minutes’ notice.
They find paying commissions undesirable. They don’t want to pay somebody to sell their house. They may also find the whole concept of negotiations with buyers and Realtors to be very undesirable. Many people are intimidated by the act of negotiation, especially when they are dealing with such an expensive asset, and as I said earlier, it’s likely the most expensive asset that they ever have owned.
And finally, many people find it very undesirable to have to prepare their house to go on the market. They don’t want to spend any more money on that house. They want to save their money and take it to the next home. And if they had the money or wanted to spend the money, they would’ve spent it already, making the necessary repairs and updates. So the act of preparing a house or investing in it or updating it can be very undesirable. And they don’t want to do it.
They fear the time, money and effort that may be required in order to sell the house.
Your solution as a professional real estate investor is to remember that your role here is to serve and to solve and to simplify. Your role is to serve the sellers, their needs and their objectives. Your role here is to solve their problem. Whether it’s a quick sale, whether it’s an “as-is” sale—whatever their problem might be—your role is to provide the solution in a simple way.
So, in conclusion, remember: uncover the unknowns. As a real estate investor, act with integrity and serve that seller. And when you do this, you provide solutions that solve the seller’s fears. Fears of the unknown. Fears of the unscrupulous. Fears of the undesirable.
When you sell these solutions, you’ll end up buying more houses.
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About the Author
Kevin Guz is a Dallas, Texas-based residential real estate investor with more than 10 years of investing experience. He owns a HomeVestors (or “We Buy Ugly Houses”) franchise as well as the Clear Key companies, which focus on residential real estate wholesaling, rental property management and self-storage leasing. He also is a licensed real estate agent in the state of Texas. He enjoys sharing his ongoing personal experiences, perspectives and learnings from his start as a part-time or “weekend investor” and full-time corporate professional through his ultimate transition to a full-time real estate investor and business owner. You can listen to his podcasts at http://www.blogtalkradio.com/kevinguz.