When you’re wholesaling houses, it’s going to happen. It’s inevitable ...I’m talking about getting a property under contract then being unable to find a seller for the price you want.
Maybe you ran the numbers the morning after a few too many (wink, wink). Maybe you misread the market. Or maybe you simply overlooked repair estimates on the property.
Don’t beat yourself up. It happens, and I guarantee it will happen. But whatever the reason, you’ve got 2 choices to remedy the situation.
2 Great Negotiation Choices Every Investors Should Know
Just Walk Away: If you find yourself up against the wall with a contract that can’t find a home (pun intended), you could cancel the contract and walk away, assuming you have a contingency plan or exit strategy in place. Oh yeah, you should always have a contingency plan in place. At the very least, have an inspection contingency in place.
Become the Renegotiator: If you do decide to deal with the cards you’ve been dealt and face this property challenge head on, your second option is to renegotiate the contract. First and foremost, you’ll need to contact your seller and explain the situation in the hopes of lowering your price. I know, I know…. your blood pressure just spiked at the thought of an uncomfortable, possibly hostile conversation, but renegotiating your contract doesn’t have to be stressful. It’s all about effective communication and making deals where one doesn’t really exist.
Stay with me here…
Let me share with you some advice based on my own personal experiences, but first let me say this…
It’s important to realize that even in a traditional real estate transaction of a retail buyer, someone buying a house listed on the MLS, it’s not uncommon (at all) – even after an offer is made and both the buyer and seller sign off – for renegotiations to take place.
Whenever someone does their due diligence inspecting a property for repairs, it’s typical for the potential buyer to come back to the seller to renegotiate. It happens all the time with agents in listed properties. So, know up front that this scenario is common and expected. Now that you know you’re not in an extraordinary position, you can breathe, right?
Simple Way to Handle Renegotiation
So, it’s time to renegotiate… and here’s one simple way to handle it that won’t give your buyer (or you!) a panic attack. Ideally for this strategy to work, you need to ensure you have that contingency clause that we mentioned earlier included in your contract. It should explain that the contract is contingent upon your business partner’s approval AND your own personal inspection.
Once the contingencies are on the table, explain to your seller that the deal made sense to you once upon a time, but things change. If your funding partner isn’t comfortable with the price, then that’s a game changer, and that’s okay. Sellers will respond to you, because you’re being honest and forthright, so use that to your advantage.
Nobody wants to deal with someone blowing smoke.
Renegotiating successfully hinges on your ability to gain your seller’s trust and respect, and to do that, you’ll need to empathize. Explain that you recognize how frustrating last-minute price changes can be, but make your buyer understand that you’re not the only decision maker in the deal. Use the word partnership, because it’s a powerful word and one that resonates with almost everyone.
Make your seller believe that you are negotiating a smaller price than your funding partner suggests, because you’re looking out for the seller’s best interests and working on their behalf for the best possible price. If the price is $30,000, say you can do the deal for $25,000.
The picture should be coming into sharp focus for you now…
Good Guys Finish First
Contrary to popular belief, good guys DO finish first. And even if they don’t, you always want to walk away knowing you negotiated a deal (or renegotiated a deal) fairly, ethically and with integrity.
With that said, there’s a new trend out there where investors are giving themselves automatic pay raises before closings. Not cool, if you ask me. It’s a mind game and an emotional assault against the seller who is trying to accept that they have lost the property.
I don’t recommend this tactic, and simply put, it’s a “yucky” way to do business. Take the high road; it has less traffic.
Listen to me NOW, Hear me Later
Renegotiating contracts is one of the most feared experiences in the wholesaling business. But now, you’ve got the tools to tackle the process.
The next time you find yourself in a renegotiating situation where your property is under contract but you’re unable to wholesale in a timely fashion, and you think you’re going to be stuck with a horrible deal or you’re going to have to crush someone’s dreams, you’ll have the confidence and prudence to go back to the drawing board and renegotiate without fear, without hesitation.