Today’s REI Classroom Lesson

John Martinez talks to us today about how to make an offer more attractive, without changing the offer at all.

REI Classroom Summary

If they’re comparing your offer to a retail price, they’re going to be disappointed. Be sure to listen in as John shares a tip how to reset the price they’re comparing your offer to.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Mike: Welcome back to the REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
John: Hi. My name is John Martinez with Midwest Revenue Group and this is REI Classroom. And I want to talk to you today about how you can make your offer for property more attractive without changing really a single thing about your offer.
Mike: This REI Classroom real estate lesson is sponsored by, FlipNerd’s private investor coaching program and your blueprint to investing success.
John: So when we’re picking up houses, especially houses at a discount or a deep discount, our offer is really where we make our profit. The offer, the lower we can pick a house up for or property up for, the more we’re going to make on the back-end when we sell it. So this is a really important topic. Lots of times we really don’t have a lot of wiggle room in our offer. Our offer is what our offer is. So is there any way we can make our offer more attractive, make a seller more likely to sell us their property without actually changing that dollar figure?
Well, the answer is yes. There’s actually about a half dozen ways but let me give you one. And this is the easiest because it’s just simply rephrasing the way you actually make the offer. So we use what we call anchor pricing or an anchor offer. I’ll explain the concept first and then exactly how you’re going to use it to make your offer more attractive. So we compare and we value something. We value certain things based on what we compare them to. So I’ll give you an example.
If you go to a retail store and you pick up a t-shirt or a pair of pants and you look at that tag and it says $99 marked down to $15, that’s a heck of a deal, right? Not because $15 is a great deal for a pair of pants, maybe it is, maybe it isn’t, but compared to the $99 it’s a heck of a deal. So how many of you out there have ever uttered the words or had a spouse or is there a significant other that came home and said, “Honey, let me show you how much money I saved you.” Pull out all these garments or whatever they bought and said, “This was a $400 purse marked down to $99. What a deal?” That’s the power of setting a price anchor.
We value that product based on that first number we see or anything that comes after it. So it’s the same thing in real estate, okay? Now when you walk in and you’re wanting to buy a property, someone might value that property at, I think it’s worth 100 or I’d like to get 80 out of it. So any offer that comes after it, it’s going to be compared to that 80 or 100. So if it’s less than 80 or 100, it’s going to seem like a really bad deal. So what we do is we do what’s called resetting the price anchor and we can do it by simply throwing out a lower number.
Now the lower number doesn’t even have to be our offer. We just want to reset in our prospect’s head what we’re going to compare our actual offer to. So in a situation like this, you can say, “You know what, I was looking at some of the comps on what house is sold for in the area. Would you believe that in the last year or two, properties sold for just under 30,000 bucks.” Now that didn’t do a thing to your offer. That is not your offer. But now whatever comes next, your actual offer is going to be compared to that $30,000 as opposed to the 80 or the 100 the prospect has in mind.
So when you reset that price anchor and I’ll say based on this and this and you actually end up however you make your offers, end up at 40 or 50 or so, that $40,000 or $50,000 is compared to your price anchor of 30. You reset the price anchor and that’s going to seem a whole lot more attractive than at that $40,000 or $50,000 came right after. They told you, “I want 80 or 100 from the house.” So that’s the way you can make your offers more attractive without changing a single thing about them.
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