Creating a sense of urgency for your self-storage facility seller can often be difficult. But when you’ve been waiting for a while for them to sign a contract, you realize that you have to take some proactive action. In this Self-Storage University podcast we’re going to review some of the most effective ways to build a fire under sellers.
Episode 133: How To Build A Fire Under The Seller Transcript
I have a little plaque on my office wall. It's been there since the early 80s and it says, time kills deals. Those three words. And what it means is we all operate under an endless degree of time urgency, but unfortunately, a lot of sellers don't see it that way. This is Frank Rolfe of the Self Storage University podcast. We're going to talk about trying to build a fire under a seller, how to make that seller appreciate the concept of time urgency, how to get them to sign the contract that you may have sent them two weeks ago, yet it's still never materialized back at your office. Now, what is it that gives sellers low urgency? Well, there could be several reasons. Some sellers have a low sense of urgency because they're not really sure they want to sell their property. They're still pondering the idea. Still others are waiting to hear responses from family members, son, daughter, spouse, affirm, yes or no. Hey, should we sell it? And if so, how much? Still others need the reinforcement of third party vendors, people like attorneys, CPAs, other people whose judgment they trust to know whether they should sell or not.
So as a result, while you just want to get them to sign that agreement, well, they have to think about it. And another problem they have is, unlike you as the buyer, they don't have a due diligence provision. They don't have the ability to get out. If they had that, it would be a whole lot easier to get people to sign agreements because they would always think, well, if I change my mind, I can just cancel. But in your typical Self storage contract, they don't have the ability to cancel. They have what's called seller specific performance, which means if they sign the document and you bring in the money on the closing date, they have to convey it over to you. And that's typically what really triggers them to be like a mule that you're trying to tug with a piece of rope around its neck, but it doesn't want to go. And the harder you yank on the mule, the mule fights you, and eventually the mule will sit on the ground. You'd have to try and drag the mule, and that's never going to work. So how are some ways you can create a sense of urgency with a seller?
Well, the first one is with enthusiasm. I've always felt that America's bookstores, places like Barnes and Noble, have done one of the greatest disservices of anyone to American deal making. Because most of the books that they sell are all what we call win, lose, negotiation. And they'll tell you in their act Disinterested. That's what we all are classically taught. If you go to the car dealer, he says, oh yeah, I've got this great car, that beautiful. You say, well, I guess it's all right, I don't know, I can take or leave it. What's your best price? And you do that to be a real downer to the salesperson, hoping they'll think, oh, I better act fast. They don't really want the car, so I better drop the price a ton. The problem is that that only works in things like buying a car or a refrigerator or a range. But that doesn't work at all in buying a self storage facility. If you're not enthusiastic, the seller is not going to do it. And if you are enthusiastic, that makes them enthusiastic. Enthusiasm is kind of contagious. If one party has it, the other party kinds of develops it.
So be enthusiastic about the property. Tell them how much you want it, how excited you are about it, how you can't wait to get it going. And that enthusiasm will spur on your older mom and pop seller to do something because they kind of like the fun, they kind of like the support, they like the affirmation that what they build is of value and that you really like it. And on top of that, everyone knows that the enthusiastic buyer will jump through hoops to get the deal done. Many self storage deals can run into a problem financing. You get a bad appraisal, whatever the case may be, they know the enthusiastic buyer will try and solve it. Whatever the hurdle is, we'll try to find a way to climb over it. But a non enthusiastic buyer, first speed bump that pops up in the road, they'll just let the deal die. They'll just drop it. So the first tip if you want to build a fire is to be enthusiastic. Another one is to create a false deadline. Now, what could a false deadline be? You're saying, well, let's see, you could tell the seller that you've got a 1031 transaction.
Now, even if you don't have a 1031 transaction, when you start throwing out the word 1031, most sellers get excited because they know on a 1031 you're going to have the money for the down. But they also know there's a very tight time clock on it. Or you might tell them that, hey, look, I'm looking at your property, but there's also another one I'm interested in. So I got to go with one again. Trying to set a sense of urgency with them saying, look, I want to buy this thing, but we got to move quickly. I've got other things I have to maybe do instead. One item you can use right now that's always good is you want to buy something by the end of the year, you can just say, hey, I have to get this deal done by the end of the year. I might have to move on to something else. Or you could use the excuse that there's a lender you issue or a capital budget that must be made, or you've got a bank that's really hot on the hook and if you don't move quick, gosh darn it, I'm afraid we're going to lose them.
Now, in all of these cases, the preamble you need to these deadline triggers is what's called inclusive deal making. That means that the buyer and the seller are both on the same page and they work as a team. The assumption is the seller is going to get a fair price and so is the buyer. But to get the deal done, they have to work together. And these are the reasons they need to move quickly. Now, Wayne Huzinga, who is the founder of Waste Management, also Blockbuster, he often said the most important thing he knew of in trying to get a deal done was a face to face meeting. Now, you can't always get a face to face meeting these days, but if you can get it, that's another good way to create the sense of urgency. Because when they meet you face to face, if you're more than just a voice on a telephone, as Wazinga would say, that makes getting a deal put together is a whole lot more likely to occur. And we've had many a deal where we go and meet with the seller face to face and it's a whole new day, it's a whole new deal.
It's remarkable how that one on one contact can totally change the playing field. So the bottom line is if you're trying to build a fire, if the seller is not responding, if he says, yeah, I got the contract and I'll get it back to you. And day after day, you wait. You're kind of like a starlet waiting for the phone to ring. In the 1950s in Hollywood, you've been doing a lot of auditions. The studios say, well, we'll call you. But yet you sit by your phone hour after hour and the phone never rings. It's very depressing, very discouraging. You got to be a more active participant than that if you really want to adhere to the concept that time kills deals that we all operate under a sense of urgency. Often you have to create that sense of urgency for it to occur, and those will give you some initial thoughts on ways that you can try and build a fire under the seller so that you can get your contract signed. This is Frank Rolfe with the Self Storage University podcast. Hope you enjoyed this. Talk to you again soon.