There are three types of sellers and only two of them typically result in a successful negotiation. In this Self-Storage University podcast we’re going to explore the different types of sellers in today’s market and rank your odds of achieving a winning deal with them.
Episode 129: Ranking Sellers By Odds Of Success Transcript
There are a lot of different types of sellers out there. Some are easy, some are nearly impossible, but in a macro way, they break into three basic categories. And once you understand these categories, you can help yourself by ranking the odds of deals coming together so you don't waste time with some sellers, but you go all in on the better ones. This is Frank Rolfe for the Self Storage University podcast. We're going to talk about how to rank sellers, how to put them into three basic groupings, and then we'll discuss those groupings and what they really mean. So let me tell you first, I've been working with sellers now my entire life. I am 64 years old, and I got into real estate back when I was a mere 21. So I'm very familiar with sellers and their basic personality types. And in my opinion, they fall into three basic categories. Number one is the low-key kind of seller, which I call the fair seller. This is somebody who understands their price has to be reasonable or the deal just won't come together. So these are the folks that say when you talk to them and discussing price, well, I guess I can do X.
I think that's probably about the right amount. And these sellers typically offer prices that are reasonable, and they will often renegotiate if they need to to make them lower because they realize, oh gosh, I might have gone too high. They're typically easygoing. They're not even 100% money-centered. They like money like anybody, but they want to make sure that that property is going to a good steward. And as a result, they're flexible, very easy to bond with. You can ask them, so how did you come to own the property? And they'll tell you a long story of it all. It's fun to bond with. And they just basically like people. It's always great fun buying from the fair seller. It's everyone's favorite kind of person out there. And when you run into the fair seller, the person who's reasonable, your odds of success are extremely high. So when you see that kind of a seller, you'll want to stick with them because you'll probably get a contract forged even if things pop up in due diligence. They'll bend over backwards to make them right. So that's the best kind of a seller, right?
And then you have a second kind of seller. And this one I call the teachable seller. So this kind of seller, they listen to logic on why they're too high. Their price is typically not reasonable. They're not quick to revise it. But at the same time, they understand that if they can't get a deal forged, they'll never get it sold. So even though their goals and their dreams are a little higher than what they're going to get, well, logic typically prevails. And this kind of seller has kind of a hard exterior shell but kind of warms with bonding. You find out they're not as tough as they seem when you start really talking to them. It's something that they have created kind of as a guard against other people. But deep down, they're pretty much kind of as nice as the fair seller. But you have to get down to get it figured out. It's like an M&M, right? It's like got a hard outer coating, but it's fairly good soft chocolate once you bite through it. And it can be very challenging to get them there. So when you have that kind of a seller, you have to have a lot of patience because the reasonable seller, the fair seller, well, they'll make changes at the drop of a hat. You call them up, this is wrong, that is wrong. The bank said this, oh, yeah, okay, sure, I'm willing to fix that. Right? But then this type of seller, they're a little harder. They're teachable. They use logic, but you'll have to be much more persistent with them. But then you have a third kind of seller, and the third kind of seller is the impossible seller. Now, the impossible seller is one who just doesn't listen at all. You can talk to your blue in the face that the price is wrong because that cap rate's impossible and you can't get the financing, but you don't seem to ever go anywhere. They're extremely cold, extremely impersonal. You can't really bond with them because they won't really talk to you. They just generally hate people. And as a result, no matter what you say or do, it's not really going to have any impact at all. One of my favorite shows is Pawn Stars, if you ever watch that on TV. And there's this Pawn Stars episode, which to me kind of summed up this type of seller.
In it, what happens in that show is people bring in goods to sell at the Pawn Shop, and the normal way it works, the Pawn Shop guy will bring in an expert to tell him what he thinks it's worth, and they'll offer the guy less than what the expert says it's worth. That's kind of the normal way the show goes. So in this case, a guy brought in a black Rolls Royce, which he said was owned by Johnny Cash. He wants half a million dollars for it. So the Pawn Stars guy calls in his car expert. The car expert walks in and says, oh, a Johnny Cash Rolls Royce. Pawn Stars guy says, what do you mean? How do you know that? Oh, yeah, well, that's kind of a black 1980s Rolls Royce. I've seen him before. A&M Records gave Johnny Cash a black Rolls Royce every time he had a gold record, and he had like 10 gold records. There was like 10 of these cars. And the Pawn Stars guy said, well, what are they worth? He goes, oh, well, these come to auction on a pretty regular basis.
There was one just last month, and it sold for about 50 grand. So, the Pawn Stars guy says, okay, thanks. So then he turns to the seller and says, okay, well, I guess you heard the news. It's not what you wanted to hear. The car is not a half a million dollar car. It's a $50,000 car. And I have to make a profit on it, so the most I could pay for this car is about $35,000. To which the guy says, no, I want $500,000. Pawn Stars guy says, well, we're obviously not going to make a deal. Thanks for coming over. But it was so ludicrous. The guy wanted more than 10 times what the car was worth, even after the expert correctly identified it was not a rare car, and had just sold at auction at a lower amount. Because the impossible seller never listens to anybody. You can never convince them that they're wrong. And therefore, let's rank these sellers in order of success. Number one, the fair seller. The fairer seller, if you play your cards right and you hang in there, your odds of success with that seller are probably at least 90% or more.
So those kind of sellers, you can normally always get a deal done. And then you've got that teachable seller. And if you're persistent with the teachable seller, if you just tell them the truth and the facts and explain it all to them, they'll typically maybe go with you about 50% of the time. So that kind of a seller, I would rank the category of that happening about 50-50. You might get the deal made or you might not. But the impossible seller, I would say it's about 0%. Now sometimes with the impossible seller, you're able to find something in due diligence they didn't know. Maybe you find that you could raise the rates. Maybe you could find that there's some cost to cut. So sometimes even without them, having to agree to anything as far as lowering the price, you're able to find the value is actually higher. But those kinds of sellers, typically you've got about a 0% chance to do anything with them. So what's it mean? It means ditch the impossible sellers. When you identify the impossible seller, get rid of them and put all that time and effort into the two other forms. I would much rather spend my time on the teachable seller trying to get them over the goal line than spending even one minute with the impossible seller. And if I had the choice, I'd really spend all my time with the fair seller and not with the teachable seller because I don't like the mind-numbing, endless work required, the heavy lift to get them to agree to something that's practical. But in life, we only have so much time. That's all there is. There are a lot of self-storage sellers out there. Make sure you invest your time in the ones that typically work out. Don't put your time into the ones that never work out because in the end, we all run out of time. This is Frank Rolfe, the Self Storage University podcast. Hope you enjoyed this. Talk to you again soon.