REISkills.com Negotiation Report Why the Upfront Agreement is Crucial After You Build Rapport With the Home Sellers

The Instant Offer System requires a disciplined progression through defined steps. Establishing rapport is the first step, focused entirely on generating a connection of friendship and making the seller feel comfortable, often using the FORM approach.

After the investor completes the walkthrough and is seated with the seller (Step 1), the upfront agreement (Step 2) is crucial because it immediately shifts the interaction from a friendly discussion to a serious business commitment, demanding a clear, immediate decision.

1. Setting the Stage for Definitive Action

The Upfront Agreement (Step 2) is the second step in negotiating with home sellers. It serves as a necessary intervention after rapport to eliminate the possibility of hesitation or stalling:

• Avoiding Ambiguity: The agreement is specifically designed to avoid ambiguity and eliminate the classic stalling response: “thank you but I want to think it over”. The goal is to avoid dealing with a confused mind that says no.
• Preventing Delay: The core purpose of the upfront agreement is to set the stage for not coming back ever. It requires a definitive outcome: yes or no, not maybes.
• Investor Efficiency: The investor explicitly frames the agreement by stating that keeping coming back over and over thinking about possible deals is not what they do. This pattern is described as a poor business plan that takes up too much time and nothing gets done.

2. Defining the Two-Way Business Commitment

To ensure the seller accepts this shift to definitive action, the upfront agreement must be framed as a very fair, two-way business agreement.

Investor’s Role (Decision on the Spot)

The investor promises honesty and straightforwardness, clarifying their obligations:

1. Immediate Decision: The investor’s job is to look at the property, look at all the financial information, then make a decision, on the spot.
2. Green Light Conditions: The investor will offer a deal (the “green light”) only if the essential conditions are right, including the location, the condition of the property, the layout, the existing financing payments, and the attitude of the sellers.
3. Paperwork Tonight: Giving the project the “green light” means going forward and getting the paperwork done tonight.
4. Accepting Red Light: If the solution is “not good work for me,” the investor will say so upfront, pack up, and move on to the next prospective seller without worrying about offending them, trusting the seller will appreciate the straightforward and direct approach.

Seller’s Reciprocal Obligation

The sellers are asked to commit to equal honesty and definitive action:

1. Seller’s Green Light: If the sellers are one hundred percent happy with the proposed terms, they are hoped to give the “green light,” feeling comfortable that they finally have a solution to their house situation.
2. Seller’s Red Light: If there is one thing that both sellers do not like (a “deal breaker”), the investor hopes they will say: “I’m sorry it’s not going to work out”. The investor promises to absolutely accept a “no” answer, though they will be disappointed.

The conversation concludes by confirming that if both parties give the green light, they will sign the paperwork and move forward; conversely, if either party gives the talk a red light, the other party will accept the decision and move on.

3. Mitigating the Attorney Objection

The Upfront Agreement is especially crucial for navigating future objections, particularly the frequent “attorney objection” that often arises in terms deals.

When a seller says, “Well it all sounds good but I want to run it by my attorney,” the investor’s strategy, rooted in the upfront agreement, is to:

1. Acknowledge: State, “I do hear that now and then and I understand your concern. I want you to have legal advice and be comfortable with this decision about your home”.
2. Manage Expectations: Gently suggest that unless the attorney is an expert in specialized deals like lease with option, subject to existing financing, [and] owner financing, they are likely to say “don’t do it”.
3. Impose Time Limit: Propose writing a condition into the agreement that allows the sellers 72 hours to have their attorney converse with them.
4. Establish Presumption: If a written response from the attorney is not received within those 72 hours, all parties will presume that there are no objections. The investor frames this sensitively, noting they “would hate” for the sellers to pay high attorneys fees only to be told “Don’t do it”.