Price and Terms

Usually Real estate negotiations are mainly about two things: Price and/or Terms.

Thus your objective during negotiations should always be to obtain a purchase or sale price and terms, which will give you the best possible deal. A price and/or terms that an investor can realistically expect a seller or buyer to agree to, which will allow you to earn a fair and reasonable profit from the deal.

In this business, knowing how to negotiate the best possible deal when buying and selling property is of vital importance, perhaps second only to knowing how to accurately estimate a property’s market value. The price and terms that you’re able to negotiate depends largely upon how good of a negotiator you are. If you’re a good negotiator, you can usually buy a property below market value and resell it for a profit. If you’re not a good negotiator, you will make less profit in your business and often end up overpaying for a property.

You must also have the ability and self discipline to walk away from properties that can’t be bought at a price and terms makes financial sense to you. You have to make a profit. Fall in love with the deal-not the property!

Fundamentals of Negotiating

Know the Other Party’s Needs

Knowing the other party’s true needs is vital. The key to getting the best possible deal, during negotiations, is to determine the other party’s true needs and then meet them and still make a profit. Your job as a negotiator is to be able to distinguish between a want and a need. A want is what someone wishes for, while a need is what they’ll accept to fulfill their wish. By learning to ask the right questions and becoming a good listener, you can usually pickup on clues as to what the other party really needs, versus what they claim they want.

Ask questions! Listen!

Don’t Negotiate with People Who Aren’t Motivated to do Business with You
Don’t waste valuable time trying to negotiate with sellers and buyers, who really aren’t serious about doing business with you. Do not try to enter into negotiations with property owners or prospective buyers, who aren’t motivated to do business with you. It will be a waste of time and energy to try and buy property below market value, from owners, who have no compelling reason to sell you their property at a discounted price. Plus, you have absolutely no leverage, whatsoever, that you can bargain with, when you’re negotiating with an owner or buyer, who has no motivation to close the deal.

You Never Get a Second Chance to Make a First Impression during Negotiations
When you’re involved in negotiations you never get a second chance to make a good first impression. And how you’re perceived, by the party that you’re negotiating with, can have a direct impact on whether or not, you’re able to negotiate the best possible deal for yourself. That’s why, as a negotiator, you want to project the image of a polished professional, but without coming across as some slick talking wheeler-dealer, who missed their true calling selling used cars. By polished professional, I mean an individual who’s sincere, personable, confident, knowledgeable, well spoken, well mannered, well dressed, well groomed, and in control of their emotions. The point that I am making here, is that if you want to be taken seriously, you must look and act like a professional, who knows what they’re doing.

Have Realistic Expectations about the Price and Terms that You Can Negotiate

Be fair and reasonable when negotiating price and terms with sellers and buyers. Don’t kill negotiations by making unreasonable demands, which no one would ever agree to.

Only Negotiate with the Principal Parties
All negotiations must be conducted between the principal parties in the transaction. In other words, I don’t allow third parties or surrogates to come between me and the seller or buyer during negotiations. They can have a small army of advisors at their beck and call, but the seller or buyer must be sitting across table from me during negotiations. I require principals to be present for all negotiations, for two very important reasons. First off, I flat out refuse to negotiate through intermediaries, who don’t have the authority to say “yes” or “no” to my proposal. And when married couples and partners show up to negotiate, without their spouse or partner, they’re promptly told that the only way that I’ll continue negotiations, is if I can sit down face-to-face, with everyone at the same time. This way, I don’t get stuck in a situation, where the person that I am trying to negotiate with, has to run everything by another person--a higher authority--before a decision can be reached. And by having both parties present during negotiations, the possibility, that an incompetent go-between, who wasn’t paying close attention to what was said during our discussion, could garble or misrepresent my offer, is totally eliminated.

Negotiating Tips

Seller Creditability

Never make the seller feel bad or embarrassed. Do not pick apart their home in front of them. If the seller has misrepresented something or lied to you, give them a easy way out. Do not put them on the spot. Never let tension build. Be patient, nice, and friendly at all times.

Questions

• Use non threatening questions (such as: “What is the area like?” or “How big is the house?”)
• Start by asking a few easy questions first (how many bedrooms, how long have you lived there).
• Do not get right into the price or their problem
• (how much are you behind, when was the foreclosure notice filed).
• Use tie down questions (if I get that done, will that work for you, if we can get you cash in 2 weeks, will the offer work for you?)
• Use time to your advantage. The person without the deadline has a definite advantage. As their deadline approaches, you should get a better deal or terms. Remember owners in foreclosure have a ticking clock with a definite problem on their hands. So, who should be more motivated ?
• Always realize that your solution(s) and service is entitles you making a fair profit. If you are the only buyer that they are talking to, you have a huge advantage. We, as the buyer have to keep in mind that the next great deal is just around the corner. Time is on our side. Don’t be in a hurry.
• “So what-next please” mind set.?

Time

Giving up ground (Concessions)

Give ground up slowly. Do not give larger price movements all in one motion, give in a little at a time. Make them “work” for each concession. Always try to get something back, when you give something up (longer escrow, less down, some owner carry back, better terms, etc…). Go slow when having to give back some ground on your offer but, let them go faster when they give up ground. Make small prices adjustments to your offer and be slow about it.

Shift blame

Always blame the market as to why you can’t pay any more for the property. Blame the bank for the problem (bad loan etc..) Blame you partner for the reason why you can’t do something (stay rent free for a few months etc..)

Introduce competition

Announce that not every house fits your investment criteria. Let the seller know that you are only buying “really good deals” right now. You have cash but need to find a good fit for your portfolio. Show them some data about the other homes you are looking at this week (or today).

Data/Knowledge

In a negotiation, knowledge is power. Use good questions to learn as much as possible about the seller, their situation and their needs or wants. Do your homework, be up on the facts of the situation (NOD, TS, BK, total on the property etc..).

Use Multiple Offer Strategies

Give the seller an opportunity to make a choice. At a minimum-one offer should be a cash offer and the other a terms offer. Just make sure that all of the offers work well for you (the buyer) and will allow you a profit. If you are not sure how to do this- get help before you got to the house.

Countering

Never counter you own offer. Always wait for an answer from the seller to the first offer before countering you own offer. Let them respond. Remember: He who talks first- loses.

Price

Always get agreement on the easy stuff first (where is escrow, move out date, etc.). Save discussing price for the end of the negotiation. Instead of more money, can you offer some other concession? For every dollar of seller change, do not try to match their change. Give up less ground. Only go up small amounts at a time. Know your limits. Don’t get caught up in the moment and overpay.