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“Let us never negotiate out of fear. But let us never fear to negotiate.”
– John F. Kennedy, 35th US President
Even the most famous recognize the need for the art of negotiation. To be able to make a good real estate deal, you must develop the art of good negotiation or find someone who can do the negotiating for you.
The real secret of being a successful negotiator is to help both parties obtain their goals. To do this you must present your case in a businesslike way and close the transaction. This can be accomplished in 4 steps.
1. Know Your Goal
The first step in any negotiation is to know your goal. If you have someone else negotiating on your behalf, make sure they understand what your ultimate goal is. If your goal is to get the property at the lowest price, make sure you understand exactly what is involved to achieve that success.
Don’t be afraid to reevaluate your goals. If during the negotiation process new details come to light that may allow you to obtain your goal by a different means, allow yourself the ability to explore the new details, don’t get stuck in your negotiations by being to rigid.
Once you are comfortable with your goals, and understand how far you are willing to go to obtain the property, you are ready to move to the next step. However, even when you are comfortable with your goals, you must be flexible. Remember there are two parties involved and the other party may present an option that could get you to your goal faster. In real estate there are several ways to achieve the same desire.
2. Blind vs. Open Negotiations
There are two types of negotiations: Blind and Open.
In a blind negotiation you don’t know anything about the other party. You do all the negotiation via an agent or third party and don’t meet the sellers. Keep in mind you may be dealing only with the other parties agent and they have their clients interest at heart.
In this type of negotiation your homework is very important. Know the property, know the market, and know values so you are able to negotiate the deal that is best for you, or be able to walk away. Blind negotiations can be handled, but they are a bit more time consuming.
Open negotiations are a bit easier, but require you do be good at your homework. In an open negotiation you may be working with the for sale by owner. In this way you have access to a bit more information.
If during your negotiations you begin having problems on a particular point, such as price, do your homework. Find out why the other party is buying or selling. Knowing the other parties motivation can give you the upper hand. For instance, if you know the seller or buyer needs to move quickly, you will then have a bit more leverage to work with.
What homework will help you in your negotiations?
- Why does the other person want to buy or sell?
- Who is the other person trying to impress?
- Know the timing aspect of the transaction.
- Verify the facts.
3. Started Out Right
In the art of negotiating, it is critical to get started on the right foot. Do not try to antagonize the other parties to the transaction. Be very neutral about the entire deal.
- Don’t praise or criticize the property.
- Don’t try too hard to buy or sell the property.
- Don’t criticize the other parties to the transaction, including any agents involved.
- Explain motivation without disclosing too much information.
- Meet all deadlines or better yet be ahead of the deadlines.
- Do not lie, rather say nothing.
4. Good Communication is Key
Communication is the key to negotiation. However, too much talking can kill your negotiations. Make your offers in a written contract and let the other party do the same. Remember “lose lips sink ships.”
When you begin talking to the other party you will give away too much of your motivation. You may think you can better obtain information from the other party about their motivation, but keep in mind it works both ways.
Now that you’ve learned the 4 basic steps to negotiating you are ready to go out and get the property you desire. You must also keep in mind that not all negotiations turn into real estate deals. Don’t be afraid to walk away from a deal that is not to your liking. Otherwise you may well find yourself making very bad deals and wasting your negotiation skills. Good luck and good negotiating.
Bill Manassero is the founder/top dog at “The Old Dawg’s REI Network,” a blog, newsletter, and podcast for seniors and retirees, that teaches the art of real estate investing. His personal real estate investing goal, which will be chronicled at olddawgsreinetwork.com, is to own/control 1,000 units/doors in the next 6 years. Prior to that, Bill and his family lived in Haiti for 11 years as missionaries serving orphaned, abandoned and at-risk children.
