Negotiation is a major part of being a successful real estate investor, and you use it every day more than you may realize. It helps you find deals and runs through many other parts of your business. Good negotiation can improve your reputation and save you thousands of dollars.
It’s hard to master, but anyone can improve with a little fine-tuning. Here are five tips.
Find motivation and information
The best negotiators look for motivation and information. Treat your first conversation as a fact-finding mission. Try to discover why someone is selling and what they want out of the transaction, then use that throughout the process.
If a homeowner needs to sell quickly, price may not be the most important factor. If they want to avoid foreclosure, they may make other concessions that push the deal forward. Their true motivation dictates how you structure your offer.
That takes asking the right questions, and more importantly, listening to the answers. People often tell you subtly what they want without saying it outright. The sooner you find their motivation, the easier the rest of the negotiation becomes.
Don’t make the first offer
Negotiation is a lot like poker. Sometimes you project strength when you’re weak, and vice versa. In poker it’s a big advantage to act last, and the same goes for negotiation. The minute you make an offer, you lose leverage.
This matters most when buying distressed properties. You never know what a homeowner is thinking. Make the first offer and you risk either lowballing them and ending the conversation, or offering well above what they’d have accepted. Either way you hurt yourself.
Let the other party go first. That gives you a starting point. Even novice negotiators don’t expect their first number to be accepted; they know it usually ends up somewhere in the middle. Their opening also shows you their intentions. If it’s far out of line, you can move on instead of going back and forth for weeks.
Listen more than you talk
A common mistake is speaking without really listening. Novice negotiators are in such a hurry to get the next word out that they miss what’s being said, and there’s plenty of information there if you listen for it.
People are trained to speak as soon as there’s a lull. Good negotiation takes a measured approach, and you should control where the conversation goes. When you respond to the other party’s comments and suggestions, you show you’re taking their thoughts seriously.
That builds rapport, and rapport prompts concessions. It may even get a borderline offer accepted. None of that happens if you talk more than you listen.
Give and take
Negotiation is about give and take. Even from a position of strength, if you overplay your hand the other party will look elsewhere. Sometimes you’ll need to make concessions to make the deal work.
The key is to make even small concessions look big. People often focus on what the other side is giving up rather than on their own benefit. A distressed owner may be avoiding foreclosure but still wants to know you’re not getting too good a deal. Giving them a few extra weeks in the property may mean more to them than it costs you. Always look for concessions that add value to your offer.
Use deadlines to spur action
Attach a deadline to every offer. Deadlines push the process along, and they tell you where you stand.
Don’t ask for an answer on the spot; give the other party a few days. If they don’t act in that time, it’s a sign they may have moved on. Most people act at the last possible moment, whatever their need. Make your offer with a deadline, then wait. You’ll often see action right before the deadline.
Negotiating just one or two extra deals a year can count as a success. In real estate, there’s often a fine line between success and disappointment, and good negotiation skills help you land more of the deals you want.
