Within a perfect world, prospective sellers and buyers would be more than eager to sell to you at the price you want to pay and pay you the price you are asking to get the deal done as quickly as possible. Of course that is not much of a reality and people always want to receive the highest price or pay as little out of their pocket as possible. So how you negotiate with your partners is often what separates a successful investor from one who wonders why they don’t have more deals. There is an art in getting what you want while at the same time making the other person feel that they got the better end of the deal. If you are not putting any emphasis on turning leads into deals by negotiating with your clients, you may be leaving plenty of deals on the table.
The first rule with any type of negotiation is to make the other party feel that they have gained something of value. For instance distressed sellers are gaining value by avoiding foreclosure. Since they are financially distressed, they are not very concerned in walking away with money in their pocket, but rather getting things done within a time-frame that works for them. Anything else that they can get out of the deal is a bonus, and anything you can do is viewed as a plus. If the seller feels happy with the negotiation and that they are getting what works for them, they will be much more likely to sell to you.
To be a good negotiator you will need to start by trying to find out exactly what the other person’s goal for the transaction is. In your first few interactions with them you should be more focused on their goals and desires than telling them what you can do. The more you know about what they want, the better you can tailor your offer to suit them. If you know their goals and what they really want out of the deal, then you already have an idea on how you want to negotiate.
Even though the other person may want something, it doesn’t mean they can, or will, get it. This requires a delicate balance of keeping the reality of the situation in mind while not beating them down to a pulp. This is where you need to tell them exactly what they can and cannot expect, in a way that will keep them working with you, but’s it’s important to keep their situation in mind and always try to do right by them.
Always reiterate what the other party is getting out of the transaction, but be ready to answer what is in it for you as well. The rapport you develop with your client can be the deciding factor in them wanting to work with you or not. Be honest in what you want and what you can offer.
If you feel you are close to a deal, you need to push the transaction towards a contract and eventually a closing. Don’t be pushy, but be sure to set firm dates and that everyone is on the same page. The more deals you are involved and negotiate in, the better you will be in seeing when the other person is bluffing and when their bottom line is really their bottom line. As much as you may like someone or the property, you need to have your own magic number that will make you walk away from the deal. If you are firm in your number or your concessions, you will find that more often than not you will get what you want. Negotiating is not easy for everyone, but once you can master it, you will find yourself with many more deals.
You also need to separate the people from the problem. In traditional negotiations, positions and counter-positions prevail and can easily turn adversarial. With a principled negotiation approach, you focus on the problem and how to solve it. Both parties take the perspective of sitting on the same side of the table and from there working together to come up with alternative solutions that will benefit both. From this type of perspective, it’s possible to have a very productive discussion of the other’s concerns and offer answers and solutions, rather than a counter-argument or opposing position that can undermine the relationship and the deal.
It’s important to know the motivation behind your other’s position, so you need to focus on the motivators and issues that are behind their position. For instance, if the counter party holds a position of “I must get the lowest price no matter what,” then you need to know why they are going that route. They may have a personal interest in minimizing their risk in making a purchase. Whatever the motivators are for their position, it’s important to keep asking questions to find out what they are and align with them to smooth the path to a mutual agreement.
So to become a great real estate negotiator and get a win-win deal, you need to develop your negotiating skills. Enter the negotiation fully prepared with what you are willing to give, what you are willing to take, and what you know about the other person and what they may want or are willing to give and take. Ask them questions to determine their position or to find their underlying ambitions or needs and wants. Use those answers to develop your negating position as it may change with the more you understand about what the other person’s bottom line may be.
In finding out what their goals and interests are, it’s important to tell them what your goals and interests are as well so they can change their negotiating position as they learn more from you. This allows both parties to better understand how to make a deal to meet each other’s needs and work toward a common goal. It is important to remember that whoever says their number first, looses. What we mean by that is that if you say the purchase price you are willing to buy a property at first, you might be juggling back and forth. So examples of coins or layers are purchase price, inspection period, paying cash or in at a higher price than the seller was willing to give the property for. This can cost you and make you leave some money on the table. Instead as a CashFlowpreneur we encourage you to be patient and wait for them to tell you first what their best number is and then work from there.
The best negotiations often come from offering many different options to the other party so that later you have more coins to toss back and forth. Coins meaning different terms or layers that you can finance, a fast closing date, etc. The idea here is to offer many different coins at once and then as the negotiation takes place, you may add or remove some to work with the other party making sure you keep the relevant ones to you always on the table.
For example, if you want to purchase a property and the asking price is $130,000, you might want to present an offer for $90,000 CASH, $500 deposit, 10 days of inspection period and a closing date in about 45 days from the day of acceptance. Here you have different negotiating coins you can play with. You have the purchase price, which is very low (the important one for you), you have a long inspection period and a closing date that is projected to be in a longer time than expected, and you are offering a cash transaction which is very attractive to sellers. The seller then makes a counter with a purchase price of $125,000 with 10% deposit to show you are serious and asks you to reduce the inspection period and if you can close sooner. The key here is to give them what they want but also get what you are looking for which in this case it is the lowest purchase price possible. So what you do is call the seller and as explained before first and foremost you build rapport, you ask questions and get a clear idea of what it is they really want. You find out they really want to close soon and they need to walk away with $80,000 but will need to get help with closing costs and the selling realtor’s commission. So then you make your move. You finally offer $80,000 CASH, $5,000 deposit, 3 days of inspection period and closing in two weeks, you will provide assistance of $5,000 towards closing costs and commissions but Seller must cover the rest. BOOM! Seller accepts!
So as you can see in the example, when you toss and juggle different terms and conditions (coins), you are able to get what you want and also satisfy the needs of the other party. You create what we call a win-win-win situation for everyone.
So the true meaning of a win-win negotiation is where all the parties involved in the transaction move away from the negotiating table happy and satisfied with the deal. Everyone is comfortable with the agreed terms and willing to move forward to the closing table.