Why is it important to have good negotiation skills? Because the best deals are NEVER found, they are CREATED!
Negotiating a real estate deal is a blast! It’s a bit like a high-stakes poker game, where timing and resolve pay off with big rewards. So why do so many investors shy away from deal-making, or hire agents to do their bidding? Probably because they don’t believe they have the negotiation skills to pull it off.
Fortunately, everyone can learn how to to develop negotiation skills, and with a little practice, you’ll be chomping at the bit to do it again!
First, you need to understand the nature of a real estate deal. Unlike the poker game, real estate deals are slower-paced. It may take weeks of back and forth before you close that sweetheart deal you spotted.
And, it doesn’t end with the final hand. Even if you get everything you ask for initially, there may be ways for an unhappy seller to wiggle off the hook. Both parties have to win, or the deal could ultimately fail.
It’s also really important to understand going into a negotiation that your reputation is everything. You need credibility to be an effective negotiator. Make sure people will refer you word-of-mouth, and polish your presence on social media. When someone takes the time to check you out, make sure they like what they see and hear about you.
So, how do you create that perfect deal?
You Need a Negotiation Checklist
One of the top negotiation tactics is learning to keep your mouth shut. You need to listen, not talk. The seller should be doing the talking, and if you stay out of the way, they can’t help but disclose crucial information, both intentionally, and unintentionally.
Keep your emotions in check. The seller may be emotional. That means you cannot be. Some investors believe that you have to bully sellers or otherwise you’ll get screwed in the deal. That negotiation strategy rarely works.
The problem is that intimidating the seller only makes them hate you. They’ll clam up about every negative aspect of the property. If they like you, and want you to like them, they’ll be more forthcoming with vital information that can impact the value of the deal.
Remember to listen. Figure out why the seller is feeling the way they feel.
Hone your negotiation skills by thinking in terms of assets and liabilities. Your assets are your financing options, your flexibility, any experience you have in investing, and so on. All of your specific demands — what you want in the property or need for the deal — are liabilities. Try to eliminate as many liabilities as possible. That forces you to prioritize what is really important, and allows you to be flexible. Let your creativity flow!
Start with bigger concepts first, then start to narrow down the details. Otherwise, you’ll overwhelm the seller before they get jazzed up about the deal. Don’t give away what your liabilities are early on in the negotiation. Don’t set ultimatums, like maximum price. Work towards that end once you see what the seller wants. The seller is waiting for buy-in questions, like “How soon can we close?” Keep quiet on those points until you see how to structure the offer.
Once you know what you want, then you can narrow down the negotiation terms by trying to identify common ground. Once those terms are out of the way, trade off on concessions. You can get a lot of little concessions from the seller that can add up to a great deal. But if you lump it all together in a list of demands, the seller will think the deal is lopsided.
That’s one of the funniest aspects of negotiation. It doesn’t matter if the 20 things you are asking for add up to $20 worth of concessions. What matters is that there are 20 things that the seller has to give up. It’s easier to swallow the overall impact of a deal when you break it up into bite-sized pieces.
And finally, one of the most effective negotiation skills, don’t assume you will never see the seller again. In any aspect of business, it’s never a good idea to burn bridges for one deal. You never know what may come of a relationship — possibly future leads. Negotiations must be based on trust, and reputation matters. Be forthright. Tell your seller what you are willing to do, and let them come around. Allow them to go into the deal with their eyes open.