by Theresa Bradley-Banta
The negotiation process is usually a part of any real estate deal or transaction. Good negotiation skills must be a strong part of your game.
You will become skilled in the art of negotiation when you have a solid understanding of the strategies that can be used by you—or on you.
Here are six ideas that will help you look at negotiations in an entirely new way.
Rule #1: Everything’s negotiable
If you don’t fully embrace Rule #1 you will not become skilled at negotiation.
You must believe that everything is negotiable.
For example, I recently asked my phone company to waive my service charges for three months because I had been a customer for years. They said yes. If I hadn’t asked I would not have received the bonus months.
In a purchase of a mid-size apartment building I negotiated several items before we agreed to close the deal. The seller carried a large unsecured note on the property, gave us a seller credit for repairs which bought us a new roof, asphalt and sidewalks, and accepted a significantly lower purchase price.
Whether a deal is small or large most people and companies are willing to negotiate.
Rule #2: Be willing to walk from the deal
You must be willing to walk from the deal—and the other party must believe it.
That means you need to believe it.
If you’re buying an investment property and you’ve completely fallen in love with it (you absolutely must have it) negotiations will not be as successful if you ignore Rule #2.
If you must have the house or property use a “partner” as the one who could do without. In this instance you could say, “I doubt my partner will agree to that. She doesn’t really need to buy this particular house. I’ll ask her.” In either case, the other party must know, without a doubt, that you are willing to walk from the deal with zero regrets.
Once you have these two rules down it’s pretty much smooth sailing. But you’ve got to believe Rule #1 and Rule #2. This is non-negotiable (in spite of Rule #1!).
Rule #3: Agree on everything else
Use your people skills, no need to be pushy. Negotiations can and should be about people. Take your time. Find out what motivates the other party through conversation, questions and listening.
Ask yourself, “What does each party need to accomplish?” This will give you an opportunity to navigate towards a solution where each party realizes their desired goal (ideally).
You might say, “Let’s sit down and talk and see if we can come to a mutually beneficial agreement.”
This is an important strategy to fully understand.
Let’s say from our example above that the seller of the house you looked at had already told you she would accept nothing less than a full price offer. Rather than let this kill the deal your goal will be to say, “Let’s put that aside and see if we can agree on everything else.”
There are still many scenarios where the seller could get her full price but not in the way she might be seeing right now. For example, you could end up negotiating a seller credit for repairs, or the seller could carry back a small second. In both cases, she could still get the full asking price, or close to it, but the actual dollar amounts would be categorized at closing as something other than the purchase price.
Rule #4: “You’ll have to do better than that”
This is a simple and effective strategy. When the offer is made you simply reply, “You’ll have to do better than that.” This is particularly effective when the other party clearly realizes that you are not desperate to get the deal done and are, in fact, willing to walk. The key here is to make your statement and then stop talking! Give the other party an opportunity to make a better offer.
Rule #5: Don’t play the high-low game
The High-Low Game is an old, dated strategy that is unnecessarily confrontational. You start low, the other party starts high, and hopefully you meet somewhere in the middle. This is generally not an effective strategy. It’s a game where the focus is solely on the money and all other elements of negotiation are set aside.
It’s a game of chicken that is time-consuming and can damage relations between the parties. There may be issues of more significant value to both parties when the simple dollar amounts are removed from the negotiations.
Rule #6: Know when to quit
If the other party refuses to negotiate further and you have not reached an acceptable deal, always remember you can walk away and come back later. You could offer to resubmit an offer in a week, or a month. This accomplishes a number of things. It reinforces Rule #2 (you are willing to walk from the deal), it provides a break from negotiations and gives both parties an opportunity to think about what they’ve brought to the table so far. It also allows for some distance that will help you reevaluate your desire to see the deal through to completion.
Latest posts by Theresa Bradley-Banta (see all)
- New Tenant at Your Property? Here’s Your 30 Day Plan - June 20, 2017
- Cool Tools: 3 More Must-Have Apps For Landlords - June 7, 2017
- Cool Tools: 3 More Must-Have Apps For Real Estate Investors - May 30, 2017