Top 7 Lessons Learned from ‘The Book on Negotiating Real Estate’
Negotiating sometimes gets a bad reputation for haggling, but true negotiators know that it’s really just solving differences between multiple parties. Good negotiators are able to focus on terms other than price and great negotiators are able to get the other party to do the same. The Book on Negotiating Real Estate: Expert Strategies for Getting the Best Deals When Buying & Selling Investment Property by Mark Ferguson is a wealth of knowledge for small and large investors alike. Here are my seven takeaways:
Gather as much information as you can because information is leverage. This may require putting on your detective hat and doing some investigating. It can be as simple as performing a Google search, scouring social media profiles, or looking on the county auditor’s website. When speaking to the other party in person, be sure to listen with intent and build rapport with the other party because people tend to do business with people they like.
Acquire the seller’s motivation and determine if there are motivating factors other than price. In short, you’ll want to learn if there are any pain points as to why the other party is selling, their timeline to sell, the condition of the property, and lastly, price. By asking the right questions, you’ll be able to gauge the seller’s expectations and their willingness to work with you.
3. Terms and Contingencies
In a sense, you could make the agreement contingent upon pretty much anything and it’s all deal-dependent. The most common contingencies are the financing and inspection contingencies. With terms, you could get a little more creative. Some general terms include but are not limited to earnest money deposit, seller financing, closing times, and personal property. Before putting together an initial offer, it would be best to make a list of all the terms beyond the price that you’d like to get from the deal and believe the other party would like to get from the deal.
4. Delivering the Offer
When delivering your offer, present it in writing because people put more weight on the written word versus something that has been simply discussed. It’s also a good idea to go through the agreement with the other party. Start the discussion with information and ideas that the seller finds agreeable, which allows you to create a positive emotional state leading up to more controversial aspects of the offer. Listen after you present your offer and resist the urge to justify a low price or some term or contingency in the contract.
Plan your negotiating strategy beforehand and tailor the conversation to the other party’s personality because by doing so, you keep them involved and in their comfort zone. Always focus on things that both sides can agree on because by focusing on agreeable issues, the other party will get the feeling that progress is being made. In tough situations, you can always appeal to a higher authority like your partner or your boss, even when they don’t exist. And always remember that no deal is better than a bad deal.
6. Concession Strategies
Instead of giving concessions, try trading concessions. Suggesting conditional concessions could also be advantageous. Make sure that you get equal value when you give. And lastly, always ask for a final concession because the other party will learn to stop asking for things once they essentially have what they want or need from the negotiation.
Defense is just as important as being aggressive, especially when negotiating against expert negotiators. When you get lowball offers, this is a good time to reject the offer outright to let the other party know you are refusing to engage in a negotiation until they are willing to be reasonable. When your offer is being criticized, the best way to react is to let them know that this deal might not work out. Lastly and most commonly, with threats of competition, the best way to defend is to figure out if the other party is telling the truth and to gather more information in terms of whether they are motivated to work with you and why they haven’t accepted other offers.
Negotiation is a muscle — the more you use it, the stronger it gets!
About the Author:
Tanh Truong is a pharmacist by day and an investor by night. A thoroughbred of Cincinnati, he invests locally in high-yielding assets and higher-yielding relationships.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.