Negotiate Like a Pro

Posted on November 6, 2013 by

Have you ever made a great offer, had it accepted and then for some reason it just fell apart? This is an all too common occurrence in the real estate business. The most common reason for this is an improper negotiation prior to the acceptance of an agreement. If you view a real estate negotiation as “win/lose” situation, then you probably got the buyer or seller to agree to something that they really weren’t comfortable with. They said “yes” in the heat of the moment, to relieve themselves of the pressure of the negotiation but then had second thoughts when they went home and thought about it. A good negotiation creates value for both sides. This is the best way to get both parties to honor the agreement all the way to a closing. Here are some tips for your next negotiation.

Gather Data! Gather Data! Gather Data! This is so important it’s probably worth mentioning again. Try to find out what the real interests of the other side are. Why is someone selling? Are they burned out? Do they need to have all cash? Are they in a hurry to close? How motivated are they to sell?

Avoid Positional Bargaining. Once you have gathered all the data you can, make an offer that solves the persons underlying interests, not just the position they have taken. For example- a person may be selling a property for $100,000 (Position) but they are selling because they don’t want to deal with the asset anymore (Interest). If the property is only worth $70,000 then your position and theirs are in conflict but your interest may not be. If you make an offer and begin the negotiation by solving their interests you will be much more likely to get your offer accepted. If they are a “burned out” landlord, then maybe seller financing or a master lease option would be an offer that would solve your interest (getting a good deal) and theirs (no more headache) without getting stuck on the differences in your positions. This is avoiding positional bargaining.

Create Offers That Solve Problems. After you have gathered the data about a seller, make an offer that solves these for these three areas in this order… Sellers Problems, Property Problems, Your Problems. Notice your problems come last? Make the offer about creating value for the seller. This is done by knowing what the seller needs and knowing what the property needs such as repairs etc. Make your offer a solution to those problems and you have started your negotiation on the right foot.

Get the Seller to Help Create the Agreement. This is the solution to the first issue in this article. If you have sellers back out after agreeing to an offer it is most likely because they were not part of creating the solution to their problems (your offer). Get the seller or the sellers agent involved in creating the solution that will ultimately be your final offer. A good negotiator will always allow the other side to be a part of creating the terms of the negotiation. As I said, if you see a negotiation or a real estate deal as “win/lose” you are probably violating this major point. When the seller has an opportunity to help create the agreement they will have ownership in the deal and will be much more likely to honor it to the closing.

Knowing what your sellers really want and making offers that create value are the best negotiation strategies a real estate entrepreneur can use. Do this and you will be closing many more deals.

Bill HamBill Ham has been investing in real estate for 8 years and has created a portfolio of nearly 400 units in Macon, GA. He created his entire real estate investing portfolio using creative and seller financing.

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