Negotiation techniques will not only save you time and money, but will assist you in closing your very next real estate investing deal. The first rule of any negotiation is to amass as much information about the person sitting across the table from you.
Remember, the key is to try to create a win-win and solve their problem. It can’t be all about you. Discover why this person has entered into a negotiation with you, and what he looks to get out of the deal. Now let's pick right back up from where I left off in the first 5 Negotiation Techniques To Help You Close The Deal.
Let me outline the last 4 techniques that I will cover today and then dive into each one:
- Red Herring
- Put offer in writing
- Counter their offer
- Draft the contract
Wikipedia defines a red herring as something that misleads or distracts from a relevant or important issue. In real estate, a buyer may include a clause in the contract that is of little importance to him. If the seller wants the clause removed, then the buyer has ammunition to go back for his own concession.
For instance, the buyer is negotiating with a bank on the terms of the financing. His motivation is to secure interest-only payments for the first twelve months of the mortgage, so he tells the bank he is willing to put down 15% as a down payment. The banker will shoot back that he needs 20%, and the buyer counters with
“How about giving me twelve months interest only payments, and I will put down 20%”.
I am not a huge fan of this technique. Negotiators often use this technique to distract the other side from a major problem, and I have included it here so you can notice when the other side is using it on you.
Put Offer in Writing
The written word validates our beliefs and gives us instant credibility. The goal of any author, other than becoming a best-selling author, is to convey their credibility and experience through the publication of their book.
When we negotiate a purchase, we analyze the numbers through our deal analyzer and send over a copy of our analysis detailing why we need to purchase the property at the price shown.
The seller can balk and become irritated, but we have shown our justification with the written word, and he is seeing it with his own eyes. There is nothing lost in translation, and he has the ability to refute our numbers.
Counter Their Offer
Sometimes, a deal is priced accordingly and you may be thrilled to offer full price. I would consider countering the offer with another demand. If you accept his proposal with no objections, the opposition may feel as if they offered too little. They may get the feeling that they missed something.
We were offered an off-market deal a couple of years ago at a great price. Our initial reaction was to accept the deal and go straight to contract. We realized that the seller might feel as if his offer was too low, and he would want to raise the price. Instead, we sent over a copy of our deal analyzer with a price reduction, and the seller accepted it.
We saved over $40,000 employing this tactic because we understood the true motivation of the seller.
Draft the Contract
If at all possible, try to draft the contract and insert the conditions that are important to you. Have the other side review the contract, and allow them to amend whatever they disagree with. You have begun the trade-off phase, where the other side is asking for concessions and you can counter with your concessions. Negotiations on your first real estate deal will bring out the nerves the first time around. Be confident that using the “9 Negotiation Techniques To Help You Close The Deal” that I've shared with you should get you well on your way to success!
I hope you have enjoyed our real estate investing article on negotiation techniques. I would be grateful if you could leave a comment below and add additional techniques for the readers.