Tip One: Four Ways of Dealing With Seller Objections
There are four ways to handle objections. Here is the list in order of least desirable to most desirable:
Flop! This means not dealing effectively with the objection. (Yes, I know that you are not going to choose this option intentionally.)
- Handle the objection. While it's good to know how to reply to the objection, once the objection is raised it is still somewhere in the back of the seller's mind.
- Melt the objection. This means letting the objection just disappear with time. Many objections are really just the other parties way of saying that they are not comfortable with the situation.
- Set the objection aside and then don't bring it up. Many times if you spend the energy and time to really connect with the other party, then the objection literally melts away.
- Preempt the objection. This is the best way to handle an objection–keep it from ever surfacing to begin with.
Tip Two: Handle, Melt, or Preempt Sellers' Objections
Building on the theme of objections and how to deal with them in your real estate negotiations, here are some ways to handle, melt, or preempt objections with other people in your real estate negotiations.
You are talking with a seller who wants to run the deal past his attorney.
Investor: “I've found that when a person tells me he needs to check with his attorney, he generally falls into one of two groups. Group one, those people who really want to move forward. In fact they're signed up and on board with all the ideas and concepts, they just want to make sure they are being prudent and run it past their attorney for one last checkup. The other group are people who really don't want to do the deal, it's just that they are uncomfortable saying no. Before you go to the expense of spending $400 to $500 just to have your attorney review what we've agreed upon, did you just want to tell me that you fall into the second group?
The Seller Protests.
Investor: “Really, it's okay. I'd understand if you wanted to go back on what we've agreed to.”
Seller: “No, I just want to have my attorney look at it.”
Investor: “Well that makes good sense. I'm really glad that we have such a good fit, and I understand and encourage you to take what we put down on paper here to your attorney. If for any reason your attorney's not happy, you can just fax me over a note saying you want to cancel the agreement. When do you think you'll be talking with your attorney?” [You pick a time and date the seller can cancel with you, and you with them, by faxing over a written cancellation.]
Many objections are really the other party's way of saying that you are rushing things, and they aren't quite comfortable with you yet. Often, just by tabling an objection and letting more time pass you can literally melt away the objection. You are negotiating with sellers on a “subject to” deal and they want to know how they can count on you to make the payment.
Sellers: “How do we know you'll actually make our payments?”
Investor: “I understand that you need to feel comfortable that your payments will get made every month. If I end up wanting to buy the property, that's even more important for me since I would lose a lot of money if they aren't made. But I think we may be getting ahead of ourselves here, I'm still not sure if I even want to buy the property. Why don't we leave that aside for a moment, and then we'll come back to it later after we've both decided that we can even find a fit here, which we may not be able to do.”
Tip Three: You Need Friction in Your Negotiations
So you want every negation to go so smooth it's like gliding on ice? Actually, that may just be the most dangerous thing to happen to any of your deals. Shocking as it may seem you need friction in your negotiations with sellers to make a deal stick. Friction can equal traction! No give and tack, no awkward silences, no negotiating fun, probably no deal that lasts.
If rapport is important to create a connection with a seller to sign up the deal, then give and take and friction is what keeps the deal closed. Imagine rapport as being the power that opens the lid to a jar. Friction is what keeps the jar closed once you finish the deal. You need the other side to struggle and work for the deal in order to have them feel fulfilled from the deal. This is one way you let them build value into the final agreement–by having them fully vested in the both the process and outcome. I hope this gives you something to think about when you're in your next negotiation.
Tip Four: Build Momentum
When negotiating with another party, remember that Newton's Second Law applies–a body in motion tends to stay in motion, a body at rest tends to stay at rest. What does this high school physics have to do with making money? The same principal applies to negotiation. If you can get the other party headed in the direction you want, you are much more likely to keep them going that way. The way that you apply this theory is by getting agreement on the big picture first, and only then by narrowing the conversation and dealing with the tougher issues.
For example: I don't know if we could do this Mr. Seller, but what if we were able to get you a chunk of money up front, and then pay you the rest as monthly payments over time. Is that something we should even talk about, or probably not? See how broad that “what if” statement is. If the seller agrees you should talk more about it, then slowly start to narrow the specifics, slowly and incrementally. It's like clamping down a vise one turn at a time.
Tip Five: Learn to Use Selective Hearing
Here are six ways your selective hearing will pay off:
- It gets the other party to repeat and reinforce both their commitment and their emotional attachment to something beneficial they said.
- It allows you to restate what they have just said–adding, deleting, or modifying subtly what they just said.
- It allows you to “miss” any personal remarks or attacks they make and to keep the negotiation as a game for you with no real emotional attachment to the outcome.
- It allows you to draw out and diffuse the other party's negative emotions. (It's really hard to keep the same emotional intensity the second and third time they say something.)
- It reminds you not to believe everything they say. It also makes it easy for you to test anything they say that you question the validity of.
- It allows you to hear any idea or offer you want as their idea. This gives them full possession of the idea and credit for it.