One of the keys to a successful life is your ability to negotiate and convey your “side of the story” to others. I learned this vital lesson from my six children. It appears that the younger they are, the better or more successful they are at negotiating. I am not sure if it has to do with their relentless personalities, or their willingness to not take “NO” for an answer. We can learn a great deal from our children.
This real estate investing blog training series will explore four tips to becoming a more successful real estate investing negotiator and in a second article, the six keys to negotiating that will bring you more success in your real estate investing business. Once you begin to apply these strategies in your life, you will be amazed at the results you will experience. You will also realize when others are trying to negotiate a better deal, especially your kids.
4 Negotiating Tips For Real Estate Investors
Here are the four tips to becoming a better negotiator:
- Create a Win-Win.
- Learn to Listen and Talk Less.
- Negotiate with the Decision Maker.
- EVERYTHING is Negotiable.
Create a Win-Win:
To most investors, this statement is just a cheap cliché. But to the master negotiator, they will not enter into a negotiation unless both parties gain from the transaction. The key is to discover how your opponent will gain from performing this transaction.
Jake and I have a story that illustrates the power of win-win. We were locked in an extended negotiation with one of our first commercial rei deals and we were rather close in closing the deal. The seller was adamant in not dropping the price any further, and our group was reluctant to increase the price to meet his demand. Jake and I decided to pay part of the broker’s commission to satisfy the seller’s request. Why did we elect to do that? The deal was too good to lose for a relatively small sum of money. Result: We satisfied the owner’s price and we closed on the deal.
The seller was content to receive his price and we were thrilled to have landed an awesome deal. The property was repositioned (fixed up) in eighteen months and we were able to refinance the mortgage and extract $1,600,000! That wasn’t even the best part. We developed rapport with the seller and the broker. Our broker subsequently brought us our next couple of deals. His level of confidence in us soared and he felt comfortable that we would perform on these deals. He was not disappointed.
The seller sold us another property around eighteen months later. He called us and negotiated the deal in a matter of a few days, and we were able to purchase the asset at a substantial reduction in market value. How was this possible? We created the win-win atmosphere from the first deal and the seller knew we would be true to our word.
Most business owners live by the mantra: “I win, and if the other party wins, that’s O.K. But as long as I win, that’s all that matters!” This mentality is shortsighted and will not allow you to secure repeat business. Always consider the other side’s position and demands and see if you can solve their problem while crafting a deal.
Learn to Listen & Talk Less:
Salesmen need to qualify their prospects if they want to satisfy their demands, offer them the correct product and close the deal. How do they succeed? By asking empowering questions and allowing the prospect to answer the question. It’s not about the salesman or the product; it’s about solving the prospect’s problem. The only path to success is by asking open ended, thought provoking and challenging questions (empowering) for the answer.
One of my favorite motivational speakers Zig Ziglar noted that people should speak 20% of the time, and listen the other 80%. This came as a shock to me. I thought you needed to dominate a conversation and have people like and admire you. The quickest way to admiration is to listen attentively to people’s concerns, and show interest in their problems.
When you are negotiating a deal, the less information you divulge the better it is for you. Conversely, it is your duty to gather as much information on your rival to understand his motivation for entering into a deal. Allow the seller to convey why he is entering into this transaction.
Negotiate with the Decision Maker
The goal is to negotiate with the person making the decisions, not his brother-in-law or his broker. We like to utilize one broker in a transaction if at all possible. It is so much easier to negotiate with the seller’s broker directly, and have the seller’s broker go straight to the seller. It becomes cumbersome when your instructions are passed from your broker to their broker and to the seller. Many minute but important details get lost in translation.
Everything is Negotiable
Why is it that kids ask for three scoops of ice cream? Because they know they can always go down to two scoops. You stood your ground and they ended up getting two scoops. WIN-WIN! Jake and I learned this the hard way on our third deal. We were negotiating origination fees with the bank. Jake casually asked if the banker would drop the fees by .25%. The banker didn’t even hesitate and said yes. Jake ended up scratching his head and wondered why he hadn’t asked for a larger reduction.
At least we learned a valuable lesson early on. EVERYTHING in real estate is negotiable, from price to terms to fees. You just need to ask, and make sure to secure a few prices from different vendors to negotiate the most competitive price. You have nothing to lose from asking.
Next Up I will share my “Six Keys to Negotiating Success Real Estate Deals (Part 2)” to complete all of the best tips and strategies that I have used to become a successful real estate investor.