Real Estate Negotiating Techniques

Many new investors get a little nervous about negotiations. That is understandable because most new investors haven’t really been involved in too many negotiations other than maybe buying a car. Therein lies the problem. In a car buying situation, the negotiations are adversarial. It is uncomfortable. It feels like you are being taken advantage of. That is not how negotiations should look. The should be more like a conversation.

If you view the interaction as a conversation, you will much more successful. Here is the reason why. In a conversation, you are focused on the needs of the individual rather than just making a profit. That has two effects. The person with whom you are negotiating genuinely feels you care about them and their problem. That is called building rapport. Building rapport is crucial to any successful negotiation. The other party involved has to feel some sort of connection to you in order to feel comfortable with the transaction. The second effect is you are getting to the problem behind the problem. In other words, you know that they NEED to sell their house, but by having a conversation with them, you can find out WHY they need to sell their house. That is the real problem you have to try to solve. A good example for the importance of finding out the big WHY is in a probate situation, when you are dealing with an executor, it could be easy to assume that they need to sell the house to fulfill their duties as an executor. But if you had a simple conversation with them, you might find out that they are also the sole heir and they need to unload the house quickly because they can’t afford the tax bill that is coming due in one month. Now the conversation can be shifted to focus on solving that problem rather than simply buying the house. You might say something like “I’ll buy the house all cash and I’ll even pay all of the taxes due for the year—not just your prorated share as is normal. But to do that, I will need a discount.” Do you see how the tone of the conversation changed? (to learn more about investing in probate properties go to www.probaterealestatedeals.com)

I heard a story of two boys who were arguing over who could have the last orange. They negotiated back and forth, raising and lowering the stakes in the amount of toys they would be willing to trade for the orange. In the end, one boy got the orange, but he really felt cheated because of how many of his toys he had to give the other boy. As he peeled the orange to eat it, he threw the peals away. The other boy who didn’t get the orange, said “Hey! Why are you throwing those away? I wanted the peels for my compost pile I am making for my science project at school!” If the two had had a simple conversation, they would have found out that one wanted only the inside of the orange to eat while the other only wanted the peel for a science project. That one orange could have met both of their desired outcomes, but they never knew that. They were too focused on the object be negotiated about.

Remember, the next time you are negotiating to buy a house try not to focus so much on the house. Try identify the seller’s problem behind the problem—their big WHY—and you will have a much better result and experience with the transaction.

Happy Investing!!

Brandon Lambert