Two of the biggest myths in business are:
“He or she was a born negotiator”
and my favorite “That guy is a natural born salesman“. What a crock!
That is taking away all the sweat and tears these professionals have dedicated to mastering their craft. These business skills can ALL be learned, and eventually the pros utilize them with ease and precision.
The previous article focused on the six keys to negotiating and the four tips to becoming a more successful negotiator. This article will concentrate on several negotiation techniques to use when purchasing real estate.
These techniques will not only save you time and money, but will assist you in closing the deal.
The idea behind this technique is to get something in return for everything that you give up. For instance, if a buyer asks to close in thirty days, you can come back with,
“How about you knock off $30,000 off the price.“
I would use the trade off every time your opponent asks for something to stop them from asking for more concessions. Also, try not to concede something without getting something else in return.
Try to exchange concessions that are worth less to you, but may carry more weight to the opposition. If my motivation is to receive a reduction in price, and my seller is motivated in selling, I would consider putting down more money in escrow if I could receive a lower price. A higher escrow amount may signal to the seller my seriousness in closing the deal, yet I would require a lower sales price.
The nibble technique is used when a negotiator asks for concessions in small “increments”. Your opponent is ready to close the deal, but you throw in one more nibble,
“How about extending the term on the note to 7 years.”
The person has mentality closed the deal, but now is faced with a dilemma. If he is truly motivated to close, he may just say yes to your annoying demand.
This technique is used in almost every sales situation. Have you ever gone to purchase a TV or cell phone, and the salesman asks if you would like to buy an extended warranty? My recommendation if you want to stop your opponent in his tracks is to cut him off as soon as he starts to nibble. I would tell the salesman,
“No thanks. I’m just here for the TV. That’s all.”
Be direct, firm and hold your ground. Another solution would be to convey all of your criteria to the salesman when making a purchase. You could tell him that you are only interested in the purchase of a TV.
My children are the masters of this technique. Hey dad, can we stay up ten more minutes? How about the next commercial? My advice to you is to nip it in the bud if you want a peaceful resolution. Kids know how to grind, and we tend to lose this gift of persistence as we age.
This technique asks the simple question,
“Is that the best you can do?”
The opposition may come back at you with a lower price, and you haven’t even begun to negotiate. Some sellers will ponder this question, and come back with a lower price. Or, the seller may consider adding some concession to the deal. I use this on my children sometimes.
My oldest daughter edits our podcast, and she is usually very punctual with the completion of the work. But if I feel she is taking to long, I will ask her “Is that the best you can do?” Often, this question will put her on the defensive and make her come up with a solution.
Works like a charm, just don’t tell her.
With the flinch technique, you are trying to convey a sense of disbelief. The negotiator displays a feeling of pain or discomfort to his opponent, such as flinching, an open mouth or eyes squinting.
A seasoned negotiator will probably notice you are employing this tactic, so don’t embellish it. A show of discomfort will signal to your opponent your disapproval.
You have come to the end of the negotiation, and you still have a few issues to resolve. Both sides can’t come to an agreement, so you decide to get up and go reach for the “doorknob” to leave the negotiation. Your goal is to have the other side stop you and bring you back to the table. You will have to understand the level of motivation of the seller for this technique to be successful. You may be shooting yourself in the foot if the other side lets you keep walking.
Many buyers employ this tactic when purchasing a car. The dealership is done negotiating, yet the buyer is unsatisfied with the results. It’s time to get up, proclaim you are going down the street to the competition and reach for the doorknob. Hopefully, the salesman will rein you in and continue the bargaining.
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.
I hope you have enjoyed our article on negotiation techniques. I would be grateful if you could leave a comment below and add additional techniques for the readers.
MULTIFAMILY MASTERY LIVE
Join Jake and Gino, along with 34 speakers and more than 100 successful Multi Family Investors for a weekend of non-stop learning, networking and ... Making It Happen!
NOVEMBER 11 & 12