Negotiation is a major characteristic of being a successful real estate investor. You use this skill on a daily basis more than you may realize. Not only is this helpful in finding deals but many other aspects of your business as well. You negotiate in almost everything you do and everything you purchase. Successful negotiation can help improve your reputation and even save you thousands of dollars. Although negotiation can be difficult to master it is something that anyone can improve with a little fine tuning. Here are five tips you can use to help improve your negotiation skills.
- Find Motivation And Information. The best negotiators seek to find motivation and information. You should treat your initial dialogue as a fact finding mission. Try to discover why someone may be selling or what they want out of the transaction. Once you get this information you can use it throughout the rest of the process. If a homeowner is motivated to sell in a short amount of time price may not be the most important factor. If they want to avoid foreclosure they may make other concessions that push the deal forward. Discovering true motivation for action dictates how you will structure your offer. Doing this requires asking the right questions that prompt answers. More importantly you need to listen to these answers. In many cases the other party will tell subtly tell you what they want without coming right out and saying it. The quicker you can find motivation the easier the rest of the negotiating process becomes.
- Don’t Make The First Offer. Negotiation is very much like a game of poker. There are times when you need to project strength when you are really weak and vice versa. In poker it is a big advantage to be the last one to act. The same is the case in negotiation. The minute you make an offer you lose all leverage. In the case of buying distressed properties this is a very important step. You never know what a homeowner is thinking. By making an offer you run the risk of either lowballing them and ending dialogue or making an offer that is well above what they would have accepted. In both cases you hurt yourself. Instead of making an offer let the other party act first. Doing this provides a starting point for negotiation. Even novice negotiators don’t expect their initial offer to be accepted. They know that it usually ends up somewhere in the middle. Letting the other party act first also gives you an idea of their intentions. If their offer is so out of whack you can move on and not go back and forth negotiating for weeks. Staying with the poker analogy always keep your cards close to the vest and let the other party act first.
- Listen. One of the mistakes that novice negotiators make is speaking without really listening to what is being said. They are in such a hurry to get the next word out that they fail to listen. As we mentioned earlier there is plenty of information provided if you simply listen for it. People are trained to speak as soon as there is a lull in the conversation. Good negotiation takes a measured approach. You should control where the conversation and negotiation goes at all times. By responding to a comment or a suggestion you show the other party that you are taking their thoughts into consideration. This goes a long way in building a rapport. A good rapport helps prompts concessions and may even get a suspect offer accepted. None of this happens if you talk more than you listen.
- Give And Take. Negotiation is about give and take. Even if you are in a position of strength if you overplay your hand the other party will look elsewhere. There are times when you may need to make some concessions to make the deal work. Some of these will be easier than others but the key is to make even small concessions look big. People often look at what the other side is giving up rather than their benefit. A distressed property owner may be avoiding foreclosure but they want to know that you are not getting too good of a deal. In this case giving them an extra few weeks in the property may be a bigger deal for them than to you. Always look for concessions that you can make that will add value to your offer.
- Deadlines Spur Action. With every offer you make you should accompany a deadline. It is no secret that deadlines often spur action. Not only does a deadline push the process along but it lets you know where you stand. It is unreasonable to ask for an answer on the spot. You need to give the other party a few days to respond. If they fail to act in this timeframe it can be taken as a sign that they may have moved on or went in another direction. In most cases people act at the last possible moment. This is true regardless of their need for action. Make your offer with a deadline and then wait for a response. What you will find is that some action will be taken right before your deadline.
By negotiating for just one or two extra deals over the course of the year it can be viewed as a success. In the real estate world there is often a fine line between success and disappointment. Good negotiation skills will help you get more of the deals you really want.