BiggerPockets

Negotiation: Part 1 As A Buyer

Successful negotiations begin with legwork. Before you even meet with another party, make sure that you've clearly defined your objectives and done sufficient research on the property as well as the area in which it is located. The more information you have at your disposal, the stronger and more persuasive your arguments will be and the more chance you'll have of getting the concessions you want from the Seller. Here are some items to help you, as a Buyer, prepare yourself for any real estate negotiation.

Define the objectives that you are looking to attain: What will be the use of this property after you buy it? How does the property fit in with your professional or financial goals? How does the property fit in with your personal goals? What price and financing terms are required for this deal to meet your financial goals? The priorities to strive to meet: Based on your objectives described above, how do the following rank in order of importance for this deal? Timing of the closing or possession, Price and financing terms, Acquisition this particular property, Acquisition of any similar property in the area, Assurances about the quality of the property, including repairs or improvements, What alternatives do you have to buying this property in a way that meets your financial objectives? What alternatives do you have to using the property as planned?

You make your money when you buy and take your profit when you sell. By getting the best price & terms possible you will always make more on each deal. In negotiations, you want to get what you want but at the same time make the other person feel like they won. Establish rapport with other side - learn a little about them personally. Knowledge is power. Listen carefully to everything they tell you about themselves and the property. Don't haggle over one point - offer choices. Determine the other person's wants and get it for them. When buying - start with a low offer. If the Seller is high state - "Let's get realistic". Then, "Is that the best you can do"? Be reluctant - there are other deals available. Good Guy/Bad Guy method - call a partner in front of them. Negotiate Price & Terms - never give unless you get something in return. Talk price last - observe & talk about the property's features and faults then get to the price. Have a set price range before you start talking about the price. Destroy all expectations of a high profit in the Seller.

Some tips to follow as you negotiate the purchase of a property. Don't let your emotions get involved. Keep it business-like using your head instead of your heart to make decisions. Don't just low ball - validate your offer with comparable sales and a detailed spreadsheet of fix-up expenses. Leave room to move up on offer price - Seller will feel like a Winner! Negotiate closing costs - Seller pays some or all of the costs. This means you have less to bring to the closing table. Motivation: Always try to find out why Seller is selling - then you can better appeal to his wants/needs. If the Seller is not motivated enough - do not waste your time in negotiations - move on to the next property.

Here are some tactics or maneuvers that gain an advantage. Disarm them by being personable. You do not have to act like a mean ogre from your side of the table. Disarm a psychological attack by drawing attention to it. Always try to keep the focus on the property and stay away from any other issues. Be irrational, occasionally. Threaten to "walk-away"! Always know your price where it will work with you. If it looks like you will not make it to that level, walk away. After a week or so, call back to close out your file and perhaps they will be more willing to make deeper concessions. Understand constraints of the deal: The time frame; other offers; tax implications, etc. In real estate there are many acronyms used. Here is another for the record: POST: Person's attending the negotiations. Objective you wish to accomplish. Strategy you intend to use. Tactics. It is an easy way to recall key points. Who will you be negotiating with? What is your end objective? What strategy will you use to reach your set objective? Which tactic will you employ? Then you want to do a post negotiation review: Did you attain your objectives. If not, how can you do it better the next time? Use deadlocks, deadlines and delays to your advantage. Play the reluctant Buyer role: "You'll have to do better than that". Use the silent close = "shut-up" and let other person talk. Use the "Power of a Higher Authority" - you have to check with a partner, lender, family member, etc. Use "Subject-To" clauses. If Seller is firm on price - negotiate flexible terms.

General negotiation items: Poor negotiators start to negotiate without planning. The best negotiators always get their price, are in control and always spend substantial time and effort on preparation. Without a good, effective plan, you are bound to lose more than you gain. In the exchange stage, both parties will "feel each other out" to gain advantage, determine the important issues, give opening positions and exchange information. Good negotiators will concentrate on building relationships, use purposeful questioning and focus on the important characteristics of the negotiation process. Compromise is the name of the game in negotiation. The key is learning to give less and receive more; easily said, but often difficult to master. You need to determine true leverage, know your options and how to use tactics to overcome an impasse. Once you have a fundamental agreement, you need to consummate the deal. Lots of good deals have been lost due to poor finalization. Get it in writing quick and make it simple. Finally, spend some time reviewing the deal. How did the process go? Could you have done better? What will you do the next time?
Remember, everything is negotiable: You may believe retail prices in stores are the bottom line -- they are not! There are very few non-negotiable products or services. Find your best time to negotiate: Everyone has peak time and an off time to work or perform. Find your opponent's off time and your peak time. Hopefully, they match. Never negotiate in your off time.

In any real estate negotiation, he who cares less wins. As you get started determine the target price you want to pay. Point out defects : All little things wrong with the property. Use these to get concessions from the Seller. Don't give away your position - you have a busy schedule to keep. Tell Seller about other properties you have - before/after pictures. Tell Seller some information about yourself and your family. Tell Seller about your excellent management history and ability. Explain that you have some very tough buying criteria and must work for you also. Understand what the Seller says but really means. Make small concessions in exchange for bigger concessions from the Seller.

Negotiation Checklist: The top items are what the Seller wants - the bottom ones are what the Buyer wants.
1.Cash to an existing mortgage.
2.Cash down & refinance current mortgage.
3.Cash down & Seller carry a second.
4.Cash plus equity in other property.
5.Cash plus mortgage on other property.
6.Equity in other property.
7.Equity plus mortgage on the purchased property.
8.Equity plus mortgage on other property.
9.Mortgage on purchased property. Blanket Mortgage = this property plus other(s).
0.Mortgage on other property. Barter/Swap.
1.Unsecured paper (note) for all equity. All Paper.
2.Term Life Insurance Policy with Seller named as Beneficiary.
3.Lease Option.
4.ABC: Anything But Cash: Use a boat, plane, stocks or anything else as down payment.
5.Divide & Conquer: Use Rents & Deposits; Assume Seller's obligations; Credit Cards; Signature Loan, Furniture and Property Splits;
6.Discount notes you currently own.
7.Other People's Resources.

Remember that negotiations start at a very early age in humans. A baby negotiates for a bottle and to be changed and/or held. Teenagers negotiate for the use of the car, to stay out past curfew and to spend more money. Either sub-consciously or consciously we do what we can to get what we want in life. If you really look at it, all of our lives are about negotiating. Why not learn some ways to make the negotiations go smoother for us?

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