If you are going to be a successful real estate investor, you are going to need a lot of skills. You will want to learn how to find deals, how to analyze them, how to handle contractors, how to manage properties, etc. But there is one overarching skill that, if mastered, will allow you to be better at all of the aforementioned facets of real estate investing.
This one skill can turn a dud into a deal and is likely the highest-valued skill anyone in real estate investing has. Can you guess what it is?
You got it! Negotiation.
By negotiating the price of a deal, the cost of contracting work done, or the terms of a lease, you can turn an OK deal into a great one! So, in this article, I am going to highlight 10 tips on how to negotiate like a pro.
With that, let’s get into the tips!
10 Tips for Better Real Estate Negotiation
Tip 1: Research
The first and most important thing you should do is conduct research. If you are going to make an educated offer or counteroffer, it will always help to come back with statistical facts. This could be in the form of market data, neighborhood data, or even buyer/seller data.
That may not be enough though. After you have gathered this information, go a step further! Ask your agent to pull comps from the MLS, drive the neighborhood, talk to neighbors, look up the buyers/sellers on social media, and so on. Dive deep!
Tip 2: Build Rapport
Once you have done your research and feel comfortable you know enough, enter into the conversation. The most important thing at this stage is to build rapport with the buyer/seller.
People like to do business with people they like. So, make sure that your buyer or seller likes you! Treat them like a friend or co-worker. Actively listen, be empathetic, and put yourself in their shoes. By actively listening, you can respond with thoughtful open-ended questions that will not only show that you care but will also invite them to reveal their motivation for selling the home.
Tip 3: Analyze Your Position
Now that you have market data and have developed a relationship, you can figure out what position you are in. Does the buyer/seller REALLY want to do a deal? Or are they in no rush, just testing the water?
Let’s assume you are the buyer here. If your seller is just listing their property to see what they can get but aren’t hurrying to sell, you do not have much leverage. However, if something just happened—divorce, death in the family, job relocation, etc.—they may want to move quickly! If that’s the case, you will have more leverage and negotiating power.
Tip 4: Define Your Offer
Typically the price is the most important piece of the offer. If you have ever read Never Split the Difference by Chris Voss, you know to not ever use round numbers. Why? Because when you use an odd number, it makes the seller (or buyer) think that you are putting your best foot forward—giving all that you can give.
After price, other negotiating items are terms and contingencies. Who pays the closing costs? When is the closing date? How much earnest money do you put down? Are there financing or inspection contingencies?
You want to extend the offer that most benefits you first, because you never know what they might accept. Let them work you down!
Tip 5: Offer With Conviction
Now you know the terms that you want to offer. What happens when it comes time to actually making the offer?
The most important thing is that you need to be confident when presenting it. If you can, meet face to face and present your offer in a calm but convincing manner.
Let them say no! That’s OK. If they don’t agree, figure out what they are pushing back about and work with them!
Tip 6: Get Creative
Oftentimes, price is not all that matters. If they are not budging on price, maybe you can negotiate other parts of the deal. Get creative!
Maybe if you offer a higher price, you’ll get to keep some of the staging furniture. If you are an agent, perhaps you could reduce the commission that you keep on the transaction. There’s really no limit to the ways you can make a deal work through creativity.
Tip 7: Embrace the Sound of Silence
When presenting your offer, whether it be in person or on the phone, do not be afraid of the “awkward silence.” In fact, embrace it!
See just how long you can stay silent. Who breaks first? It better not be you!
The genius in using this tactic is that silence is uncomfortable. It gives the seller/buyer the feeling that you may not be happy with their offer (or counter) and will likely require further negotiations.
Tip 8: Create Some Friction
If the seller or buyer presents you a counteroffer, don’t be afraid of creating friction. Pretend to be insulted.
Tip 9: Don’t Be Afraid to Walk Away
When in a negotiation, always keep in the back of your mind that you can walk away. You can’t be afraid to actually do so.
If you listen to BiggerPockets podcasts, watch the webinars, or have read any BiggerPockets books, you’ll know that you should never invest with emotion. In many cases, buyers/sellers are emotionally attached to the property and make illogical decisions. Never get emotional.
Do not be afraid to walk away. If you put yourself in a position where it seems like you never truly want it, then you’ll have much more negotiating power.
Tip 10: Practice
The last and final tip is to practice! Like the old saying goes, “Practice makes perfect.”
The best athletes practice every day. The best salespeople practice new selling techniques. The best negotiators—yep—practice negotiating!
This weekend, go down to your local flea market. Negotiate the price of some items you want to buy. Or next time you are at a yard sale, practice! Any moment you can, practice negotiating—even if you don’t care about the price!
Just get comfortable and accustomed to the idea of negotiating. That way, when it comes time to actually negotiate, you know exactly what to do.
That’s it! There are 10 pro tips on how to negotiate better deals as a real estate investor. If you want to learn more about how to negotiate the best deal possible, J Scott and Tarl Yarber will dive into the details this Thursday, October 24th at 7 p.m. EDT/4 p.m. PDT. Register here!
Have you used or heard about any other powerful negotiating tactics?