Real Estate Negotiation 101: Don’t Bid Against Yourself!
I find the “art” of negotiating to be a truly fascinating experience, and find myself often times spending as much time assisting investors to learn the business as I do helping them to understand effective and execute negotiating techniques.
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The fact is negotiating is something we do everyday. From our personal relationships (negotiating whats for dinner), to raising our children (when can they start dating), to our real estate business (what we pay for our properties, charge for rent, terms of borrowed money… etc.). In essence we are immersed in negotiating just about every minute of our life.
I got my real start in business life negotiating from a great book by Secrets of Power Negotiating by Roger Dawson. If you haven’t read this book I would highly recommend it. I was fortunate that I was able to execute many of newly learned strategies as I built a small business, and the more I practiced the better I got!
When I started my real estate business I loved the notion of negotiating. Executing my “walk away power”, injecting “red herrings”, creating “false deadlines” and on and on and on…
More recently I have found I’m almost hooked on a recent reality show called Pawn Stars. Watching the back and forth negotiating between the Pawn Shop and sellers is enlightening to say the least.
In almost every transaction, you can witness the ploy in the title above — “bidding against yourself”
Have you ever found yourself actually bidding against yourself?
You know, when you offer a price in either a purchase or a sale, and in the process the other party reacts, but remains silent.
What is your normal inclination?
To break the silence . . . and often times the first thing you will say is, “well, I could accept a lower price or make a higher offer.” I am sure every one of us has been caught up in this scenario. In fact if you have every been asked to offer your “highest and best” offer, you have more then likely been caught up this obvious trap.
However, some investors seem to get when they are being asked to negotiate against themselves.
Very recently one of my clients found herself in just such a situation. She made an offer that worked for her (meaning that it was a conservative offer) and the lawyer involved immediately went to — “well we have other offers coming in. . . so, I would recommend you provide your best offer now to be considered.”
My client held firm and requested that the sellers be made aware of her offer and if they wanted to get the deal done quickly then they could make a counter offer. When the lawyer balked at this request, what do you think she did?
If you guessed “walked away” you would be correct.
The real message here is this…
The sellers representative wanted the buyer to increase their offer price without any counter offer. Or put into its simplest terms, they wanted her to negotiate against her own offer, just to see if they could get her offer to a higher price, but she didn’t bite.
Are you a good negotiator? If so, great! And if not, get the book, watch some TV and practice, practice and then practice some more.