{"id":46488,"date":"2013-08-05T08:30:59","date_gmt":"2013-08-05T14:30:59","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=46488"},"modified":"2021-03-16T10:09:32","modified_gmt":"2021-03-16T16:09:32","slug":"2013-08-05-negotiated","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2013-08-05-negotiated","title":{"rendered":"How I Negotiated a 30% Price Reduction and Saved $100,000… During a Bidding War"},"content":{"rendered":"

\u201cLet us never negotiate out of fear.\u00a0 But let us never fear to negotiate.\u201d
\n-John F. Kennedy<\/p><\/blockquote>\n

I love negotiating.\u00a0 Some people HATE it, some people SUCK at it, and some people LOVE it.\u00a0 I\u2019m in the latter camp.<\/p>\n

People say things like \u201cthey are so irrational\u201d though, in reality, people are very rational – but they position themselves to protect<\/em> themselves.\u00a0 In this positioning, the opposing party believes this is irrational.\u00a0 Did I just jump into the deep-end too quick?<\/p>\n

A Negotiation Case Study<\/h2>\n

Here\u2019s a true story to show you what I\u2019m talking about.<\/p>\n

An acquaintance of mine owned some nice rental properties in a very nice area of town.\u00a0 Every year, I would call this guy, who we will call \u201cJim\u201d and offer to buy a particular quadplex.\u00a0 Nothing high pressure, but I would always just ask for the sale.\u00a0 Every year, he politely turned me down, saying it is a cash-cow and he has no interest in selling.\u00a0 This went on for five years but on the sixth year, before I got my call in, I notice the property pop-up on one of my screens.\u00a0 It\u2019s the property I\u2019ve been trying to buy for five years AND the price is only about half what I would have paid. \u00a0After further research, I discover it was empty and in foreclosure<\/a>!<\/p>\n

I\u2019m sure you are asking yourself a million questions as to why \u201cJim\u201d didn\u2019t simply sell me the property.\u00a0 The truth is: I don\u2019t know why<\/em> – but this is what I think happened: he was protecting (see above) his ego and pride.\u00a0 Rather than sell me something at a discount, or sell it all. Jim would rather just lose it.\u00a0 Some would say this is irrational.\u00a0 However, if you approach it from a different angle you can learn how to deal with this.<\/p>\n

Develop A System<\/h2>\n

Most people reading this blog are BiggerPockets<\/a> members, which means you guys and gals are smarter than around 80% of real estate investors out there.\u00a0 It also means that you guys are looking for great deals, not just the good deals that are on the MLS everyday.<\/p>\n

Most of you have made an infinite amount of low-ball offers only to waste your time and the time of everyone involved.\u00a0 Please, do not misunderstand me – I am all about making low-ball offers and getting a great deal.\u00a0 However, as you probably have already experienced – blindly making a ton of low-ball offers doesn\u2019t get you far.<\/p>\n

Instead, why don\u2019t you design a process that is repeatable, scalable, and works within the parameters you define and what works with whatever negotiation style you prefer.<\/p>\n

My Real Estate System<\/h2>\n

Let me give you a real case-study of a process that I have defined for myself.<\/p>\n

It was early December and we were currently renting, but my wife was VERY tired of living in a 1 bedroom place.\u00a0 Additionally, we were having our second child in February so she couldn’t help move and pack if we waited any longer.\u00a0 My wife found three houses that were the size we wanted and in the location we wanted.\u00a0 When we walked into the final house we knew this<\/em> was the one; everything was already remodeled and we loved everything.\u00a0 At this point we knew it was obviously empty and on the market for awhile.\u00a0 I also saw where it had never been lived in at it’s current state, as it was previously a duplex.<\/p>\n

Additionally, the price was way out of our budget.<\/p>\n

After going through a number of failed low-ball bids, my wife and I tried a different strategy this time.\u00a0 We made the low-ball bid, but also included a letter explaining the offer.<\/p>\n

This is the letter we sent:<\/p>\n

November 30, 2010<\/em><\/p>\n

Dear Seller<\/em><\/p>\n

I\u2019m writing to let you know that I would like to make a bid on your property. I love your house and would love to raise my family in this wonderful house.<\/em><\/p>\n

But given that my offer is well below your asking price, I also feel I owe you an explanation.<\/em><\/p>\n

I am a credit analyst at a bank and my wife is a photographer.\u00a0 We were pre-approved for a $225,000 purchase price and my parents agreed to help us with another $15,000.\u00a0 This is how we came to our proposed purchase price.\u00a0 Even though this offer is below the asking price I feel there are several positive items in our offer that I would like to highlight:<\/em><\/p>\n