Negotiating in a competitive market any tips welcomed

22 Replies

   After mustering sum courage and getting out there researching, analyzing, and making offers i soon realized that the real estate business has no liniency to weather you’re a newbie or not. I’ve been making offers but feel as if I’ve been a step behind on the negotiation aspect. I’m sure I’m not alone out there on this one. 

   I would really appreciate any tips on how to better negotiate on a property or even a point in the right direction on how to get better. 

Tips, strategies, examples all welcomed 👍🏽

Thank you in advance!

Some "hard" strategies to present a better offer to a seller:

  1. 1 - Offer all-cash
  2. 2 - Fast close (~2 weeks)
  3. 3 - Removing contingencies
  4. 4 - Offer to buy more than one property from the seller (investors typically own more than one, if they've got one on the market, they may be willing to sell others too)

Soft strategies:

  1. 1 - Be professional, open with your communication, & honest. This is absolutely number 1, you'd be surprise how far this goes. People don't like dealing with shady, rude, or dis-honest buyers (or sellers), and there are a lot of those types of people out there - make sure you are the polar opposite, and people will gravitate towards you.
  2. 2 - Figure out what the seller REALLY needs, and find a way to meet that need - it isn't always about price. Sometime the property is a disaster, and they just want out from underneath it. Some times there is an emotional attachment, and they cant set foot in the house again ("mom died in that house", etc). Some times the property is owned by inheritors who don't have a clue about RE and just want to get rid of it with as little hassle as possible. Etc, etc, etc. 
  3. 3 - Find off-market deals, or create them. This involves a lot of legwork and networking, but is very worth it.

Remember, real estate is a Get Rich Slowly game. Be patient, work on your network, find mentors, learn, learn, learn. It will all build up over time. 

@Ryan D. thank you for your insite and you’re right there are a lot of shady people in this business and I will keep distinguishing myself from them. 

The bar to get into RE is very very low, so you end up with a fair share of shady folks. Its been my experience that when I'm very honest & open with sellers about what I'm willing to pay for a property and that I'll follow through with any commitment I make, sellers end up coming back to me, even if they are the ones to walk away from the table. People always appreciate honesty - I'm not saying you should always show all your cards, but always act in good faith, and the good people in the business will respond favorably.

@Ryan D. in or out of real estate honesty will take you a long way. With so many investors willing to get in a bidding war how do you stragize your offer so that it is still a competitive one but doesn’t affect your bottom line number?

This is the market environment we are in right now. Lots of capital chasing a finite number of deals resulting in asset prices being bid up. Stick to your guns and don't overpay for anything just because there is a bidding war. I don't think there is anything you are doing wrong in particular, you just have to look harder to find the needle in the haystack. Rewind to 2009-2014, everything was on sale and no one was buying. Now is different. Good luck!

@Rob Beardsley thank you for putting what I was thinking into words. I will be sticking to my guns with even more assurance. 

Lean on your realtor and hope they have networked the other realtor. They'll be able to make a stronger case for your bid vs it just being some nobody. Also it's human nature to know why, people need to know a reason (any reason) for self validation. If you can make an offer of xxx, fast close, etc and give a reason that will make it to the seller you have a better chance.

But don't get attached. Let the numbers speak to you, once they stop working it's on to the next one.

@Matt K. I was wondering that since I haven’t been able to get face to face with the sellers just the middle man(the realter). And yes great points thank you

Among what the others have said, understand the other parties' motives and their problems. Then, if you have a solution and a possible deal, ask for a price range instead of a hard number. This is a little less intense than asking "So what's the lowest you can go?" or directly asking for a number. A range has leeway and gives you a place to start negotiations or to walk if the range is way out of your league.

I'm no expert by any means, but a good book to read on negotiation is "Never Split the Difference" by Chris Voss. His way of negotiating isn't to use manipulative techniques (not only unethical but also only "good" for short-term, not the long-run), but to be honest and understand the other parties perspective.

-Sam

Originally posted by @Rob Beardsley :

This is the market environment we are in right now. Lots of capital chasing a finite number of deals resulting in asset prices being bid up. Stick to your guns and don't overpay for anything just because there is a bidding war. I don't think there is anything you are doing wrong in particular, you just have to look harder to find the needle in the haystack. Rewind to 2009-2014, everything was on sale and no one was buying. Now is different. Good luck!

This is exactly right, many RE markets are very competitive right now. The equities market (stock) is inflated from all the capital the FED "printed" a few years back, so lots of people flush with capital, and moving it into RE & chasing after limited supply. Bidding wars help no-one but the seller. My best advice about bidding wars is to never get into one in the first place. If your market is that hot that you regularly get into bidding wars, then look for another market. Let the other guys pay more for a property than its worth. Don't overbid for a property just b/c someone else is willing to take a poor ROI.

There are some folks who will intentionally overbid just to get the contract, having no intention of paying what they offered and then nickle & dime it back down once they are under contract.  Sure its legal, though not particularly ethical in my opinion (unless its for legit problems that you only discovered during DD). 

Another tactic you can take is to take advantage the cyclic nature of the market - wait for the next recession (the market is overdue), after much of the overvalued wealth in the stock market evaporates. Then things will be on sale. "Buy when there's blood in the streets"

Originally posted by @Gilbert Lugo :

@Matt K. I was wondering that since I haven’t been able to get face to face with the sellers just the middle man(the realter). And yes great points thank you

Gilbert, you can also specifically search for FSBO, if you feel you are skilled with people and can make a direct connection with the seller, this may be a good tactic for you.

Find a niche at which you are good, and stick with it. Maybe that's FSBO, maybe SFH, maybe its duplexes in need of repair, maybe its small multi-family commercial properties, etc.

Originally posted by @Sam Amir :

Among what the others have said, understand the other parties' motives and their problems. Then, if you have a solution and a possible deal, ask for a price range instead of a hard number. This is a little less intense than asking "So what's the lowest you can go?" or directly asking for a number. A range has leeway and gives you a place to start negotiations or to walk if the range is way out of your league.

I'm no expert by any means, but a good book to read on negotiation is "Never Split the Difference" by Chris Voss. His way of negotiating isn't to use manipulative techniques (not only unethical but also only "good" for short-term, not the long-run), but to be honest and understand the other parties perspective.

-Sam

@Sam Amir  Thank you for the advise. Asking for a price rang rather than asking for a direct number sounds like a better passive way to negotiate the price tag. I will be checking out that book also

@Ryan D. After seeing all the over paying that’s going on I’m sure a lot of us are waiting for the time where we can take advantage of a recession again. 

Originally posted by @Gilbert Lugo :

@Ryan D. After seeing all the over paying that’s going on I’m sure a lot of us are waiting for the time where we can take advantage of a recession again. 

 yeah, a lot of people are overpaying and thinking they are investing. Let them. They'll get a crappy return on their investment, and sell a few years down the road, thinking this real estate thing is over rated. RE works well, but only if you buy at the right price.

You can also go directly to management companies - call a few in your target market, and ask if any of the owners they service are interested in selling. This could be a good source for off market transactions. 

What type of properties are your target?

@Ryan D. haven’t tried that yet but I will look into it. 

As of now I’ve been focusing solely on multifamily since I’m planning to house hack. 

@Gilbert Lugo  It sounds like you want to learn better negotiation skills. I recommend you get on Amazon, and buy the book Nevet Split The Difference by Chris Voss.

As you start to understand what it is they need, you will help them reach the goal.

Read the book, then come back and read this post again.

@Levi T.  heard some good things about the book already getting it. Thanks man! 

Negotiating is all about problem solving.  Figure out what problem the seller has and tailor your approach to solve that problem.  As mentioned above, it's not always about getting the best price.  Every negotiation is different, so you will have to use different tactics depending on the situation.

The Chris Voss book is ok, but some of his techniques don't translate well to the real estate world.  I would consider that book more for advanced negotiators.

If you want a good beginner book I would check out "The Book on Negotiating Real Estate" by J Scott, Mark Ferguson and Carol Scott.  That book has a lot of great info on negotiation preparation and real world examples.

Good luck

@Wade Sikkink yes every negotiation will be different just felt a bit unsure since all negotiations have been through my realtor. But thank you I will be checking out that book also. 

@Wade Sikkink I’m curious why your saying that Never split the difference is “advanced” I’ve read it multiple time and I think it hat everyone could relate to it in some level,
However I’m happy to hear people discussing this book.

I agree with David. I don’t think it’s advanced, it’s just one of many tools you should have in your pocket. 

When you reached the point of understand that market price really does not matter, then your stepping over the chasm.

That’s the art of this business. Developing system and processes to stack deal making in your favor. When your working a deal worth millions, you want to hopefully walk away only paying hundreds of thousands. 

That’s where most fail, they will say it’s worth millions, but they can’t accept what one pays does not have to be anything close to the value. You could pay a dollar, the question is how do you talk someone down to a dollar. That’s the fun part!

Just one example.  Mirroring is a technique that Voss discusses quite a bit but would be hard to use in most real estate negotiations and probably hard for a beginner to get their arms around.  That's my $0.02.

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