What's your favorite negotiating tactic?
Real Estate Investor · San Antonio, TX · Member since 2010 · 328 posts · 182 votes
Just curious to see what other people's favorite negotiating tactic is.
Aside from not needing to buy and having a seller that needs to sell (this is a position rather than a tactic anyway), my favorite tactic is to remain silent. This works like a charm and I am always amazed at how effective it is.
Most people aren't comfortable with silence when talking with someone else. While negotiating, just don't say anything and wait for the other person to speak (of course negotiations need to have started already. If they haven't they might think something is wrong with you. :lol: ). They will feel the need to fill the air with something and usually will start giving away concessions. You can have fun with this one also. See how long you can go without talking. You will be tempted to break the silence yourself....
So what is your favorite negotiating tactic?
This reminds me of a "negotiation" I had yesterday...
I'll occasional pimp out my project manager and crew to do rehabs for other investors, for a fee. There is an investor we work with, and all his deals are handled by his right-hand man. Well, this investor has a rehab coming up, and I negotiated a price with his right-hand man. As usual, it's was a very good price for them, as I'm just interested in getting my PM some extra cash on the side and keeping my crew extra busy...we don't need the work and it would probably be easier for me personally if I didn't have my guys do it...
Anyway, I meet the actual investor at the property, and while he knows that we already have an agreement on price (at $4000 for the whole job), he tells me that he thinks $3000 is more fair for this particular project.
I basically replied with, "I already agreed on a price with your guy, and I've already starting getting contractor bids, so it's a little late to start renegotiating now."
He replied with, "We don't have a signed contract yet, so it's definitely not too late to renegotiate."
I replied with, "Good point. I hadn't considered that. Okay, I now want $4500 for this job. It's non-negotiable. Take it or leave it." (I often do this when someone tries to renegotiate after an agreement has been reached, even if it means spiting myself)
He started balking that I was being ridiculous, and I walked out. I told him to call me if he wanted to move forward for $4500.
His right-hand guy called me today and said, "How about if we just stick with the $4000 we originally agreed on? I think that's fair."
I told him that I thought $4000 was fair also, but that there was a surcharge of $500 for having to deal with this guy who didn't want to honor an agreement. I then told him to call me if he decides to pay $4500.
We'll see if I hear from him...I'm guessing I will...
Moral of the story #1: He who needs the deal the least will often get the better deal. I personally don't care if he ever calls me back or not, but I know he wants this house done in about 2 weeks, and if he has to switch gears now, he'll never make it.
Moral of the story #2: If you don't negotiate in good faith (in this case, sticking to a previously agreed upon price), you deserve to get screwed.
Moral of the story #3: Sometimes you have to act a little irrational during a negotiation to keep the other party on his toes and keep him from trying to negotiate too much in the future. It comes with risks, but can definitely be worth it.
Here's an awesome article from J Scott about negotiation that is a must read:
7 Tips for Better Negotiation in Real Estate & Everywhere Else
A favorite of mine is "Sorry, but you you'll have to do better than that."
For example, the seller gives you his rock bottom price. You pause, like you are studying his offer. Then come back with "Sorry. but you'll have to do better than that." Experienced negotiators will fire back with "Well, how much better do I need to do"
Inexperienced negotiators will usually drop the price some, or a lot! Once they do, then I start negotiating. Works well for me in a lot of different situations, not just housing.
7 Tips for Better Negotiation in Real Estate & Everywhere Else
Good stuff. Thanks for posting that Josh!
This is definitely shaping up to be a great post already. BTW, Josh, thanks for the link. Although I missed that post the first time around, I noticed that I regularly use all of those techniques (and more).
Yet, I do take a slightly different approach on the first tip ("Let the Other Party Speak First"). Besides the midpoint rule, lots of inexperienced negotiators learn this technique early on. So negotiations with them won't move forward until the other party makes the first offer. If I sense that we're at a standstill, then I'll sometimes make the first offer to anchor the negotiations.
Nevertheless, my favorite negotiating tactic by far is the third tip ("Information is Power"). The more I know about a property, all of the parties involved with the deal, the neighborhood/subdivision, the neighbors, etc; the better equipped I'll be to negotiate a good deal. Although price is important, the terms of a deal are more important to me.
For example, the seller gives you his rock bottom price. You pause, like you are studying his offer. Then come back with "Sorry. but you'll have to do better than that." Experienced negotiators will fire back with "Well, how much better do I need to do"
Now I'm curious - what line would make a good answer to that question?
For example, the seller gives you his rock bottom price. You pause, like you are studying his offer. Then come back with "Sorry. but you'll have to do better than that." Experienced negotiators will fire back with "Well, how much better do I need to do"
Now I'm curious - what line would make a good answer to that question?
Good question! You tried the squeeze and got squeezed back... But, don't let them box you into setting a price. Instead, I would switch techniques to the reluctant buyer. "Well, I'm an investor and at this price I just don't think I can make it work. I hate that you spent so much time with me for nothing, but just to be fair what's truly your rock bottom price on this property."
You basically just rephrased the original attempt in a different format. The seller may then make a price concession since you put it on him again. If the seller does drop, Congrats! You accomplished your opening and can start negotiating an even better price, since you have yet to even mention a price that works for you.
If the seller holds firm on the original price, I would start packing my things up and say "Thanks for your time, I'm sorry we couldn't work something out. I wish you the best of luck selling the property." Showing the seller you are ready to walk may cause him to rethink his "wish price"
These are all still opening positions. True Negotiations haven't even really begun yet.
Back to the original "you'll have to do better than that" if the seller does concede price. Try the exact same phrase again.
Seller: "Rock bottom 100K"
You: "You'll have to do better than that"
Seller: "Ok How about 98K"
You: You'll have to do better than that
Seller: "97K!! FIRM!!"
You" You'll have to do better than that"
Seller: 96K please??
I once had an agent ask me for my "best and last offer." While probably best to only use when you have multiple offers, I thought it was good.
And kind of along the same lines as what Brian M. was saying, if you are direct to the decision maker and they are engaged, the take away works wonders in helping you regain control.
It also helps to have a senior partner or committee (who may just be your significant other), who has to "approve" all the changes.
I have read a lot of books on negotiation as well as listened purchased several home study courses. I personally negotiated with 501 sellers last year.
The one thing I have found is that there is no ONE tactic that is going to get you any deals in negotiation. That is like asking "Which is your favorite move playing chess?"
Well, it is obvious that the answer would be "The one that puts my opponent in check mate!"
Every seller or person you are negotiating with has a different style and reason for wanting to sell. I've closed some people in less than 2 minutes. Others, I have been negotiating with for years and still haven't purchased their property.
I guess my favorite 'tactic' is "No" never really means "No". Time and circumstances changes all people's minds.
Well, tell me, do you want to sell or do you need to sell?
Seller: I want to sell
Me: Give me a price that will make me want to buy!
Seller: I need to sell
Me: Give me a price that makes me need to buy!
If I have to make an offer, I might say something like:
I can only of offer what it's worth to me......you might get a better price, someday but I can buy now....I can only go XXXX
The first one to speak, loses!
depending on how they react, I might say, well think about it and give me a call (handing them my card) but I'm a buyer and I will be finding something else.
I really never liked "canned" pitches, but I have found myself saying that.
If I hear a canned spiel of any kind, I'm not interested, usually. It tells me that my buyer (or seller) thinks of themselves as a wheeler dealer, and I just don't have time for them, you never get a good deal from a wheeler dealer type. Only motivated sellers or buyers!
Awesome discussion, mine would have to be silence is golden rule with a long hmmm...before it.
Works even better on the phone, people tend to cave so fast on the phone, since we are so use talking back and forth on the phone. 5 seconds on the phone seems like forever.
I was a young man and had to sell to car dealers. I typically ended up with the GM or the Owner for the final negotiation. I learned a couple of things from swimming with these sharks.
First and foremost I would say do you homework. Know what you want. What you can settle for. Without homework negotiation is an exercise in futility.
Second listen to the guy across the table and ask questions, never interrupt and never insult
Third Be flexible and willing to negotiate that is what you are there for.
Fourth Be prepared to take a stance and walk away amicably.
Fifth If you have the opportunity to close close that door immediately.
Great stuff.
I was just putting one under contract and the seller didn't tell me this, but his attorney was to meet us there also. The attorney proceeded to try and negotiate everything, including price, which of course had already been agreed upon. After he talked about all that 'he' wanted, I told him I was not there to negotiate. The seller and I had already agreed on the deal and that I was paying for some things that I do not normally pay for.
After a brief spell, he came at me with, "you know, you are not the only person that buys houses." To which I responded, "And this is not the only house for sale. So I guess we are in the same position, aren't we?"
After realizing that there would be no bullying, we had a good time. All went well.
I like to come to the table with a solid background on the property and where possible the seller. This tactic has helped many times in justifying our offer. In so many cases listing agents and sellers gloss over known issues and paint a rosier picture than really exists.
Thanks for providing the link to J Scott's list of negotiating tactics. Very useful points.
This reminds me of a "negotiation" I had yesterday...
I'll occasional pimp out my project manager and crew to do rehabs for other investors, for a fee. There is an investor we work with, and all his deals are handled by his right-hand man. Well, this investor has a rehab coming up, and I negotiated a price with his right-hand man. As usual, it's was a very good price for them, as I'm just interested in getting my PM some extra cash on the side and keeping my crew extra busy...we don't need the work and it would probably be easier for me personally if I didn't have my guys do it...
Anyway, I meet the actual investor at the property, and while he knows that we already have an agreement on price (at $4000 for the whole job), he tells me that he thinks $3000 is more fair for this particular project.
I basically replied with, "I already agreed on a price with your guy, and I've already starting getting contractor bids, so it's a little late to start renegotiating now."
He replied with, "We don't have a signed contract yet, so it's definitely not too late to renegotiate."
I replied with, "Good point. I hadn't considered that. Okay, I now want $4500 for this job. It's non-negotiable. Take it or leave it." (I often do this when someone tries to renegotiate after an agreement has been reached, even if it means spiting myself)
He started balking that I was being ridiculous, and I walked out. I told him to call me if he wanted to move forward for $4500.
His right-hand guy called me today and said, "How about if we just stick with the $4000 we originally agreed on? I think that's fair."
I told him that I thought $4000 was fair also, but that there was a surcharge of $500 for having to deal with this guy who didn't want to honor an agreement. I then told him to call me if he decides to pay $4500.
We'll see if I hear from him...I'm guessing I will...
Moral of the story #1: He who needs the deal the least will often get the better deal. I personally don't care if he ever calls me back or not, but I know he wants this house done in about 2 weeks, and if he has to switch gears now, he'll never make it.
Moral of the story #2: If you don't negotiate in good faith (in this case, sticking to a previously agreed upon price), you deserve to get screwed.
Moral of the story #3: Sometimes you have to act a little irrational during a negotiation to keep the other party on his toes and keep him from trying to negotiate too much in the future. It comes with risks, but can definitely be worth it.
One of my favorite strategies is good cop bad cop, and not just for real estate deals. I did a joint venture project deal last year and the jv partner was playing hardball about percentages. My business partner and I like to play good cop bad cop because we sometimes appear highly disorganized and inconsistent. Actually we talk about every contingency before a meeting. In this particular jv deal, my partner and I met with the jv partners individually (we never appeared together until deal details were solidified). I had made it known that I was a very amicable guy, and possibly easy to manipulate. My partner was very aggressive and loud and with very extreme terms. I was able to convince the jv partners that my business partner would derail the deal if they wouldn't come up with better terms. My partner and I snickered all the way to the bank (figuratively).
Another strategy I like and use often is to figure out just how much the other party is making. It often makes your decision making a lot easier to have the power of an Excel spreadsheet in front of you.
Had a family friend who owned some acreage near a proposed upscale hotel at the lake. He was approached by the developer about buying his land since it was within the view of the front of the proposed hotel. (We're talking a grand a night joint here for the suites, Branson stars stay there). He shot them a price that was way over what it was worth and they declined. He later came back with a lower amount and they declined. A third time, very close to the original offer...they declined.
Now he was ticked as he didn't want a hotel towering over his property.
We talked and I asked about his brother who had a gentelman's farm that he played with. He had decided to let a caretaker bring in some hogs.
I told him he needed to bring a few hogs in on the subject property and put up a couple pens, since it was zonned agricultraul in the county.
He did just that and they had constuction underway.
The buyer for the hotel contacted him a cople weeks later. He got the first price he wanted! first
Asking questions, then listening to them, then giving them what they want. (provided it works for me in the deal too) I gotta say that most of my deals never get into heated negotiations. I just ask lots of questions and let them draw their own conclusions. (of course the questions are designed to help them see my way, LOL!)
I think you will too. It's amazing how bad people will want something when it is offered up and then taken away from them.
I think you will too. It's amazing how bad people will want something when it is offered up and then taken away from them.
It's human nature; people want what they can't have. Once he had the deal at $4000, he wasn't happy. Now that it'll cost him $4500, the original deal looks so much better. Funny stuff.
I get a lot of word-of-mouth referrals throughout the community of elderly folks in my favorite neighborhood. They like how I restore the old mill houses and get good tenants as their neighbors, so I've gotten a good reputation.
Of course, I'm often dealing with older folks or their kids. They're usually needing to leave the home they've lived in most of their lives, and emotions and anxiety run high. So I avoid any pushy sales tactics, and I put all my cards on the table. I make sure I know what I think the house is worth before I even show up on their doorstep. I spend all the time I need to sit and chat, so they can get comfortable with me. If their children are not involved, I nearly insist that they get involved. I do not want to be accused of taking advantage of anyone. After all of that, I tell them what I think the house is worth on the market, but that they need to spend $X to get it ready, then wait for an offer, and then pay the listing agent $X. Then I say that I wish I could pay them what it's worth, but that since I'm an investor, I must pay less. So, I can offer them $X today, and close in so many days, or whenever they're ready (one lady needed a few months, and that was fine with me).
Sometimes, the homeowner has been pleasantly surprised at how much their home is worth and has decided not to sell it to me. That's OK too--I refer them to my favorite real estate agent and help them get a great deal. So, I didn't buy the house. They still passed my name on to their friends and neighbors, and that gets me more leads. More than that, I made a sweet little old lady (and her family) very happy and a little richer. You can't put a price on that.
I also take the time to determine if they need help clearing the house out or moving or whatever. Sometimes they breathe a sigh of relief when they learn that they can take whatever they want out of the house and that I will clear out whatever they leave behind. It's a day of labor and a dump fee (or tax-deductible donation) for me, but it's a major load off their shoulders.
If they sign a contract, I'll often have the yardwork taken care of from then on, too.
I don't know how much of a "tactic" this is. I guess it's more of a strategy.
I think you will too. It's amazing how bad people will want something when it is offered up and then taken away from them.
It's human nature; people want what they can't have. Once he had the deal at $4000, he wasn't happy. Now that it'll cost him $4500, the original deal looks so much better. Funny stuff.
Quick update -- Got an email overnight offering $4250... :D
I plan to just accept it to show good faith, even though I had originally said take-it-or-leave-it at $4500....
Probably not a great negotiating tactic, but I'll live with it....
I think you will too. It's amazing how bad people will want something when it is offered up and then taken away from them.
It's human nature; people want what they can't have. Once he had the deal at $4000, he wasn't happy. Now that it'll cost him $4500, the original deal looks so much better. Funny stuff.
Quick update -- Got an email overnight offering $4250... :D
I plan to just accept it to show good faith, even though I had originally said take-it-or-leave-it at $4500....
Probably not a great negotiating tactic, but I'll live with it....
Smart move. :D
I think Jason delivered a great article on negotiating and everyone should use the techniques, they work!
One of my favorite specific strategies, no matter RE or anything else, is a simple one liner which I use, then use again, and again if necessary to get a lower price. After I have utilized all the other techniques to get a price i am comfortable with, I then state, "is that the best you can do". It often works to get another reduction or concession. Good negotiators will simply say, yes, and then I will use silence or body language showing I am ready to walk, then re-ask it again.
It has worked time and again for me on many different types of purchases, not just RE.
We use a 7 step process that starts from the moment you meet the seller to the time you make the offer. It is a process that was developed by the Sandler Sales Institutes and utilizes bonding and rapport techniques to include identifying the sellers disposition (Auditory, Visual or Kinesthetic) in order to establish how to best communicate and make an offer that suits their personality.