5 Crucial Steps for Successful Real Estate Negotiations

36

I read a great article a while back in Inc. Magazine. The title of the article was “The Art of Conversation”. This article was written by George Stephanopoulos who certainly knows a lot about this subject.

After reading this article, I began to think about just how much this applies to real estate investing. When you are having a one-on-one conversation, it really doesn’t matter if you are speaking to a motivated seller or the president of the United States. The same rules apply.

The 5 Crucial Steps for a Good Conversation (According to George)

1. Prepare Extensively

When you have an appointment with a motivated seller come prepared to present yourself as a credible investor.

  • Make sure you have completed your due diligence on the property.
  • You will need to know the comps for the area.
  • You should know the amount of the tax assessment for the property.
  • Be sure to arrive a little bit early and drive around the neighborhood. Compare this house to the other homes in the area.

Do everything necessary to be prepared for your appointment.

2. Don’t Be a Know- It-All

Now that you have done all the necessary preparation, you are almost certain to feel like an expert on this property. That’s great but it will be very intimidating to the seller if and it won’t really do you any good if you do all the talking. Ask the seller questions so he will become involved in the conversation early on. You can ask about the history of the house and the neighborhood. Let them contribute any information that might be helpful to your negotiations. This is one time it really pays to listen.

3. Ask “Why”

Getting someone like a seller to answer “why questions” takes a little finesse at times, but it is well worth the trouble.

If the seller throws out a price for the house that you know is too high, ask them why they think the house should be priced for that amount. The next time they bring up an objection, ask them why they feel that way or how they came to that conclusion. I have found in the past, sellers often admit that they are way off base with their prices once they are forced to explain their reasoning.

I once asked a seller why he thought his house should bring a particular price and this was his response; “I didn’t really think it was worth that much, but you can’t blame a fellow for trying”. He then laughed and accepted my offer.

4. Watch for Facial Clues

You can often tell how the negotiation is going simply by looking at the person’s facial expressions. You may need to back off if they seem upset or agitated. If the person appears to be offended, they may simply just be “blowing smoke” as the expression goes by trying to get the upper hand in the negotiations. In this business it’s essential to get to the point where you can read people especially when you enter into negotiations.

5. Force Yourself to Be Interested

One of my early mentors told me that when you ask a homeowner to tell you about their situation and why they need to sell, to be prepared to just sit back and listen patiently for the next 30 minutes. They will almost always proceed to tell you every detail about their problem and their life (most of which you would rather not know). I have to say that I have found this to be true in most cases. There is just nothing you can do but listen.

But here’s the thing; you need to show some interest in what they are saying. Pick one thing they have said and focus your comments on this particular part of the conversation. This is the time when you are most likely to get valuable clues about their true motivation.

Being skilled in the art of conversation has everything to do with succeeding in negotiations. Done properly, it helps you to build rapport with the seller very quickly. Our job as real estate investors is to solve problems. As boring as this process is at times, it often turns out to be the quickest path to finding out what the seller really wants.

Remember that there is always something else the seller wants; something other than the money.

Photo Credit: Oneras

About Author

Sharon Vornholt

Sharon has been investing in real estate since 1998. She owned and operated a successful home inspection company for 17 years. In January of 2008 she took the leap of closing her business to become a full time real estate investor.

36 Comments

    • Adrian –

      I know that some folks are born negotiators, but for most of us it is a skill we have to learn. You are right when you say that buying at the right purchase price is everything in a deal. If you can’t negotiate, you are in trouble.

      Sharon

  1. Thanks for the Post Sharon, I like your topic “The Art of Conversation” I have always preached the “The Art of Communication” Either way is requires LISTENING! Thanks again from a Newbie in Texas

    • Hi Tom –

      It is so hard at times to just be quiet isn’t it? There’s that awful pause in the conversation when we feel the need to jump in and say something.

      But I know that it is critical when you are negotiating. You’ve heard the saying, “He who speaks first loses”. That is absolutely true when you are negotiating with a seller. You just have to be still and let them talk. Best of luck in your business.

      Sharon

  2. Great tips! Thank you for sharing.
    An added tip for learning #4 is to study “micro-expressions.”
    Google it and you can learn a lot from something as simple as someone fidgeting with their ear while they may be bluffing or telling a lie about something. If you want a fun show to watch based on this. Check out “Lie To Me”. It’s on Netflix if you have that. Only 3 seasons, but I learned a TON about body language and signals that people are nervous or bluffing about something. (The show is pretty clean too. Little language, but makes it easy for people to watch learn, and not be offended if that is of concern.)

  3. Ben Leybovich

    Sharon –

    Flat out the best article on the BiggerPockets blog in the last 12 months – period. The way you write I imagine you are familiar with the work of the great Greeks Socrates and Aristotle, among others… Good for you! They wonder why some people succeed and others fail – they just need to read between the lines of what you wrote here 🙂

    I am bothered by 6 comments. I suppose the number of comments does not have to be indicative of readership, but I tend to think in this case it is – too bad. Everyone seems to be attracted to shiny objects much more than the truth…

    Thanks for this article Sharon. I am actually working on a book on this subject as we speak. Nice to know there are others who think about things…

    • Thanks so much Ben.

      Negotiation is such a hard thing for most folks to learn (except those that were born with the negotiation gene). For most of us, we need some guidelines to be successful, and listening is by far the hardest part of the equation. Thanks for your comments!

      Sharon

  4. Hi Sharon, great way to articulate key fundamentals. Quite often one hears the phrase — “real estate investing is a relationship business”… This couldn’t be more true.. The problem is that most of us learn this in the school of hard knocks after we’ve screwed up a few times… It is like being in love I guess… you can’t explain it to someone, they will know it when it happens!

    • Ryan –

      I love your “being in love analogy”. Boy that is so true, but I never looked at it that way. I have to remember that.

      Most of the time when you ask a real estate investor what business they are in, they will say something to do with houses and property.

      But in reality we are in the problem solving business which is all about people and relationships. Once people understand this they will quit trying to make deals work that aren’t deals. I have had many folks come back to me to buy their house (and accept my low offer) when their other methods failed. The reason that happens is because I take the time to build a relationship with them. If I buy the house right away – great. If I don’t, I want to always be their “plan B”; the person they come back to when “plan A” doesn’t work out.

      Always leave the door open on your way out.

      Sharon

  5. Listening, creating win-wins, and being a good reader of body language and personality styles are all very important in closing deals, no matter what line of work you are in. Excellent article, Sharon.

  6. Sharon
    Excellent job.
    I would add Negotiation is a dance, mutually beneficial and should feel good.
    People like doing business with people they like and trust might as well be you.

    Body Language you are not getting anywhere until the other person shows you the ta-tas. If they stand arms crossed in front of their chest until they drop the hands to their lap your not getting anywhere.
    When speaking to someone if their eyes are roaming all over while speaking what they are saying is probably not true their eyes are searching for their “story”

  7. As always great information. You mentioned tax value. It is interesting that many times that is the value sellers have for their property. I just started reading Secrets of Power Negotiating as suggested by a fellow BPer. So far excellent basic info to know. I am sure it will get more complicated as I get more into the book.

    • Gary –

      For most folks that’s all they know. That or maybe the neighbor’s house down the street that just had 50K in renovations done. The think that their house that has “original everything” should sell for the same price. It’s a teaching experience for most folks.

      Thanks for your comments.
      Sharon

  8. Thanks Sharon for the reminder. Simple ideas yet for me, the listening part is a bit more difficult. Just have to keep working on this and after some time, it will be second nature. For body language, I try to mimic what the other person is doing. If they sit, I sit. If they put one hand in their pocket and keep the other out, I do the same.

    Forcing myself to be interested is also another thing that maybe hard for many. What happens is you drown yourself out of the conversation and if they catch you not listening (whatever the subject matter was), the deal is over. Keep up the great posts.

  9. Cuong

    I think most of us need to be better listeners, but with some practice we can all do this. Being a good listener is especially important in negotiations.

    When you force yourself to listen you also have to pay attention; that’s for sure. Thanks for reading.

    Sharon

  10. Great article Sharon. I’ve been prowling the web for a few days looking for good articles on negation skills and this one took the cake. I agree that our job as investors is to solve problems. If we can’t sit back and let the seller “vent” their issues then “problem solving” is only a cliche we use to get more business.

    • Alex –

      It is just part of the business, and at times it can be really painful LOL. You will hear about a whole lot of things you didn’t want to know. But hopefully you will also find out their true motivation or what “else” they need in addition to cash the process.

      If we can find a way to solve their problems, then it will be a win-win for everyone and we will get the deal. Thanks for reading.

      Sharon

    • Sharon Vornholt

      That’s exactly right Mike.

      You have to really show interest when the sellers are telling you their story. It’s their story and it almost always reveals something about their motivation to sell. Those investors that do this are much more likely to get the deal.

      Sharon

  11. Nice article, Sharon!

    I can definitely relate. For the most part, negotiating has always been a process in my experience. So many times, we want immediate results. Though, things don’t always happen overnight. I find time is the best remedy when it comes to dealing with folks.

    Right now, I’m in the middle of negotiating another deal. It’s been almost two months and we haven’t come to an agreement. The seller went down a bit in price but it’s still a bit high for me. So, it’s definitely been a game of back and forth which I’m used to — only time will tell.

    One of my longest negotiations spanned over 2 years. It involved a lot of meetings and talks. Though it took awhile to do the deal, it was a good feeling once it finally went through. Every negotiation may be different and can definitely be a learning experience!

    I enjoyed the write-up, thanks for sharing!

    • Sharon Vornholt

      Wow – two years Rachel? We all know the money is in the follow up. I applaud you for hanging in there on that one.

      It seems to me with single family houses the sellers are getting letters and postcards from so many people that gives them more choices in who they will go with. Also in my market a lot of deals have been lost to inexperienced investors that paid way to much for the property.

      I’m curious; do you have many competitors in your niche Rachel?

      Sharon

      • Yes, it definitely was a long haul on that one Sharon! It was one of those situations where the seller knew they needed to move on but just needed some time to finally do it.

        Oh, there’s definitely competition in my niche. Though as in any business endeavor, there’s only a few key players. I’ve missed out on deals when I’ve been out of town or have been tied up with other deals to competition in the past. Luck definitely has a role in success being at the right place at the right time!

        p.s. When it comes to studying the competition, I’ve learned to take some of the lessons in the book, _The Art of War_. In the past, I’ve actually bought from some of my competitors who chose to exit the business and liquidate their holdings in this niche!!

        • Rachel –

          I figured your niche was just like all the others; plenty of competition. You have definitely made name for yourself in your niche.

          Have a great week.

          Sharon

  12. Lots of great points.
    The last 3 especially are great points and go to the skill of active and empathic listening.
    Great way to build rapport and show yo care.
    Not just with sellers but this is a great skill with friends and family too.

    Think about how good you feel when someone actually listens to you and hears you when you tell them something rather than talking over and around you.

  13. Gloria Dulan-Wilson

    Hi Sharon: Love your advice – thanks so much – however, most of my interactions have been with the realtor as opposed to the sellers themselves – giving me little to no face time for the kinds of quality conversations you recommend. Is there a way I can get around this and get direct access to the seller instead of having to deal with the realtor. I know that there are some areas that frown on this if the seller has contracted to sell through an agent. Still, if there is room for negotiation, I would definitely like to have the capacity to do the negotiation directly as opposed to through the realtor. Thanks again.

  14. Sharon Vornholt

    Gloria –

    You cannot go around the Realtor on a listed house. When we are negotiating with a seller, that property isn’t listed. You have to market directly to the seller using direct mail or some other method in order to talk with them directly.

    Sharon

  15. Jason Gray

    The more they talk the more they trust…

    Micro expressions are important, but so is the ability to keep them talking by drilling down.

    Finding one word or key phrase that the mention can sometimes continue a stagnate conversation.

    Really, you said THEY asked you to sell. Who is they?

    You mentioned, “by next week” why is next week the goal?

    Sometimes listening for conversation bumps can keep the process moving along if you pay attention.

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here

css.php