8 Negotiation Techniques That Will Help Every Newbie Land a Better Deal

by | BiggerPockets.com

I find it amazing that in school, we are not taught the skill of negotiation. By definition, negotiation is the act or process of having a discussion in order to reach an agreement. There is barely any mention of this in formal education, yet the happiness of our lives depends immensely upon how well we can negotiate for ourselves and “get” what we want. I would like to share with you a few negotiation techniques to get what you want in your next real estate deal, as well as discuss how to become a better negotiator.

The success of negotiating depends upon your ability to walk away from a deal. In some instances, this may prove to be a difficult task. A beautiful lake house caught the attention of my partner and his wife. From the outset, his wife fell in love with the house, while he has hidden his emotions about the purchase. He has implemented the successful attitude of patience and persistence, while being willing to walk away. He has a price and terms set in his mind, and if he can’t achieve the objective, he will walk away from the deal. As you can see, his wife’s emotions would have made him overpay for the house, but he has enough experience to hold out until his demands are met, or else he will walk. The key to his success in this negotiation is that he has been flexible with his demands while concealing his excitement about purchasing the home.

Another key to negotiation is that everything is negotiable. All you need to do is ask — and be willing to walk away if it is a part of the deal that you need. When we were securing financing for our first large deal, the banker was charging us a 1% origination fee. We asked if he could charge us only .75%. The banker agreed immediately, and we were left confused. All it took was a simple question. We were mad at ourselves that we didn’t ask for a lower rate. You can always start low and work your way up.

hire-a-contractor

Related: The Newbie’s Guide to Becoming a Savvy Real Estate Negotiator

In business, your goal is to create a win-win relationship with the other side. The key is to listen to the other party and discover how you can solve their “problem.” If you can solve a problem and add value to the other side, you will reap the benefits. On our first deal, we knew that the sellers were mom-and-pop owners who were burned out and ready to retire. Armed with this information, we were able to negotiate a lower price and obtain seller financing. The owners were simply going to deposit the proceeds in the bank, and we convinced them that seller financing would provide a higher rate of return, while deferring some of their capital gains. Win-win for both sides: We needed less money out of pocket for the deal, and the sellers sold the property and received mailbox money!

Let me list a few other keys and techniques when negotiating.

8 Negotiation Techniques to Help Every Newbie Land a Better Deal

Put your offer in writing.

We will send over our underwriting template to the seller to show them why we need to buy at a certain price. There is power in the written word. Do not underestimate this power.

Try to be non-confrontational.

People like to do business with people they like and respect. I would rather sell my property to someone I like than some jerk.

Create rapport.

Try to find things in common with the other party. As referenced above, people like to do business with others who have things in common. Jake loves to talk about the Buffalo Bills (I don’t know why). It’s amazing how Bills fans will email us and mention they are also fans.

Seek as much information as possible.

It is imperative to find out as much as possible about the other side and find out why they are buying or selling. People only care about what is in their own best interest. Step outside the box and try to think about what your adversary is gunning for and see if you can help him get it.

leadership

Related: 6 Steps to Masterful Real Estate Negotiation (to Land the Very Best Deals!)

Draft the contract.

If you draw up the contract, you have the ability to control the negotiation from the outset. The other party will come back to you with revisions, and you will be able to counter. The key is that you will be able to control what gets put into the contract.

If you decide to give a concession, make sure to ask for one in return.

If not, the other party will continue to ask for concessions. In my household, my children are constantly negotiating with me for “one more cookie” or “can I stay up later.” If I concede easily, I can guarantee another request will soon follow.

The power of silence can’t be underestimated.

Once you have received an offer, maintain your silence and allow the other party to speak. Silence may hide your desperation, and your counterpart may jump in to adjust the offer. I love when I am negotiating with someone who is negotiating against themselves.

Ask, “Is that the best you can do?”

This question tends to unnerve the other party — and implies that you may get a better deal elsewhere. 

The experts realize that negotiation is just a game, and they check their ego at the door. In the end, try to create those win-win relationships in business, and be willing to walk away from a deal if you can’t receive the terms you need to make the deal work.

Investors: Any tips you’d add to this list?

Let me know your best negotiation stories with a comment!

About Author

gino barbaro

Gino Barbaro is a father of six and the co-founder of Jake & Gino LLC, a real estate education company focused on multifamily investing. He has grown his portfolio to 674 units in three years and is the best-selling author of "Wheelbarrow Profits".

13 Comments

  1. Nick B.

    Gino,

    How do you negotiate if a seller hides behind a broker or an agent? I heard that in large multi-family transactions buyers and sellers virtually never meet face to face and rarely speak on the phone. How do people negotiate if there is no personal contact or connection?

    Thanks
    Nick

    • gino barbaro

      Listen to what the broker says and try to find out the story. When you walk the property, speak to the tenants and the management company and any employees. Tenants and disgruntled employees love to talk. It’s your job to do some Inspector Columbo work and find out any issues/problems.

  2. Christopher Smith

    I employed most of the above steps for a recent long distance purchase (~2,000 miles away) that i recently made without ever even having seen the property or having met with seller or seller’s Rep. I did it through my local rep who knew I was interested in properties in that area. I likely will never see the property or ever meet Seller or Seller’s Rep:

    It was done as follows:

    1) My Rep and I developed an initial strategy and he submitted (via my POA) a written offer to Seller / S. Rep on my behalf
    2) My Rep is very much a people person (much unlike myself), so he is always the non confrontational face we present to Seller / S> Reps during any negotiating process (although I set typically set all the hard terms from my remote location with constant input from my Rep)
    3) My Rep has been in that market locale for 30 years so establishing rapport for him is something he can do in his sleep, plus he knows how to ensure that if he is dealing mostly S. Rep, and not Seller directly, that Seller is well aware of the very positive negotiating atmospherics he is creating
    4) My Rep established a virtual real time constant stream of information from Seller via S. Rep back to me and vice versa as appropriate.
    5) Through that informational exchange process the final contract terms we ultimately agreed upon began to take shape
    6) During the negotiating process we probably made 3 or 4 minor concessions, but never made unilateral concessions, we always got something significant in return including a pretty hefty price reduction (14% below market which for a pristine turn key ready property is typically tough). Even got a 1/3 commission concession from Seller’s Rep to make the deal.
    7) & 8) were not really necessary in our case since the Seller was motivated because of another business commitment that he had to acquire another property, which would have been hung up by his continued ownership of this property (got that very helpful info during the info gathering step).

  3. Eric Bilderback

    Gino,
    When you send the other party your underwriting do you then give them your criteria. My gut tells me to hide my criteria. My criteria is to buy properties at prices that beat the market (COC of 10%), I know you have made some killer deals do you fear that a seller will see this in your underwriting and then say who do you think you are? I can see this working in a market that is softer then today’s but not working now. In fact for the offers and purchases I have made in the past 18 months (all 2 of them) I have felt as if I needed to hide something from the seller because they were missing it, and if they figured it out they would pull up the price.

    If a property was overpriced then I would be willing to show them why I believe it is with may underwriting. Would be interested to hear your thoughts.

    Thanks,

    • gino barbaro

      Hi Eric
      you need to deal with motivated sellers. I always let sellers know my criteria. Obviously, good luck trying to buy a property at an 8 cap if the market is a 6 cap, unless there are some serious issues or the seller is truly motivated.
      Negotiation is not personal. They are trying to sell and you are trying to buy. If the seller doesn’t like my offer, he can counter or tell me to take a walk.
      You need to keep sourcing as many deals as possible, so you won’t overpay

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here