8 Effective Negotiation Strategies For Your Next Real Estate Transaction
In today’s competitive real estate market, investors are finding greater
difficult growing their business. Yet, when prices are high, the one who
can negotiate the best usually ends up closing the deal.
As a real estate investor trying to find the edge over your local competitors,
you can benefit from these 8 proven tactics. By improving your negotiation
skills you can see a dramatic shift in your investment portfolio by getting
the deals you most desire.
1. Figure Out Your Highest Bid Before Beginning Negotiations
If you are planning to come in well below the asking price, you should prepare yourself for a counter offer. Know what you will do in that instance.
When negotiating for a real estate property, you have to know your top bid before entering into discussions. Knowing what you are willing to spend before negotiations, means you are starting from a place of confidence. It will help with knowing when to walk away and when to counter.
2. Offer an Amount Below the Seller's Minimum Acceptable Price
Many novice real estate investors make an offer they believe the seller will accept, rather than offering an amount the seller can counter.
The seller doesn’t want to feel like a pushover and they also want to feel like they got enough money for their property. Even if the back and forth countering is intense at times, the seller will feel better knowing they influenced the final sales price.
So, give the seller the satisfaction and help them feel like they got a fair deal. To do this, set your initial offer low enough to allow for negotiations to take place. And low enough so when you go up, you’ll still be comfortable with the price.
3. Meet the Sellers in Person Whenever Possible
By meeting a seller in person you have an advantage over the anonymous offers that come in. People like doing business with those they like and trust. This is especially true when it comes to selling a home because it could be an emotional process for sellers.
In the event the seller is another investor, the advantage of meeting them in person still stands. Your offer could stick out because they can associate your face with your offer.
Even more, when you meet in person, you have the opportunity to feel out the deal. Through your interaction you might discover what else about the deal matters to them. For example, there could be certain concessions or specific timelines for completing the deal.
4. Investigate Any Non-Financial Concerns of the Seller
Some sellers could be facing bankruptcy, financial hardships, a divorce, or needing to move for work. Whatever the case is, the seller might be hoping for a fast sale and it’s to your favor to know those details.
In these cases, the seller will accept a lower price if you can settle the deal quickly. Second to speed, is certainty. If they have had a previous deal fall through, they could be cautious of it happening again.
If there is something you can do to guarantee the seller your offer will settle, let them know. It could mean putting down a higher deposit, forgoing a contingency clause, or fast-tracking a settlement.
Other concerns the seller can have is needing more time to find themselves a new home. If you become privy to this information before negotiations, you can offer to let them rent the property for as long as needed, while they continue their search.
5. Offers Should Take Place Live
Make your offer live, rather than over email. Many prospective buyers do this over the phone, but one step better is to make the offer via video conference.
This strategy let’s you see the reaction the seller has to your offer. You can’t get the same reaction through an email. A video chat gives you an idea of how interested, or not, the seller is in what you offer.
Furthermore, the more time you spend face to face, whether in person or video chat, the seller is getting to know you better. And as mentioned in an earlier strategy, people feel comfortable conducting business with someone they know and trust.
The more time spent with them, the better odds are that they’ll want the deal to work.
6. Make a Cash Offer When You Can
Cash is, and forever will be, king.
Because sellers want assurance that a deal will settle, one way
of giving assurance is by making a cash offer. A cash offer
guarantees a short settlement process and avoids the long and
tedious financing process.
Sellers are more likely to choose a cash offer that's lower than
a financed offer because they have confidence in the deal closing.
7. Allow the Seller to Feel in Control
A seller never wants to feel pressured or forced during negotiations
of their property. They will invariably push back.
Be a participant in the dialogue rather than approach the conversation
in a domineering way. Help the seller feel part of the proposal from
the very beginning.
8. Discretely Suggest That You Have Other Available Options
Never approach a negotiation from a position of desperation. Otherwise,
you’ll often find yourself in the losing position.
Being interested does not equate to being desperate. Although you want
the deal to happen, if it doesn’t work out there are plenty of other
deals in the same market.
The secret is knowing how to make this known without saying it directly
because that would be off-putting to the seller. Instead, try saying,
“I’ve walked through many available properties in the area, but your
property stood out to me. I would like to sit down and chat and see if
we could work something out.”