In the business of real estate investing, there are negotiations happening every day. Not just with buyers and sellers, but also with vendors, contractors, suppliers and even tenants. I have put together a list of some tips on negotiating with that I have used over the years in my real estate investing business.
1. “Is that the best you can do on price?”
I always ask, “Is that the best you can do on price (or terms, or whatever you are trying to get)?”, and then be quiet. I have made this one a habit, not just in real estate, but in life in general and it is very powerful. It puts the other person in a situation where they are, in essence, negotiating against themselves. More often than not, it results in a better price or terms. Seriously, it works really well – both when buying and selling. It has the added side effect/benefit of making your significant other squirm from being uncomfortable while you negotiate the price of popcorn at the movie theater.
2. “What do you think it’s worth?”
When dealing directly with a home seller, it can sometimes be difficult to find out what would be the lowest price they would accept for an offer. I like to use a process that involves 2 questions. I always ask, “What do you think the house is worth?” first. This helps to gauge the number they would be happy with, but do not necessarily expect to get. It is a non-threatening question, and can lead to them telling you a lot more details about their opinion of value based on their motivation. It will also tell you how realistic they are about the condition of the house vs. comps, whether or not a friend/family member/Realtor has an influence on them, etc.
“What would you take for it?”
Follow up this question with, “What would you take for it?”. These questions seem like they should have exactly the same answer, but they almost never do. However they end up answering this question, you are now much closer to the real number that they would actually accept.
3. Explaining Options
Always talk about the seller’s different options to get the house sold, and the pros and cons of each. Depending on how the conversation is going, I normally begin by asking them if they have considered listing the house with an agent, letting them know that it is still a sellers market, etc.
In general, I try to steer them away from doing business with me, because if they are really motivated, they will sell me on why they want me to buy it instead of the other way around. “I don’t have time to wait for the house to sit on the market”. “I don’t like Realtors”. “I can’t afford to pay commissions and closing costs”. “I guess I thought that with the condition of the house, I couldn’t sell through a Realtor”. “I don’t want my nosy neighbors going through my house”.
Any of these responses are helpful to determine the best approach to help them, and their motivation level. Don’t make the mistake of making it seem like your offer is their only option, because it usually isn’t and people will see through that.
4. Selling as-is through a Realtor
Make sure to explain to them that there is always the option to list the property “as-is” on the MLS, with “no repairs or reports to seller”. It amazes me how many people don’t realize this. They think that in order to list their house for sale, it has to be in updated condition with all the needed repairs completed because that’s what their friend/dad/neighbor told them.
Adding the phrase, “No repairs or reports to seller” is key verbiage to add to a listing. It helps to protect the value of the home if something is uncovered during a home inspection that the seller was not previously aware of.
Explaining this is huge in establishing credibility and trust. They may or may not end up doing business with you, but you are going to establish yourself as someone who cares about their situation and this is huge for your reputation and referral flow. At the very least, you may get a referral fee for sending business to your agent.
5. Read “Never Split the Difference” by Chris Voss
This is one of the best books on negotiating ever written. Voss is a former lead hostage negotiator for the FBI, and is a world renowned business consultant on negotiations. So many golden nuggets in this book – I try to read it at least once a year as a refresher.
These are some that I use regularly, what are some of your best negotiating quick tips?