4 Critical Real Estate Negotiating Tactics

Negotiate like a Pro in Real Estate Transactions

It is often said in real estate that you make the money on the buy.  Buying at the right price level often provides you with enough margin of error to make mistakes when executing on your project and still come out a winner. Therefore, successfully negotiating a purchase of your next real estate deal is paramount to its success. Here are four tips that can help you negotiate a better purchase price (and more), ensuring success down the road:

  1. Learn what the other party needs from the deal

A lot of time the other party wants to be heard.  As an interested buyer, collect as much information as you can by letting them talk.  Talk to the owner to find out what terms he or she needs. Fast close? Contingency to find new home? Whatever it may be, figure out the reasons for selling to see if you can find some leverage.

For example, if the seller does not want to offer seller financing, ask what they need the cash for.  Perhaps the seller just wants to put the money into a bank account and receive their 1.5% interest rate. Would they be open to tripling the return on investment through seller financing?  Understanding the other side’s desires and fears will allow you to structure an optimal deal on terms that work for both sides.

  1. Don’t negotiate via email

By communicating electronically, you are not only missing a lot of information, you cannot hear the other side’s view, and learn what matters to them. By talking via phone, you might learn that the seller is nervous as he is trying to concurrently buy a home, and closing both sales on the same day is stressful. In this situation, offering a seller a one-week lease after the sale can win the day. Learning these nuances about the seller can be done most effectively through a phone or a face-to-face conversation. It is also easy to misjudge tone when communicating electronically, so always strive for live contact.

  1. Negotiate from a win-win perspective

Can it still be a win-win negotiation if you’re trying to gain as much as possible for yourself? The answer to that question is a definite yes.  Win-win negotiation doesn’t mean automatically making a concession just because the other party made one.  Rather, win-win negotiation involves working to get the best deal possible for yourself while also working to ensure that your counterpart is satisfied. It means making offers that are good for them and are great for you. It means thinking creatively about how you can get more of what you want by helping the other side get what she or he wants.

Suppose that the buyer wants to get $300,000 for their house and is not willing to budge.  By talking to them, you find out that they do not need that money today, rather, they think of it as a retirement peace of mind.  You might get a win-win agreement by agreeing to pay the $300,000 price to the seller, but to spread out that payment over 5 years.  As long as your seller is not sensitive to time value of money, the seller wins by getting the price they wanted, and you win by ultimately scoring a great deal for yourself.

  1. Control your body language

It is often said that only 7% of communication is verbal, the rest is done through voice, tone, and body language.  These non-verbal elements can put the listening party at ease with you, or make you come off more aggressive than you would like to be.  For example, if a person states, “I don’t have a problem with your offer” while avoiding eye-contact, looking anxious, and maintaining a close body language, the listener will trust the non-verbal clues.

FBI negotiator Chris Voss, the author of “Never Split the Difference”, states that depending on how you use your voice in a normal conversation can trigger either positive or negative emotions inside the other person’s brain.  Scientific data shows that our brains will work up to 35% more effectively, if they’re in good mood.  If you hear a smile in someone’s voice, you are more likely to respond with a better reaction. Chris suggests conducting negotiations with a voice of a late night FM DJ voice, whose voice is usually calm, deep, and disarming

The take-away here for real estate negotiators is to always remember to come off as non-threatening, maintain a positive attitude, and treat the other party with respect. Even if they’re not ready to close the deal with you today, they will think of you in case they are willing to change their position later.

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Should you find a great deal and have a need for financing, please consider PSG Lending (www.psglending.com) for helping you financing the transaction.  We close in as little as 1 week and finance anything from flips to commercial real estate, including ground-up construction and land.