Hey guys, I just wanted to take a second and help polish up your negotiating skills. Whether you’re dealing with motivated sellers or loss mitigation negotiators… it’s always good to have a negotiating strategy in place.
So, here’s a list of my Top 5 Negotiating Tips that really do work wonders.
1. The “Phantom Partner”
In order to be a successful negotiator you have to over-prepare yourself. You need to know as much as possible about the property (needed repairs), comps, seller’s motivation and seller’s wants (this includes what the seller’s lenders want if it is a short sale). This will help you position your offer, stage your demeanor and ask strategic questions.
See, the goal is to ask as many open-ended “optimistic” questions as possible to get to know the situation. But, you want to be as non-threatening as possible. A great way to do this is to always have a financial partner who is the ultimate decision maker and you can “pass the buck” on to them. Obviously, this partner can be real or fictional but either way they are not physically at the negotiation with you.
For example, when dealing with a motivated seller always write down everything you are offering on a sheet of paper in front of them. Never say things like, “We will offer you X dollars for your property.” This locks you in and can possibly shut you down and shift the power to the seller if they say, “Were not interested in that price.”
Instead, always start off your offer with: “After getting to know you better and seeing all the repairs that will need to be done to the property, I am going to need a minute to run some numbers.” Get out your pad and pencil…
(SIDE NOTE: When you start off, begin very excitedly with a HUGE grin on your face. As you pencil the numbers, slowly turn your grin into a very serious look as if you’re getting a little frustrated. Keep on running your numbers and end back at a big smile when you deliver your offer.)
“Okay…I have some wonderful news for you today. (Now show them the piece of paper) Because we have some available money right now, I can offer you $X dollars in cash and close within 14 days pending a small inspection from my partner.”
If they panic or say “NO,” just remain calm and say, “Well, what were you thinking you wanted for the property?” No matter what their answer is I always reply back with “Well, you will have to do better than that if we are going to be able to make a deal today.”
After I say that once or twice, and I feel I have come as far as I can at this moment, I then “pass the buck” onto my phantom partner and say things like, “While I think we are close to making a deal, I can tell you there is no way in a million years my partner will go for this price.” Then you write down the price they are asking for the property on a piece of paper…
And I say one final thing before I step outside to call my phantom partner:
“Mr. Homeowner, for a second let’s just forget about (insert the price they are asking) because I don’t think I will be able to get my partner on board. Let’s look at (then write down on your paper a price that is in the middle). Now this is out of my hands, but if I can talk with my partner, I am certain I can get him to commit to that much money for the house.”
Then I reach out across the table and go to shake their hand and say, “The best part about dealing with us is that we never back out of a deal unless we find something terribly wrong with the property!”
(SIDE NOTE: Never spend time trying to justify your lowball offer! This never works and will only cause frustration on both sides of the deal! Remember this is a business transaction and you are a professional.)
I learned this technique from an investor who did it to me when I was trying to wholesale him a property we purchased at the foreclosure auction that was full of garbage.
The concept of nibbling is done after you make a deal with the person. It works by you saying things like:
- “Now, I am assuming this property will come completely cleaned out before you deliver it to me?”
- “You plan on leaving the appliances as part of the deal, correct?”
These little “assumptions” get you some extra bonuses after a deal has already been made so I always “nibble” every time I make a deal now.
3. “The Switch Up”
I use this technique when dealing with unruly, rude loss mitigation negotiators.
Now, remember that these people feel as if they have all the power. They want to intimidate you by talking sternly or simply telling you exactly “how it is going to be!” I actually really like these types of loss mitigators because they are very predictable and always follow the same pattern. At first they are an “intimidator,” but after they realize you can’t be bullied, they turn a corner and try to win you over by being extremely friendly and helpful.
Here are some tips and tricks to helping them turn the corner:
- Always stay calm and stand your ground – In the beginning, I am always a bit more aggressive just to prove I can hang, but I let up if the conversation gets ugly.
- Fight your case with facts (Comps, crime statistics, etc.).
- Realize they are always testing you to see how you react.
- Focus on establishing rapport – If I get into a heated debate with a loss mitigator, the next day I always call and say something like: “I know we got off on the wrong foot yesterday and I know we both want to see this deal get done quickly, I just want this family to avoid foreclosure so let’s try and work things out, okay?” Then begin asking personal questions to try and get to know the loss mitigator and build a relationship.
4. Dealing with “Take It or Leave It” Statements
This comes in handy when dealing with real estate agents who think they know everything…
Many times I get a lowball offer from a real estate agent, and when I call to begin negotiating they say something like, “Don’t you know it’s a buyer’s market and my client is looking at many good deals? That offer is the best we will make…TAKE IT OR LEAVE IT.”
Now this is obviously very difficult to overcome, but I always try and redirect their statement by saying something like:
“I may be willing to meet your price, but your client obviously needs to throw in some extra benefits that are worth the difference in what I am asking. How about letting me take back a note at reasonable terms for the difference?”
“The price you are offering is obviously much lower than what I want to accept. If you won’t raise your offer, then I will have to think it over and get back to you.”
Statements like those take the edge away from the “Take It or Leave It” comment and allow you to continue negotiating. Your ultimate goal is to keep trying to bridge the gap and “make the deal work” even if you have to slow the negotiations down to fight another day!
Now if you are on the other side of the table and the one making the offer, try saying: “After reviewing all the numbers, that’s the best I can do.”
That’s a much nicer statement than saying “take it or leave it!”
5. Educated Enthusiastic People Sell Themselves
This is a negotiating tip for anyone out there who wants to raise private money.
Let me tell you a little story of how in a little more than a year and a half, we raised more than 3 million dollars for our real estate business. The best part of this story is that the investors actually handed us the money… it went right into our bank accounts and powered our investing business.
It all started when we saw an opportunity. We knew the local real estate market was opening up and that there were many good deals coming through the foreclosure auctions. The problem we had was that in order to buy a property from the foreclosure auctions you needed a lot of cash. Plus, since everything moved so fast, there was a tremendous opportunity to make a costly mistake. So we also needed to learn the ropes and educate ourselves on the ins and outs of buying at auction.
We went around and talked with everyone we knew who had money, and they all turned us down. The main reason was that we really truly didn’t know much about buying at auction and it showed through during our pitch. After a few weeks of trying, we still had no investors willing to invest with us.
Learning from the rejection, we decided to take as much time as we needed to learn the auction business. We went down to the auctions every day and just watched. We took notes, asked questions, and tried to get to know as many people as possible. We even drove properties, analyzed deals and pretended like we were bidding just to see how things “would have” worked if we actually had real money.
Doing this gave us the confidence in our business plan to go back out and talk with the same people who rejected us earlier… and guess what… many of them invested in us because they could see our enthusiasm and realized that we now knew what we were talking about!
The moral of this story is that when raising private money, you need to sell yourself and your business model to any potential investor by being overly educated and enthusiastic.
I hope my Top 5 Negotiating Tips For Real Estate Investors was helpful and that you apply these tactics and go out there and start closing deals!
To Your Continued Success,
Talk to Me
Are these 5 tips helpful? I’d love to hear your thoughts in the comments
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