Basic negotiating tips can be applied to any situation, whether you're selling a product, deciding on a movie (when you and your spouse are not in the mood for the same thing), or persuading your fussy toddler to eat his vegetables.
There are some specific techniques that you can use when negotiating real estate deals that work well.
1. Set limits and stick to them.
Know what you're willing to pay and what concessions you're willing to make, and don't go beyond that.
This is especially important if the property is one you really want because it could be easy to allow your emotions to override your common sense.
To think, "Well, it's only $X more" is OK for a luxury consumer purchase if you can afford it, but that type of thinking can mean the difference between profit or loss on a real estate deal.
2. If you cannot get the property for a price that will allow you to make a profit, walk away.
This is also important to keep in mind if you're buying at auctions.
3. Early in the process, whether you're buying or selling, very clearly state that you want to do the deal but that the numbers have to make sense.
You are an investor, this is your business, and you must make a profit or you won't do the deal.
At the same time, say that you also want the other person to be satisfied with the outcome.
When you set the goal early on that you want everyone to come away from the closing table a winner, you've established a positive tone for the negotiations.
4. If the seller rejects your initial offer because it isn't high enough, you can expedite the negotiation process by asking, "What is the very lowest price you would sell this property for?"
Most people will answer you honestly. With that number, you can decide how-and if-to continue negotiating.
5. When a seller asks if you'll increase your offer, your immediate response should be,
"My research indicates that I am able to offer $X [whatever your offer was] at this time. I'm not saying your property may not be worth more to somebody else, but I'm willing to offer you $X for your property right now.
Then wait for a response. You can always change your offer later.
6. In your initial offer, ask for things that you don't care if you get.
You might ask the seller to do some cosmetic work, such as painting, that you really intend to do yourself.
Alternatively, ask them to leave things that you do not really care about, such as a swing set, area rugs, special light fixtures, non-built-in appliances, or even certain pieces of furniture.
This gives the seller something to say no to, and you might even end up with more than what you really wanted.
Take a similar approach if you're asking for seller financing.
7. Don't begin with your best offer.
If you are willing to pay 10 percent interest with a five-year balloon, offer 8 percent with a seven-year balloon.
If you have to go up to what you were originally willing to pay, you have not lost anything and the seller feels like he's won something in the negotiations.
And you may end up getting a better deal. This technique works with every part of your offer.
8. When you're dealing with a first-time buyer or seller, recognize that they are going to feel insecure and apprehensive about the transaction.
It may be just another piece of investment property to you, but it's a home to them.
Respect their feelings and do what you can to take the mystery out of the process.
Give them an outline and timetable of what they can expect to happen as the transaction moves forward.
Break it down into simple, easy-to-understand steps, and be sure to do it in a way that is not condescending.
If you sense "first-timer fear," try saying something like, "One of the things I like to do in all my transactions is go over what's going to happen and when.
You may already know this, but I've found it helpful if we just go through the sequence of events."
Then quickly outline what is going to happen and how long it will take.
This is also a good way for you to identify any potential problems that may arise with the deal.
9. Throughout your negotiations, ask questions to confirm that the other person understands what you're saying and agrees with it.
Phrase the questions to elicit a positive response.
For example, you can ask; "Does that sound fair (or good) to you?"
Or a more simple, "Fair enough?"
Most people will let you know if they don't think it's fair or good and you'll have a chance to deal with a sticking point before you close the deal.
