The nature of the real estate industry requires individuals to exhibit a unique and deliberate set of skills, each of which are essential to their success as an investor. It is the culmination of these traits that permit a real estate investor to realize their goals and aspirations. Everyone investing in real estate has an arsenal of attributes at their disposal that compliment their particular strategy. However, none may be more important than real estate negotiating.
As a real estate investor, your business relies on your ability to wear many hats. At times, you may be required to act as an accountant or marketing specialist. Each phase of a successful deal will require you to draw on a specific aspect of your educational background. New investors may even have to improvise in situations they are unfamiliar with. Of particular importance to the real estate industry, however, is the manner in which you relate to people. Above all else, real estate is a people business. It is your job to reassure motivated sellers that you can provide a solution to their needs.
Becoming a successful investor is almost entirely dependent on developing good negotiation skills. Tactful negotiations are required at every stage of investing, regardless of the size of the project. Investors are advised to hone their real estate negotiating skills, as they will impact their ability to close deals – ultimately influencing the overall profitability and success of their business.
Our intent, by writing this series, is to bestow upon investors the negotiation skills they will require to propel their career to the next level. Rehabs and wholesales may come to you at a rate you never thought possible. In this real estate negotiating system, you will be made aware of the key strategies used to instill confidence and trust in the sellers with whom you do business. We have taken the guesswork out of negotiating, painstakingly developing a process that will enhance your ability to understand people and their needs.
Upon completion of this series, you should recognize the importance of becoming a good real estate negotiator. However, perhaps even more importantly, the skills you retain from this real estate negotiation series should help you maximize profit margins and build a solid foundation for your business.
Establishing a Good Relationship
Upon establishing a lead, it is absolutely critical that you are mindful of the manner in which you are presenting yourself. First impressions go a long way in either establishing healthy relationships or destroying them. Therefore, each lead will require a different approach. It is important to note, however, that you need to treat them as an equal. Each party has something to gain from the proposed transaction. Be sure to approach them on equal ground.
Investors are advised to use a certain degree of charisma when commencing introductions, as it is capable of establishing a quick and meaningful connection. For those with less tact, it is important to develop a strategy before you enter into conversation. Consider the following to help you create lasting relationships:
- You want to come across relaxed, even if you are nervous on the inside.
- Laughter is connected to trust.
- Have confidence in yourself.
Understanding Personality Types
Once the conversation has been initiated, it is absolutely instrumental that you understand the individual’s personality type. Knowing how to engage them relies entirely on your ability to decipher inherent characteristics. Whether dealing with buyers, sellers, contractors, Realtors, attorneys, or even your own business partner, you are more than likely going to come across a myriad of unique personality types. It is, therefore, up to you to master the principals of human relations and learn how to deal with each one respectively.
Everyone communicates on a platform of their choosing. There are those who are blunt and to the point, neglecting to account for the feelings of others. Conversely, there are people who that avoid any form of confrontation, essentially placing the needs of others above their own. The same can be said for individual real estate negotiation tactics. Everyone has his or her preferred method of negotiating. It is your job to figure out which form of negotiation will work best.
The type of personality your fellow negotiator has will dictate the progression of the conversation. If you discover that you have a more responsive individual who needs a lot of information and time to think, be proactive. Come prepared with preempted questions answered for them. The details will help to justify your position, as they are naturally inclined to focus on the specifics. On the other side, the more assertive types may not pay enough attention to the details. They can be so forward-moving that they can’t concentrate on the specifics. Solutions for these individuals come from general concerns rather than specific details – primarily working to maximize their gain quickly. Be ready to provide the big picture.
Real Estate Negotiating Steps
Investors are advised to approach real estate negotiations with a proven system. A proactive approach that outlines the task ahead will make the process that much more affective. Accordingly, if you fail to plan, you plan to fail. The incorporation of a proven strategy will allow you to replicate your success on every level. The following list serves to break down the 8 steps every real estate investor should adhere to during the negotiation process:
- 1.) Understand the seller’s needs
- 2.) Know your offer
- 3.) Build rapport
- 4.) Ask open-ended questions
- 5.) Explain how you can help
- 6.) Present your offer
- 7.) Handle objections effectively
- 8.)Close the deal
Real Estate Negotiation Tactics
Real estate negotiations are a foreign concept to those who are relatively new to the industry. Tactful navigation around a potential deal is an art and comes with experience. However, there are some strategies you can implement to make your negotiations transpire smoothly. Use the following tactics in your real estate negotiation process to help you succeed:
Do Your Homework
Doing your homework, or more importantly your due diligence, is the fundamental basis for proper real estate negotiating. You can’t even begin to assume you are ready to negotiate unless you have taken the steps to familiarize yourself with every aspect of the impending deal. However, more often than not, sellers will try to interrupt your process by requesting an offer up-front. Investors are advised against making an up-front offer, as any price you throw out must be complimented by facts. In other words, don’t make an offer until you know exactly what it is worth to you.
In the event you make an offer you regret, you will have placed the seller in a position of power. They will focus on that particular offer and any attempt to entertain lower offers will ruin your credibility. To avoid this scenario, gracefully deflect any offer requests and change the subject. In doing so, you can keep yourself in negotiations and build your credibility.
Always Play Fair
Real estate negotiating revolves around inspiration. Accordingly, manipulation should never be considered a deployable tactic. The instant a seller is made aware of false intentions or deliberate manipulation; the integrity of the deal becomes compromised. A sense of betrayal will manifest itself within the seller and make progression on any real estate deal a foregone conclusion.
Conversely, investors are strongly advised to begin real estate negotiations with a direct sincerity. This will help you build a foundation on trust and reduce the likelihood of friction. A deal based on trust is more conducive to the process of real estate negotiating. There is no point in burning bridges you don’t need to.
Be Willing To Walk Away
When commencing in real estate negotiations, it is important to position yourself in a way that allows for an easy exit. Not that you will want to leave, but having that option serves as a form of insurance if things go south. Having said that, it is important that investors can recognize a bad deal and know when to walk away. Some of the best deals ever made are those that never come to fruition. If your negotiations are not going according to plan, do not hesitate to walk away at any time. It is important to note, however, that you will want to leave on good terms. Should circumstances change later, you want to be in a position to make a move.
Many investors are afraid to engage in seller negotiations, and therefore fail to break the ice enough to actually make things happen. Not going for it can hurt both parties. Remember, there are no failures – only feedback. If you know there is a large difference between your offer and what your seller is asking, you should start your negotiation below the offer you have in your head and make sure that you can still make a reasonable counteroffer. This can convince the seller to come closer to where you are. If all goes well, you can arrive in the middle.
Determining a seller’s level of motivation will require different strategies and tactics depending on the seller’s specific set of circumstances. Every situation and every seller is unique; the same goes for their motivations to sell. So you can’t take the same approach with everyone. Always be flexible and willing to switch your negotiation strategy to suit the specific situation.
Get Small Agreements
Navigating a real estate negotiation involves a series of small steps. As an investor, you want to speak in a manner that enables you to garner more “yes” responses from the seller. Asking questions that demand a yes answer will facilitate a smoother process and move you towards your ultimate goal. Essentially, smaller agreements will lead to a larger agreement if the investor has done their due diligence.
Know When To Close
When the buzzer is going off, you have to listen to it. If you’re a natural negotiator, then you can feel it. Those who aren’t as seasoned can sometimes keep negotiating and ruin their progress. You can often tell by words, body language, change in excuses and objections. If you can sense this, you’ve done your job.