Once the leads start coming in, and you’ve filtered the good properties from the “not-so-good” properties, it’s time to get out there and make some offers. And that’s where having the best real estate negotiation tips under your belt can make a huge difference.
But negotiating, whether it’s in the midst of the real estate offer process or in the middle of a job interview, is about adhering to some timeless (though effective) principles about human persuasion. And learning these principles, from the best in the negotiation business, will help you not only in your quest to understand how to make a real estate offer, but also make you a better communicator and entrepreneur.
Here are five real estate negotiation tips from experts who’ve mastered the ability to establish rapport with individuals and ultimately, more often than not, get what they were looking for.
4 Real Estate Negotiation Tips
1. Focus on the First 5 Minutes
Turns out that not only does the early bird get the worm, but they might also win the negotiation as well. According to a study published in the Journal of Applied Sciences, the outcome of a particular negotiation is often established — and can be accurately predicted — within the first five minutes of a negotiation.
And what exactly should you do during those five minutes? Engage and mirror what the other person is doing. As the study pointed out, the first five minutes are key for “conversational engagement, prosodic emphasis — which basically means you should copy the emotional state of the speaker—and vocal mirroring.”
People are trying to “size people up” in the first five minutes of any interaction. So, when you’re meeting with a seller, soft-pedal on the sales pitch, and take the first five minutes to have an authentic conversation. (You’re more likely to achieve the result you want, if you do.)
2. Share Your Story
Too often real estate investors are focused on “winning” a negotiation, and withhold information – either personal or professional — in the hopes that this will create a strategic advantage.
But as the Wharton School of Business’ professor, Adam Grant, recommends in his book Give and Take, a better strategy is to share information and use the powerful principle of reciprocity — which motivates people to respond and “match” communication that another person has given them — to your negotiating advantage.
The information doesn’t even have to relate to the negotiation. By sharing insights into your hobbies, passions, and your journey as an investor, you’ll not only get a prospective seller to lower their guard, but also boost the chances of reaching a successful negotiation result.
3. Tell It Like It Is
When dealing with a seller — especially one in the midst of a difficult life situation — it can be challenging to bring up the bitter realities of what may happen to their ownership of a property. But when learning how to make an offer on an investment property, it’s vital that you cultivate the ability to “tell it like it is” and describe exactly what the situation is, for both you and the seller.
This principle was underscored when a series of emails between Apple CEO Steve Jobs and book publisher Harper Collins. As Inc. magazine recounted, the winning chess move by Jobs was to lay out the limited — and difficult — options that Harper Collins faced in a changing (and disruptive) eBook market. And then point them toward making a decision.
From the email:
As I see it, Harper Collins has the following choices:
1. Throw in with Apple and see if we can all make a go of this.
2. Keep going with Amazon at $9.99.
3. Hold back your books from Amazon. Without a way for customers to buy your eBooks, they will steal them. Trust me, I’ve seen this happen with my own eyes.
Maybe I’m missing something, but I don’t see any other alternatives. Do you?
You may not be running a multi-billion-dollar tech giant (yet), but sharing Jobs’ same strategy of providing an honest assessment of a seller’s options — along with an open-ended question to see what possible alternative action they might take — not only will inject urgency into your negotiations, but lay a groundwork of trust and respect that might end up in an offer being accepted.
4. Use Deadlines
As the old expression goes, “deadlines spur action,” and nowhere is this truer than with a negotiation.
Though none of us “prefer” to work under the gun, many of us simply won’t make decisions until we are forced to. The same is often true of the sellers you will be negotiating with.
The Harvard Business School recommends “To avoid getting bogged down in never-ending talks, it pays to impose a deadline at the outset of negotiation.” This doesn’t mean the deadline has to be presented in a harsh, aggressive manner. Simply, inform the seller you have a limited amount of capital to purchase properties, and that you’re looking at a number properties to invest in. (Both which will more than likely be true.) And to “ensure I’m able to help you reach the result you desire I’d like to hear from you in the next three days.”
If you feel the need to put a “fuse” on your offer — such as “This deal will expire in 24 hours” — realize this can make a seller you’re negotiating with defensive. They key is to give them just a bit of extra incentive to make a decision. At the very least, if you don’t have a successful negotiation, you’ll have a result that will allow you to move forward on other deals. (Which will save you time and money.)
The Negotiation Secret Nobody Will Tell You About
What’s the big negotiation secret that nobody wants you to know? To make a negotiation not feel like a negotiation at all.
The best real estate negotiation tips are about striking the perfect balance of spending time finding out what somebody else wants, expressing what it is exactly you want, and see if there’s a way to proceed that helps both parties achieve the desired result.
If you’re able to do that — and keep a sense of humor in the process — you’ll find you “win” more negotiations than you lose. And your reputation as somebody who is fair and honest will grow beyond your wildest dreams.