Negotiating is a skill in Real Estate that will help you in all stages of your investment. You will use this skill in negotiating the contract, negotiating the financing, working with your tenants, working with contractors and lastly negotiating your sales contract when you are ready to dispose of your asset.
The first thing you must do is get mentally prepared to win. You must visualize the success you want out of the negotiations.
Next, make sure you do your research. The last thing you want to happen is for you to lose your edge because you don’t have the facts to back up the terms you are working towards.
Always remain positive about the path you are looking to take. Negotiations are a little like playing poker. You have to let the other party think that you are holding five aces or a royal flush.
- Communication is the key. Make sure you present a clear argument that is logical and easy to back up with facts and supporting documents or information. This is why we suggest that you show your opportunity evaluator to both the bank and the seller. You are showing seller why you are only willing to pay a certain price. In the case of the bank, you are showing them where the property can perform with just a few minor changes to the management.
- Make sure you stay true to your beliefs but still present it in a polite and diplomatic matter. No seller wants to be disrespected. They will choose not to sell you the property out of principal even if you can negotiate the price.
- Make sure you show the pros and cons of each point. You can be clear in your mind about the outcome you desire as long as you understand the need to compromise. There really is such a thing as a “win-win” situation.
- Remain open minded through out the whole process. If the person you are negotiating with feels that you are only concerned with the issues that affect you and not them, they will not be inclined to give a little on their issues.
- Look for a clear and permanent solution. Temporary solutions or delaying some points of the negotiations until later will not help you come to resolution. This will only draw out the deal for a longer period of time. Eventually you will have to come to a resolution. I have found the longer the time period the less chance the resolution turns out the way you wanted it to.
- Make sure that you keep the negotiations focused on the issues and not the people involved. If you allow emotions to get involved in the negotiations then you are bound for failure. Focusing on emotions will lead you off track and will take your mind off the matte at hand. The goal is to come to an amiable solution not to prove who is right and who is wrong.
- Never use force, threats, manipulation, deception or extortion. Using these tactics is completely unethical and will come back to bite you in the future.
- Make sure you respect everyone’s time and schedule. If you commit to a time period in the negotiations then you need to work diligently to meet that commitment. Agreeing to points that you know you can not meet does nothing but hurt your credibility. As soon as you realize you can not meet a commitment you need to let the other parties know and also let them know what you need in order so that you can meet the commitment. Credibility will go a long way in your negotiation process.
- Make sure that you aim for the outcome you want as a whole. It doesn’t matter how many battles you have won if you lose the war. Same goes for negotiations.
- You must always know when to push your issues, when to compromise and when to walk away. Know which points you are willing to negotiate on and which are deal breakers before you go into the negotiations. This way you will know when to walk away without wasting your time.
Remember that negotiating starts in humans at a very early age. As babies you negotiate for a bottle and to be changed and held. As teenagers we negotiate for the use of the car, to stay out past curfew and for spending cash. Either sub-consciously or consciously we do what we can to get what we want in life. If you really look at it, all of our lives are about negotiating.