The art of negotiating real estate deals.
I say that negotiating is an art but cause whenever two individuals are talking about the price or terms of a house, a lot of weird things can happen, so there is no room to call this process a science. I once had a seller counter my offer with a lower price. You read that correctly, he blurted out a number that was lower than the number that I just said. I guess he was so focused on his lowest acceptable offer that it never occurred to him that I made a higher offer. I just shut my mouth and shook his hand. I have no idea if he ever realized what he had done, and I sure wasn’t going to point it out. Sometimes shutting up is the best negotiating tactic.
I use the shutting up tactic a lot. Anytime I ask an uncomfortable question, I shut up. Things like “what is the least you would take for this house?” make me clam up because anything that I say after that deflates the uncomfortable situation that my question just initiated.
I also like to use the repeat question to follow up any price answers. For example, I ask the best price question and I get an answer, then I follow up with, “no really what is your BEST price?”. A lot of times the price will drop by thousands of dollars just by asking this question.
Now once I have drilled down to a price, I can now reverse direction, and off the seller a better price but on my terms. Let’s say that I don’t really care about price, because I don’t. What I care about are the terms of the deal. Give me good terms where I can either cash flow or flip the property to another investor and I am happy. My terms negotiation focus on getting the lowest price per month possible. How many of you would buy a $400,000 house for $1000 per month? We would all buy this house.
This leads me to one of my favorite negotiating tactics, the multiple offer strategy. You will hear a lot more about this when Robyn Thompson comes to town. Multiple offers are her bread and butter. The core concept of the multiple offer strategy is this, you make 2-3 offers and your seller chooses one of them without realizing that NO was one of the options. I like to make my all cash offer the lowest to induce my seller to choose one of my owner financing or terms offers.
When I find a seller with no equity in their home, my negotiations are simple. I make one offer. I will take over their debt. This is the simplest negotiation out there. I offer to take over their debt and they can walk away. This also works well on burned out landlords. As long as I am thinking about it, if any of your have a property that you want to walk away from, I will take over your debt. There I just made several hundred offers all at once. My day is now complete.
This brings me to my last point. We get paid to negotiate. It doesn’t matter if you are a buy and hold landlord, or a flipper, a lot of what we do is negotiation and the better we are at negotiating them more money we will make.