Once you find a good real estate property to invest in, real estate negotiations becomes a factor in winning the best deal.
Real estate negotiation tactics are important to master because they can transform dead deals into big profit deals.
In other words, you can talk with the seller who is selling at a price that far exceeds what you can pay for it and make money, and use simple negotiation tactics to literally knock off tens of thousands of dollars from their asking price.
Real estate investors been able to get great deals from difficult sellers not sell to anyone else using these simple phrases.
The great news is that even though these tactics are extremely powerful, they are very simple to execute perfectly.
Here are some simple steps to powerful negotiations that could be worth tens of thousands of dollars to you for each real estate deal you make.
Let’s face it, when you first start talking with potential sellers you may be scared out of your mind.
Just remember, this is normal to all of us. An easy way to break the ice for you and for the prospective seller is to start by building rapport.
Get to know one another on a personal level by asking them about the house, if you have family that lived in the house with them, how many years they have enjoyed house as a family, and other questions that get them in a good mood.
Some people may be motivated sellers because they are getting a divorce, the house has fire damage, water damage or some other condition that puts them in a negative emotion.
If this is the case, you want to shift the conversation in such a way that makes them feel good and positive and encouraged.
You may bring up how your passion is to help people land on their feet in a new home after going through this tough situation.
Everybody has something in common. Your job will be to find out what things you have in common with the seller and celebrate the common ground.
Asking them if they have kids, how many, boys or girls, and how old is a great conversation starter.
Parents love laughing about the daily difficulties of every stage of parenting children. Parenting children through the newborn stage, toddler stage, elementary stage and into the teenage years brings very distinct experiences shared by most parents.
So, talking about these things and laughing with the prospect of you lower your guard and see one another as friends.
Another technique that you should use when talking to prospective sellers is mirroring. Your goal is to try to match their tone and tempo in their body language and voice.
This makes a prospect feel like you are one of them.
Uncover Their True Desire
One of the keys to my negotiation strategy with all sellers is to find out what they need and try to figure out a way to help them out.
A big thing for a lot of sellers is they need to sell their house and then have enough money to find an apartment, and have moving money. If that’s the case, be sure to solve this problem for them. That’s an easy one, right?
Focus on identifying their true desire is from the deal and do your best to fill those desires!
You must understand the seller’s reason for selling in order to fix their problem.
Most sellers will pretty much tell you their life story when you talk to them and will tell you exactly what they want if you just ask.
Asking open ended questions that allow them to share what they want is a great tactic to use to allow them to share their desire from the deal.
When you know their true desires you can ask any clarifying question to verify which is hearing them saying. This will put their potentially vague desires into concrete terms.
when the conversation turns to talking about the specifics of the property, remember when the most important rules in any sort transaction you will make in life.
This rule is that you never want to be the person to mention price first.
the first person to name a price or He who names price first loses. Remember this rule whenever talking to a seller about buying their property.
A lot of sellers will dance around the price questions and want you to just make them an offer.
If they will not give you a number then say something like:
- “In order for me to not waste your time I need to know that we are in the same ball park on price.”
- “In order for me to properly evaluate and give you a fair price I need to know that we are in the same ball park”
- “Can you give me a price range that you need to be in, that way I don’t bring you an offer that would insult you.”
Sometimes when you are asking a seller what price they want for the property they will say something like, “Well, I don’t want to give my house away.”
You would respond here by saying, “I don’t want you to give your house away either. But what would you feel like price range wise would be giving your house away?”
After you ask a question, always shut up. Let them blurt out whatever is on their mind.
Sometimes when you just shut up, the sellers will pretty much negotiate with themselves.
Let’s say you have a seller that says, “I want $100k for the house.”
All you should say in response is…
- “Ha, wow…ok.”
- “Wow…ok. What’s the least you can take?”
After you respond with something like this, look at the prospect in their eyes and don’t say a single word. It will be seriously hard to do, but do it.
If one minute, two minutes or three minutes goes by – which will feel like an eternity, don’t make a sound. Allow the seller to make the next response.
This very simple and short interaction could make difference of $10, $15, $30,000 or more off the asking price of the property.
Yes, it’s one of the toughest things to do, but also one of the most rewarding. If you will allow yourself to do this simple step, you will become a powerful negotiator for real estate deals and other deals.
Tip: You should never be afraid to walk away from a deal. As a matter fact, you have to go into every conversation with the seller in a neutral position. You have to be willing to walk away and accept a “no deal” scenario.
Settling On Price
if you are rehabbing our wholesaling a property then the price you purchase the property at must be low enough for you to buy and make money. There are strategies that allow you to purchase a property at a higher price, but most investors need a discount to make money.
Let’s take a look at some negotiation phrases you may use to negotiate price.
“Now your neighbor is selling their home around the corner at well below your price. What’s the lowest you can take?”
“We talk to hundreds of people a week, and in order for us to purchase your property you need to be competitive on price.”
“I just purchased a similar house not too far away from here for $XXX”
“I understand. What I can offer you is XXX and if you accept this price, you’ll get a check in that amount in just 5-7 days.”
Dealing with a “Show Me The Money” Prospect
In real estate negotiation, you’ll have some prospects that don’t like being low-balled and want to see why you can’t afford to pay more for their property.
You will need to justify your price with facts like other fixer upper houses that have sold and repair cost estimates.
These types of sellers will need to be able to rationalize the fact that they will be selling a property at a discount.
Whenever you pull comps there will usually be a few low sales, these are usually other fixer uppers that have sold. All you need to do is show your seller the facts and they will be more willing to negotiate price.
If you’re interested in taking your real estate business to the next level, then download our free Real Estate Investment Starter Kit here.