Have you ever listened to professional football announcers
like John Madden? They're always talking about players they
admire having great "skill sets," the ones that help them
win games for their teams. Well, as a real estate investor,
you have to bring a great "skill set" to the negotiation
table in order to win your game.
Below are some basic negotiating skills that you need to
acquire or sharpen in order to complete great deals.
Skill 1: Know Your Stuff! By this, I mean that you should
know everything possible about the property, the market,
the buyer/seller, etc. before you ever sit down to
negotiate. Professional sports teams employ scouts to find
out as much as possible to determine the strengths and
weaknesses of the competition. In other words, they're
looking for complete information in order to operate from a
position of strength. You don't have the luxury of hiring
scouts, but you can become a scout yourself. So, prepare
yourself by researching deals carefully and thoroughly
before you ever enter into negotiations. All of that
research will help you build Skill 2 below.
Skill 2: Bring Facts to the Negotiating Process. Buyer,
sellers, realtors—they can all get very creative with
asking and selling prices, rehab costs, etc. After all,
that's their job—to get the best price possible. Of course,
these figures are often inflated and have absolutely
nothing to do with the actual real estate market prices. To
bring a dose of reality to the negotiations, have the
latest market information handy. Then, when an unreasonable
offer is made, simply put that information on the table and
politely but firmly let the other parties know that their
offer is unreasonable given current market conditions. This
act lets everyone know that you're a professional and it's
time to get down to the real business of negotiation,
instead of wasting time on frivolous offers.
Skill 3: Determine Seller/Buyer Motivations. Often, it's
very easy to determine the motivations of buyers and
sellers. Sellers may have a hard time making payments and
need to get out from under the mortgage. Buyers may be
looking for the lowest price possible. In some cases,
motivations are more complex. But whatever the motivations
are, it's to your advantage to find out what they are
before negotiations so you operate from a position of
strength. After all, you're in the business of meeting
customer needs in a reasonable way. If you know those needs
ahead of time and work hard to satisfy them (in a
profitable manner), then you can create the classic
"win-win" situation, and everyone walks away from the
negotiation table happy.
Skill 4: Develop Patience and Objectivity. Your heart
should never rule your head in negotiations! So, no matter
how attractive a deal may appear at first glance, don't
rush headlong into it. Keep a cool head and analyze the
offer as objectively as possible. It should make good
financial sense. Rely on the research you've already done
and use it as a measure of the quality of the deal. If you
rely on cold facts instead of a hot head, you'll have many
successful transactions.
Skill 5: Think Long-Term, Not Short Term. Earlier, I
mentioned that you should work to create the classic
"win-win" situation. I want to re-emphasize that point
here. Why? Because happy buyers, sellers and realtors come
back for more deals! It's as simple as that. Also, they
spread the good word about you, and that brings in more
customers.
In the truest sense, it's an investment in your future. So,
work to establish your reputation as a fair and honest
negotiator. It's not only the right thing to do, but it
pays off in great personal and financial dividends. At all
costs, avoid unreasonable hardball tactics that create
enemies. If you adopt this approach, your real estate
career will either be short or not as profitable as you
want it to be because few people will want to work with you.
Key Points:
- Research every deal thoroughly before you enter into
negotiations.
- Negotiate real estate investment deals with your head,
not your heart.
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Jack Sternberg is a nationally recognized expert on real
estate investment who's been in the business for more than
30 years. Sternberg's deals have totaled over $750 million
and he's been to the closing table more than 1,500 times.
For more, visit http://www.askjacksternberg.com
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