The Art of Negotiation: Arriving at the Best Deal
By JD Esajian on November 8, 2013
The art of negotiation, while you may not realize, is an aspect of everyday life. Whether it is with your spouse or with a business colleague, there are always circumstances in which you are trying to get your point across. How you structure your arguments and present your facts will go a long way in determining your negotiation success. This does not mean that you have to be an attorney, but there are some basic rules if you want to negotiate with a homeowner or a lender to get the best possible deal.
Preparation is the key to a successful negotiation. If you go into an argument without knowing what you are talking about, you run the risk of looking incompetent. If you are looking to buy real estate, you had better know as much about the property as the seller. Doing so will only increase your chances of success during a negotiation. Find out as much information as you can about the property online, at the town hall and through local comparables. The data collected from these sources will serve as the foundation for your offer and negotiation. Accordingly, you must understand why a property sold for what it did and know every current listing in the area. The more information you have, the more you can use against the seller.
Once you have information, don’t throw it all out there at once. Listen to what the seller has to say. Most of the time, the seller will give their goals or intentions as to what they want out of the transaction. Some are motivated by money while others are looking to get out as quickly as possible. Whatever the motivation is, you can tailor your negotiation to fit their desire. If they want the highest price, you can show them sales in your favor to deem their price unrealistic. If they want a quick closing, you can make yours in seven days following an inspection. Whatever it is they want, use it against them. However, they can not be aware you are exploiting them.
Real estate investing is not gambling, but there are many scenarios that call for ambiguity. You never want to bid against yourself and you have to know how to call someone’s bluff. If you know what someone really wants and they are trying to squeeze something extra out of you or have you increase your offer, you have to know when to stand pat and let your offer speak for itself. There will certainly be some tense moments, but if you are negotiating from a position of strength, hold out and wait for the seller to accept. Don’t go giving away the farm if you don’t need to.
Negotiating is about knowing your competition and finding the middle ground of what you both want. Sometimes you don’t have much bargaining power to work with while other times you have the upper hand. This knowledge is the key to getting what you want.