September 23, 2020
9 Negotiation Skills Every Real
Estate Investor Should Know
One of the biggest challenges you face as a first-time real estate investor is learning how to negotiate real estate deals. Even motivated sellers are not always easy to deal with. If you don’t know how to negotiate a deal, you may miss out on golden opportunities or lose thousands of dollars on your next transaction.
The ability to negotiate with a seller is something that you will learn, practice, and perfect over time. So, if you don’t get it down right away, don’t worry. You’ll eventually refine your skills and become a master negotiator. Below, we look at some negotiation skills that you can learn and improve right now.
1. Know What You Want to Accomplish Going In
Singer George Harrison once wrote, “If you don’t know where you’re going, any road will take you there.” This is true for real estate investing. If you go into a deal with no plan of attack, no goals, and no idea of what you want to get out of it, then you are likely to regret the outcome. Ask yourself, “Why this house? Why Now? What do I hope to achieve?
2. Set Your Budget
No matter good the deal looks or how much money you think you can make off the property, you have to be able to buy it first. So be clear on whether you can afford the property before you go in. Estimate what you think the rock bottom selling price (not asking price) will be and keep it within your budget. If you can’t make the budget, then walk away from the deal.
3. Determine the Seller’s Motivation
Success in real estate negotiation is mostly determined by having a keen sense of psychology. More specifically, you need to assess the seller’s motivation and understand how to act on it. Not all property owners are motivated sellers. Some are unwilling to lower their price at first. Others may view negotiation as a game. Learn the motivation, and create a strategy for overcoming the challenges they present.
4. Leave Your Emotions at the Door
The best way to keep from getting emotional is by remembering that you can always walk away. There is always another deal around the corner, and you have nothing to lose if the deal doesn’t work out. Most bad decisions are made from fear, anxiety, or stress. When you keep your emotions in check, you are more likely to think clearly and get a good deal.
5. Meet with the Seller Face to Face
You cannot gauge a seller over the phone or through an email. You can’t read the emotions or assess their motivation. Most of all, you can’t see their body language. All of these are important when negotiating a real estate investment deal. Personal interaction fosters trust and commitment. It helps you build a relationship, which is important when negotiating a deal.
6. Pay with Cash
Paying with cash may seem like an afterthought. However, some real estate investors may attempt to go into a deal with an ‘arrangement.’ Showing that you can pay with cash shows the property owner that you are serious about buying the property. It also gives you leverage to make a deal. Sellers are more likely to accept a lower cash offer than a higher bank-financed offer.
7. Know Your Competitors in the Area
Property owners often go through real estate agents to sell a property. If possible, try to strike up a healthy working relationship with the agent. Why? The agent can tell you if there are already any offers on the property and how much your competitors are willing to pay. If there is no real estate agent available, then dig around to find out who is making an offer on the property. Knowing your competition can give you a good idea of how much you should offer for the property.
8. Negotiate a Counteroffer
A savvy seller will rarely accept the first offer you throw out. So, you should already prepare for a counteroffer. If the seller makes a counteroffer, then patiently consider their offer and whether you should move forward. If so, then try to move toward a win-win situation. If not, then know what your threshold is and don’t cross it. It’s better that you lose the deal than get desperate and pay too much for the property.
9. Be Willing to Walk Away
By now, you’ve probably figured that walking away isn’t the worst thing that could happen when you are negotiating a real estate deal. In fact, walking away could be the best decision you ever made. Even as a beginner, you need to have enough confidence in yourself to know that other opportunities will arise. Better yet, walking away may get you the deal you were looking for if the seller is desperate to unload the property.
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