Negotiation is a direct part of almost everything you do in the world of real estate. In addition to negotiating the best possible price on every offer you make, you negotiate with your contractor, property manager and possibly even tenants without even knowing it. The better you are at negotiation the greater impact you will see on your bottom line. On the flip side, if your negotiation tactics and approach are poor you will not only lose credibility you will lose money.
Improving your negotiation is more about the little things than drawing a line in the sand and not being flexible. Changing your mindset and doing your homework prior to any negotiation will help you win more small battles that effect your business. Here are five simple tips that will help improve your negotiation skills.
- Do your homework. A majority of negotiation battles are won even before they are started. By doing your homework and knowing what the other side wants you are squarely ahead of the game. Every negotiating party is motivated by something. If you are buying a house the seller may be motivated by money, but they may also be motivated to close quickly or to close on the property as-is. The clearer the motivation of the other party is the easier it is for you to build your plan of attack. It is also a good idea to know everything about your subject as possible. If you are negotiating with a painter you should do some homework on the cost of paint, supplies and comparable work done in the past. Walking into any negotiation without some data behind you not only makes you look foolish but will immediately put you on your heels and leave you willing to take the best offer you can get and run.
- Let other person make first offer. In any negotiation there must be a starting point. It is important for you to let the other person say what they want first. This gives you a reference point and helps know where you stand. There is a fine line in any negotiation between asking for what you really want and insulting the other side with a lowball offer. An outlandish first offer or price gets things started on the wrong foot and can bring negotiation to a halt before it even gets started. By letting the other party go first you now know what they want and can work your argument from there. If you are thrilled with their offer you can’t show your hand. You need to let them think you are taking it all in and considering it. If their offer is not even in the ballpark you should immediately lay out the reasons why. The more data you have behind you the easier it is for them to see they may be way off.
- Stop talking. Regardless of whether you have the upper hand or not you need to learn to stop talking. In any argument or negotiation it is best to let the other side get out what they need to. This is important for several reasons. First, let them feel that they are in control of the situation instead of listing to you rattle off facts and data at them. Secondly, by talking too much you will end up giving away the farm and boxing yourself into a corner. Most importantly, by listening you will hear valuable information you may be able to use against them down the road. A seller may secretly disclose their motivation or let you know what they really want out of the property. A contractor will tell you what they need to pay their guys, giving you an idea of how to structure your bid. If you listen without thinking of what you will say next you will set yourself up to counter intelligently.
- Be willing to compromise. The best negotiations are the ones where both parties walk away happy. Steamrolling may feel like ultimate victory but if you overplay your hand it will eventually come back to haunt you. An attorney or real estate agent will form a negative opinion of you that may hurt on a future deal. This doesn’t mean you can ask for what you want but you should always be willing to compromise. Prior to entering negotiation think about what is really important to you. There is most likely one sticking point that is non-negotiable and several other items you want, but can live without. These items you must be flexible with and be willing to bend on if you have to.
- Attach firm deadline. If you make an offer to someone you should never put them on the spot, but you must attach a firm deadline to respond. It is no secret that deadlines always spur action. By giving the other party 24 hours to respond you put their feet to the fire while keeping negotiation moving. Even if they counter at least you have kept the dialogue going and are closer to getting what you really want. On the flip side, without putting pressure on the them you increase the likelihood they will look elsewhere or put things on the back burner.
Negotiation is everywhere in real estate. Getting the upper hand on just a few negotiations a year will have a positive impact on almost every aspect of your business.
