Negotiating a Real Estate Deal

By: Steve Gillman

Do you really need to learn special techniques for negotiating a real estate deal? Absolutely not. You can get by with offers that you know work for you, and just keep making them until one is accepted. On the other hand, if you know a few simple real estate negotiation techniques, you can get that yes more often, and at a better price and terms. Here are three of the many techniques you can use.

Negotiating Real Estate - Time Investment

The more time a seller spend with you, the more he will fell he has to make a the deal work. This gives you leverage. For example, suppose a seller has a small apartment building for sale for $450,000. In his mind, he may be thinking he won't go below $435,000. In fact, if you walk into his office one day and drop an offer of $420,000 on his desk, he might just throw it straight into the garbage can.

On the other hand, what if he has spent several days showing you the property, and has spent hours talking to you about the property. It helps that he has time to get to know you and like you, but even if he doesn't like you, he will now feel like he need to get a deal put together after investing so much time. At this point, if you make your offer of $420,000, he might not be thrilled, but he might at east give you a counter-offer. In the end, you might settle on a price of $425,000 - a price he previously considered too low to consider.

This doesn't mean you should waste his time or abuse this technique. But if you seriously want the property, and need a lower price to make it work for you, take your time. Time investment is a negotiating technique that has been proven to work in everything from buying a washing machine to the most expensive real estate.

Negotiating Real Estate - Limited Authority

A tough negotiator often offends a seller. He can't necessarily understand why you can't accept his "reasonable" counter offer. He may think you are being difficult and unfair. How do you avoid this?

Give the seller an acceptable reason for your offer or for your rejection of his counter-offer. The most convenient reason? You lack authority to accept his terms or to offer more. In the case of a house, you can say something like, "I can't do that - my wife said I could only go up to..." In the case of a rental or commercial real estate, you can say that you have to check with your partner, or that your partner already said you were limited to ...

Why does this work? It make perfect sense if you think about it. Put yourself in the seller's place. If you thought you are being perfectly reasonable, and the buyer was just saying no, you might feel some resentment. You might even want to look for other buyers. On the other hand, if he tells you that he thinks you are being fair, but he just can't say yes without checking with his wife... Well, in that case, you might feel bad for him, and even want to make it easier for him to get his wife to agree.

Negotiating Real Estate - Step-By-Step Commitment

Get a seller to agree to everything else first, and you are more likely to get him to agree to a low price. To do this, start getting his verbal commitment to anything and everything along the way to a discussion of price. There are two reasons that this can work.

First, the process of saying yes many times just makes a seller more likely to say yes to whatever else you ask - including a lower price. You essentially are conditioning him. You are getting him in the habit of saying yes. He may not say yes to everything, but he will be more likely to move in your direction.

The second reason this works involves another technique for negotiating real estate deals. That is the technique of asking for many things in order to have something to "throw back into the pot" when it comes time to talk about the things you really want. With a step-by-step commitment to things like closing dates, what will stay with the property, and more, you have many things that the seller feels obligated to give you. You can use these then, as "bargaining chips."

When the time comes to get what you really want - let's say a low price or low interest rate on a note the seller will carry, you offer to "give up" these things you already won in the negotiating. For example, you might want low payments on an apartment building for the first two years, so you can fix things up before raising the rents. If the seller hesitates, you can say something like, "How about we close when you want to, and you keep the maintenance truck for your other properties?"

A few good techniques make a big difference when negotiating real estate deals.

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