Negotiation is one of the biggest keys to success in real estate. It’s also the skill that’s going to make you the most money you could ever hope to make per hour in a traditional job. Think about it this way: If by negotiating you can save $5000 in half an hour when buying investment property, then you just made what would be equal to a hourly wage of $6000 an hour. I challenge you to think of any career that can pay that much! This is why expert-level negotiation skills are critical for success in real estate investing. Some other investors may have more capital than you have. Some other investors may have more networking connections than you have. But if you have master-level negotiation skills you have an advantage over 90% of the people you’ll find in business and investing.
When making an offer on a property, the most likely scenario is that you’re aren’t going to get your first offer accepted. Of course, there’s always the chance that the seller is going to accept the first offer. But usually you’ll be receiving a counter-offer shortly.
I’m going to break off from the traditional negotiation mindset right here – and there’s going to be some sales gurus disagreeing with me on this one. A lot of sales trainers and real estate investing instructors teach that when negotiating you should have a “Scorched Earth” approach. This means that you go for broke – you negotiate everything and you squeeze everything you possibly can out of the deal, no matter what. Including items like the rusted mower in the backyard, negotiating the stinky sofa and including it in the contract, etc.
I disagree with the traditional negotiation mindset of getting everything possible no matter if the deal goes bad. It’s a matter of mindset and priority. Your mindset should be to get this deal done quickly and fairly. Your priority should be on getting the best price and terms possible for the circumstances available to you. Get a great price and terms and just buy those items yourself afterwards! If you’re getting a great deal on the investment property (good rule of thumb is at least $25,000 of profit) then do the deal and forget the other junk around the house. Don’t get your priorities switched around and end up losing a profit of $25,000 over silly negotiations that amount to $3,000.
When making an offer on a “hot property” (one that will sell fast due to great price) and you get a counter-offer that’s acceptable, then you’re going to usually want to accept the counter-offer. Of course, you’re going to want to run the numbers and make sure you’re getting a great profit. But if you are, and you have good terms even with the counter-offer, then go ahead and accept the counter-offer. The worst feeling in the world is to have wanted to do something but because you hesitated you lost out on the opportunity. Real estate investing is the same way. When an opportunity presents itself – like a great counter-offer on a hot property – accept the deal and keep your profits coming.
When negotiating, remember you’re dealing with human beings, not some sort of emotionless negotiation robot! People have emotions and don’t like to be made fools of! If you’ve negotiated a great sales price, but you continue to hard negotiate trying to squeeze out an extra $1,500 for bathroom repairs, for example, the seller may likely become upset and will angrily cut off all negotiations with you. Another investor comes along with a good attitude and a nose for profits and will snatch that property right from under your nose. When you get a deal that’s going to get you good profits, just sign the deal right there and get it done.
Just like some sellers may get upset by hard-nose negotiation strategies there’s going to be some sellers that may get upset by a seemingly “untrusting” nature. During your real estate investing deals, you’ll inevitably come across individuals that are “handshake people”. You often come across these people when you begin to do owner-financed deals, such as no-money down investing deals. They often refuse to sign a written contract for items such as financing. They may say things like, “I’m a man of my word, we don’t need a contract.” It’s a big risk to just shake hands on the deal without a written contract. What if they sell to someone else a day later? This is when your gut and intuition come into play. Do you feel this person is faking you? Then do as much as possible to get it in writing or just back out of the deal and let someone take the risk. Do you feel this person is genuine? Then don’t press them on a written contract if the terms and price are good. Most of these “handshake people” would be insulted if you press them on signing a contract. Of course I’ll always advise you to do everything possible to get the contract in writing, but if you feel it’s the only way to get the house closed, you may have to take the risk. 99% of the time, you’re going to want a written contract of everything. At the very least, send this person an email stating, “Just to confirm that we agreed to do ________ yesterday.”
These items I’ve touched on with you are common in real estate investing. One of the great joys of investing is that we are in close contact with people on a regular basis, but that in itself brings along its share of challenges. Just keep working your negotiation strategies, work with people as partners and not as adverseries, and investing will pay off huge dividends for you.
