By David Finkel
I've gotten so many comments from readers that I decided to compile the best 100 tips into a series of articles for CRE Online to publish over the next six months leading up to the Annual CRE Online Convention. I will be at the Convention for the third year in a row, and I truly hope you will too. It is a GREAT event!
Here are five tips for successful negotiating.
Tip one: Four ways of dealing with seller objections
There are four ways to handle objections. Here is the list in order of least desirable to MOST desirable:
Tip two: Handle, melt, or preempt sellers' objections
Building on the theme of objections and how to deal with them in your real estate negotiations, here are some ways to handle, melt, or preempt objections with other people in your real estate negotiations.
You are talking with a seller who wants to run the deal past his attorney.
Investor: "I've found that when a person tells me he needs to check with his attorney, he generally falls into one of two groups.
"Group one, those people who really want to move forward. In fact they're signed up and on board with all the ideas and concepts, they just want to make sure they are being prudent and run it past their attorney for one last checkup.
"The other group are people who really don't want to do the deal, it's just that they are uncomfortable saying no. Before you go to the expense of spending $400 to $500 just to have your attorney review what we've agreed upon, did you just want to tell me that you fall into the second group?"
The seller protests.
Investor: "Really, it's okay. I'd understand if you wanted to go back on what we've agreed to."
Seller: "No, I just want to have my attorney look at it."
Investor: "Well that makes good sense. I'm really glad that we have such a good fit, and I understand and encourage you to take what we put down on paper here to your attorney. If for any reason your attorney's not happy, you can just fax me over a note saying you want to cancel the agreement.
"When do you think you'll be talking with your attorney?" [You pick a time and date the seller can cancel with you, and you with them, by faxing over a written cancellation.]
Many objections are really the other party’s way of saying that you are rushing things, and they aren't quite comfortable with you yet. Often, just by tabling an objection and letting more time pass you can literally MELT away the objection.
You are negotiating with sellers on a "subject to" deal and they want to know how they can count on you to make the payment.
Sellers: "How do we know you'll actually make our payments?"
Investor: "I understand that you need to feel comfortable that your payments will get made every month. If I end up wanting to buy the property, that’s even more important for me since I would lose a lot of money if they aren't made.
"But I think we may be getting ahead of ourselves here, I'm still not sure if I even want to buy the property. Why don't we leave that aside for a moment, and then we'll come back to it later after we've both decided that we can even find a fit here, which we may not be able to do."
Tip three: You need friction in your negotiations
So you want every negation to go so smooth it’s like gliding on ice? Actually, that may just be the most dangerous thing to happen to any of your deals. Shocking as it may seem you NEED friction in your negotiations with sellers to make a deal stick.
Friction can equal TRACTION! No give and tack, no awkward silences, no negotiating fun, probably no deal that lasts.
If rapport is important to create a connection with a seller to sign up the deal, then give and take and “friction” is what keeps the deal closed. Imagine rapport as being the power that opens the lid to a jar. Friction is what keeps the jar closed once you finish the deal.
You NEED the other side to struggle and work for the deal in order to have them feel fulfilled from the deal. This is one way you let them build value into the final agreement--by having them fully vested in the both the process and outcome.
I hope this gives you something to think about when you're in your next negotiation.
Tip four: Build momentum
When negotiating with another party, remember that Newton’s Second Law applies--a body in motion tends to stay in motion, a body at rest tends to stay at rest.
What does this high school physics have to do with making money? The same principal applies to negotiation. If you can get the other party headed in the direction you want, you are much more likely to keep them going that way.
The way that you APPLY this theory is by getting agreement on the big picture first, and only then by narrowing the conversation and dealing with the tougher issues.
For example: “I don't know if we could do this Mr. Seller, but what if we were able to get you a chunk of money up front, and then pay you the rest as monthly payments over time. Is that something we should even talk about, or probably not?”
See how BROAD that "what if" statement is. If the seller agrees you should talk more about it, then slowly start to narrow the specifics, slowly and incrementally. It’s like clamping down a vise one turn at a time.
Tip five: Learn to use selective hearing
Here are six ways your selective hearing will pay off:
David Finkel is an ex-Olympic level athlete turned real estate millionaire and one of the leading investing experts in the nation. He and his partner, Peter Conti, teach people across the country how to create multiple streams of income buying homes in nice areas with nothing down and minimum risk. Over the past decade, his students have bought and sold over $100 million worth of real estate.