Whether you are the buyer or the seller in a particular real estate transaction, it pays to know what type of a market you are in because that will impact how you handle your negotiations.
Successful negotiations require that both parties come away feeling like they got what they wanted or at least that an acceptable compromise was reached. Negotiations can be simple or complex and each transaction is unique. But there are some keys to successful negotiations that will help make the process go more smoothly.
What Does Your Local Market Look Like?
It’s important to know what cycle your local real estate market looks like. Is it a seller’s market? Is it a buyer’s market? Quite possibly, it may be neither one. It could simply just be a good steady real estate market. Being armed with this information will put you in a much better bargaining position.
If you are negotiating with a seller that lives in a desirable area with few sales, you may be able to strike a better deal. Buyers that can close quickly almost always have an advantage. And as the saying goes, “cash is king”. If you are a cash buyer that put’s you right at the top of the list. Try to put yourself in the best position possible.
Who Has the Most Leverage?
When you come across a seller that is ready to lose their home, there is usually no doubt which person has the most leverage; the seller or the investor. In most cases, the seller has just about run out of options.
Let me just throw a wrench into this particular scenario. What if you are one of 5 or 6 real estate investors that want this exceptional property? After all is has a fair amount of equity and it’s in great shape. Who has the most leverage in this case? Well, that would be the seller. They have a desirable asset and a lot of folks that want it. So how might you be “the one”?
Each situation is different, but you can still be the one that comes out on top if you are a true cash buyer or you can offer the seller that “something else” that they want or need. In a foreclosure situation that might be moving money or something entirely different. Just find out what it is.
Whenever you start the negotiation process, ask yourself who has the most leverage and try to find a way for that to be you.
The Devil is in the Details
Let’s look at a different scenario.
If you are a rehabber trying to sell a property in a hot market, you are sure to know that this will be more challenging than usual. But it doesn’t have to be. Get rid of all those objections that would normally come up during negotiations before they even show up.
Ask yourself if you have done everything to make your property the most desirable property in the area. When buyers have a lot of choices they have all the leverage. Simply understanding this principle will make it easier for you to be the one that comes out in first place in the negotiations. When they want a cheaper price, all you have to do is sell them on your property with all the extra bells and whistles.
As you are planning your rehab, what upgrades can you make that folks wanting to move into this area will “drool over”? What would they love to have, but don’t expect to find in a property of this type? Deliver that property that will make them. Your negotiations will look a whole lot different if you do.
Planting Yourself Firmly in the Driver’s Seat
The big question here is, “who has the most expertise”? That should be you.
Learn how to convey your expertise and your knowledge in a casual, non-threatening way that makes folks want to say yes to you; that makes folks trust you.
When you do this they will be much more willing to meet you in the middle during your negotiations. In other words, “don’t be a know it all”. Remember that this has to be a win-win for everyone.
Want More Tips on Negotiating?
How to Negotiate Like a Pro
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You make a good point about understanding the market, being armed with good information. Research is a key element of negotiation.